Reputation Risk: Why Companies Need to Care
Imagine you’re at a meeting and the topic of risk arises. You would naturally expect data security, labor, or safety to be among the first topics to come to mind. While those are top priorities at Starwood Hotels & Resorts Worldwide, I’m finding it harder and harder to ignore a risk that is far more basic. Water.
“When I get my MBA, I want to build a career as a Chief Compliance Officer (CCO).” Just imagine if that was one of the top ambitions of the best students at the world’s foremost MBA programs and business schools—not the CEO, not the VP of Marketing, not the Finance Director or the IT Leader, but the CCO.
You get it! This is what every company wants its consumers, customers, and other key stakeholders to say about it. You “get it”—you understand what they need, want, and value. The companies that last and thrive in a competitive marketplace are those who get it over and over again, year after year.
Fortune's Most Admired list was once the gold standard for corporate reputation. The much-anticipated list came out once a year and, for the longest time, the top 10 best companies rarely changed. As a former Marketing and Communications Director at Fortune, I can say that when we talked about strong corporate reputation, we discussed such things as which companies ran successful corporate advertising campaigns, what products they made, what services they rendered and, of course, how high stock prices rose in a given year.
So, let’s be clear up front: although the title of this article may sound promising, there is no easy formula for salvaging, repairing, or restoring a previously solid reputation in the aftermath of a negative event.
The Great Recession of 2008-2009 had profound consequences for business and government alike. Long-established companies such as GM and AIG were forced into bankruptcy. Euro-zone nations were compelled to bail out member states including Greece and Portugal. But the most long-lasting effect of the near-catastrophe may well be the fundamental destruction of trust in institutions.
Some of us believe the conduct of modern business in the Western world, especially the United States, has been positively influenced by an unwritten “social contract” that set forth public expectations from business in return for access to the public franchise that permits most kinds of business transactions.
In a climate where true product differentiation is difficult, the regulatory landscape challenging, global partner ecosystems vulnerable, and the pressure to hire high-potential talent intense, a company’s reputation is increasingly recognized as a business asset that is central to maintaining and growing business value.
Corporate reputation matters—in good times and in bad. Looking back at the last nine years (the period since Reputation Institute’s first public release with Forbes), it is very clear that being one of the most reputable companies creates disproportionate financial value.