News Analysis: Reputation leaps up CEOs' agenda

Data from MORI's Captains of Industry survey suggests a massive increase in corporate bosses' concern for their reputations, says Richard Cann

From being almost an afterthought throughout the 1980s and 1990s, reputation has become more important as a barometer of company health in recent years, according to MORI's annual Captains of Industry survey.

The opinion research organisation has for the first time collated the 23-year-old poll's findings, providing a clear picture of how company chiefs' opinions have shifted.

In 2003, for instance, 48 per cent of CEOs, chairmen and senior board members of the FTSE's top 500 companies spontaneously mentioned image and reputation as the main criteria they use to judge a company - ahead of indicators such as financial performance and product/service quality.

This marks a radical shift from 1983, when only eight per cent of company leaders showed concern for reputation.

'What has changed is businesses now take a much wider view of their operations, and they think and serve a broader community,' says Liz Hewitt, group corporate affairs director at FTSE 100 medical device maker Smith & Nephew.

Shifting priorities

She explains that the so-called captains have to consider the needs of a wider range of stakeholders than their counterparts in 1983 did, a group that spans customers, suppliers, employees, trade groups, shareholders and government. Reputation is of concern to all interest groups.

Hewitt is 'surprised that financial performance and product quality do not rate higher' in the 2003 MORI poll, but adds that stakeholders vary in their concerns.

Weber Shandwick UK & Ireland chief executive Colin Byrne says CEOs have picked up on reputation because they see a definite link to the more traditional benchmarks of long-term financial performance, ability to attract and retain the best staff, and customer approval.

He says that consequently, most CEOs acknowledge that reputation management has to be 'long term, consistent and part of a company's DNA, not a short-term, anti-crisis sticking plaster'.

In 1995, MORI began tracking captains' impressions of five major accountancy firms, receiving consistently positive results. The exception was in 2001, when Arthur Andersen's reputation was massacred by the Enron crisis. The results suggest single scandals are the major differentiator of reputation.

Hill & Knowlton MD of corporate comms Stuart Wilson believes it is corporate governance scandals, such as those involving Parmalat, Enron and Shell, that have left boardrooms shaken, while rocketing corporate reputation up the agenda.

'Changes occur on the back of large events and we've had several of those recently. CEOs are starting to realise that such issues are now likely to cost them their jobs,' he says.

Manning Selvage & Lee managing director Nicholas Walters agrees, but does not see companies allocating sufficient resources to in-house PROs and external agencies to deal with the problem. 'I am worried (that company leaders value reputation) out of fear because they recognise that they have less control over the levers that govern reputation,' he says. CEOs are worried not by company-wide scandals, adds Walters, but by 'something that happens from left field in some far-flung part of their empires. The things that could affect reputation are legion'.

He says scandals can be guarded against with reputation management and CSR programmes that are ingrained at all levels of an organisation.

'Johnson & Johnson famously makes sure everyone who joins the company lives and breathes a set of values, and it is no surprise that time and again it comes top of reputation monitors,' says Walters. 'This is an area where external PR agencies can have an impact. When you get the director of HR advising the CEO on culture management, you are very rarely going to get the right mix of advice.'

Wilson agrees that PR consultancies are best placed to advise boardrooms about reputation because it is not a discipline traditionally taught to CEOs.

Contrasting views

The difference between public and company leader perceptions of corporate performance was underlined by MORI's look at CSR and environmental issues.

On average, from 1989 to 2003, 65 per cent of the public agreed that British companies do not pay enough attention to environmental issues - only 13 per cent of company leaders were in agreement.

There was an even greater gap regarding social responsibility, with 55 per cent of the public saying that companies could do more socially - 14 per cent of company chiefs agreed.

Sony UK director of public affairs Bill Vestey, who believes reputation is inextricably linked to CSR activity, says: 'Traditionally in the UK, companies tend to be modest about their CSR activities and tend not to unleash the PR battalions.'

He explains that the public are usually cynical about companies' attempts to promote their own good deeds, creating the need for groups such as Business in the Community and NGOs to take the lead in educating the public about how much the private sector is involved in CSR activity.

'Personally, I don't think PR can ever build reputation on its own,' warns Vestey. 'There has to be something very strong behind it first. It's really quite damaging if there is no substance - you need to build substantial activity and then get the PR team to work on that.'

The opportunity for PROs is to influence such reputation initiatives at their point of conception, rather than implementation. MORI's 2003 survey shows that the reputation of PROs has not suffered the same decline of confidence that advertising has, with about two fifths of captains retaining a favourable perception of the PR industry.

That, combined with growing concern about corporate reputation, should give PROs a voice in the ear of company leaders.

A REFLECTION OF CHANGE

MORI began tracking the views of senior board directors in 1981, conducting face-to-face interviews with chief executives, chairmen and senior board directors from FTSE 500 companies and the UK's largest 500 firms by turnover.

The Captains of Industry annual survey, this year taking place in September, covers areas such as economic confidence, the euro, government economic policy, industry sectors and impressions of peers.

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