Charlie O'Rourke, AIMediaComms: The value of reputation.

The ability to manage stakeholders is vital to uphold corporate reputation and to build trust.

Charlie O'Rourke, AIMediaComms: The value of reputation.

After missing the cut at last month's PGA Championship in Atlanta, one of the world's most prestigious professional golf events, Tiger Woods slumped to 33rd in the world rankings (after 623 weeks at number one). It is not only his golf game that has failed to recover since his extramarital affairs came to light in 2009 - Woods' bank balance was further hit in August when luxury watchmaker Tag Heuer decided not to renew its estimated $10m sponsorship.

The Swiss firm is the sixth major sponsor to drop Woods after the loss of his squeaky-clean reputation. According to CNBC, Woods personally lost about $23m in endorsements during 2010 alone. His misdemeanours also cost IMG, Woods' management firm, an estimated $4.6m.

Woods' plight highlights the relationship between reputation and value, succinctly demonstrated in a study published in March by Echo Research, in association with Bestra Brand Consultants.

Corporate reputation currently contributes close to £460bn of shareholder value to UK FTSE350 firms. If reputation has a value then losing it clearly comes at a cost, as Woods found, and there are many more recent examples.

BP's share price crashed by nearly 50 per cent after the Deepwater Horizon oil disaster, as the City feared BP would not survive the crisis. Despite recovering somewhat, tens of billions of pounds have been wiped off its value. News Corporation shares have lost more than 20 per cent of their value since the first reports that phone-hacking victims included the murdered teenager Milly Dowler. The affair also led to the closure of the 168- year-old News of the World and forced the company to abandon its BSkyB bid.

The Echo research also tells us that corporate reputations contribute 32 per cent to the market capitalisation of FTSE100 firms. There is also evidence that maintaining a positive reputation will directly increase a company's market cap. On average, a five per cent improvement in the strength of a reputation will lead to an increase of 1.8 per cent in the market cap of a FTSE100 company.

A positive reputation can help in other ways. In March, the Reputation Institute found 50 per cent of the public would give a reputable company the benefit of the doubt during a crisis. If a company is trusted by stakeholders and has a good reputation in normal circumstances, it will have the luxury of the benefit of the doubt when a crisis occurs.

To build this trust, companies must manage relationships with many different stakeholders (including the media, legislators, regulators and customers), in particular managing the interactions and comms with them. The role of corporate comms is crucial. If stakeholders are left on their own to unify all the information they need about an enterprise, the enterprise could find itself vulnerable to misinformation and hearsay, putting reputation at risk.

The organisation and its corporate communicators must embrace more than just the media if they seek to influence public perceptions. With such a broad audience, it is important that a company presents a consistent message to all stakeholder groups and talks with 'one voice' across all channels.

Corporate comms and key spokespeople must have access to the appropriate lines to take, briefing statements and be ready to react consistently to enquiries from any stakeholder group to ensure they remain the trusted source of information.

Careful management of stakeholder interactions will ensure the message finds the right people, helping to leverage opportunities, mitigate risks and protect reputational value.


Which brand has gained most, reputation-wise, in the wake of the riots?

Tariq Jahan with the most powerful slogan: 'Step forward if you want to lose your sons. Otherwise, calm down and go home. Please.' So powerful, so heartfelt and so spontaneous and generous after the death of his son.

What is the best example of a firm that has planned its internal comms strategy to fit with its wider corporate reputation?

The Carphone Warehouse keeps its retail staff up-to-date with relevant info, including up to 50 product launches each month, new tariffs, recalls and corporate news, a challenge very adequately met by the internal comms team.

Charlie O'Rourke is MD of AIMediaComms

Have you registered with us yet?

Register now to enjoy more articles and free email bulletins

Already registered?
Sign in