Closer Look: Recent Scandals Have Thrown PR Industry into Turmoil

12.05.2013 19:33

Closer Look: Recent Scandals Have Thrown PR Industry into Turmoil

Things are so bad that illicit payments are best made in person instead of by bank transfer, a sure sign changes should be made

By staff reporter He Chunmei

(Beijing) – An employee of a public relations company recently complained to me about the difficulties her industry now faces. The confusion was brought on by recent episodes in which reporters were arrested for taking bribes to print stories.In the first, a reporter named Chen Yongzhou, was detained for publishing stories that damaged a company’s reputation. Later, a trio of reporters faced charges theytook bribes from PR firms to publish articles.

“Lately, my journalist and PR friends are sharing news about people and companies from these two industries being investigated by police,” the PR company employee said. “We don’t even know how to operate now.”

A PR consultant at a well-established company told me that in the past when she asked journalists to write advertorials all she had to do was transfer money to their bank accounts. Not she is being more circumspect.

“I will bring the money in person just in case anything happens,” she said. “This has caused a lot of trouble.”

The consultant said it was not clear to her anymore what was right and what was wrong. This caused her to worry she may accidentally break the law.

A senior manager at a PR company has explained a range of scurrilous activity by PR companies and media types.

Some involved surprisingly large amounts of money. For example, certain reporters publish a set amount of articles each month for a client of a PR company and get paid monthly. Transactions routinely exceed 10,000 yuan.

Then there were reporters who tried to blackmail companies with negative stories that had some grain of truth. Other journalists just made up bad news and went about the blackmailing.

Reporters even took money from companies to publish negative reports about competitors.

All of this points a unique form of “public relations” in China.

“In other countries, PR companies usually serve as consultants,” the senior manager said. “But in China, PR companies make money by being an intermediary and taking the difference between what they charge their clients and what the media companies charge them. This business model is twisted.”

This way of doing business is crying out for change. Both PR firms and their clients need to be clear about what the law allows and what is ethical.

“The PR companies should really be helping their clients deal with a crisis,” a senior PR manager at a computer company said. “They should help analyze a crisis and instruct clients on what to and how to apologize if negative stories are exposed.”

Media companies cannot be absolved. They need to redefine their business models as well, not to mention update their codes of conduct.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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