Only 8% of CEOs think stock price is linked to reputation

NEW YORK: Despite the beatings corporate America has taken in recent months, a mere 8% of CEOs feel that a company's stock price is enhanced by its corporate reputation.

NEW YORK: Despite the beatings corporate America has taken in recent months, a mere 8% of CEOs feel that a company's stock price is enhanced by its corporate reputation.

These are among the findings of the annual Harris Interactive study sponsored by Hill & Knowlton and Chief Executive Magazine, which surveyed 557 business leaders.

The report also found that only 6% of CEOs said they have methods to measure reputation formally, and a staggering 73% said they relied on word of mouth.

The results come even as much of corporate America continues to be engulfed by a spate of high-profile scandals.

The normally reserved Goldman Sachs CEO Hank Paulson commented last week, "I cannot think of a time when business has been held in less repute. However, only 42% of the respondents view unethical corporate behavior as one of the biggest threats to a company's reputation.

The same poll found that only 32% of CEOs said they used media coverage to measure reputation, while 45% and 21% said print media and broadcast media respectively influence a firm's reputation.

"What I take away from the results is that most CEOs have a lack of understanding of what reputation is and how they can use it, said Professor Paul Argenti, a reputation expert at Dartmouth's Tuck School of Business. "The fact that only 8% think reputation can influence stock price, when there is considerable evidence that it does, shows how little they understand about what reputation is worth."

The results are a blow for the communications industry's efforts to convince corporate America's upper management that their reputation directly affects such things as sales and stock price.

H&K senior MD Eric Borsum, who said he was "pretty surprised at the 8% figure, added, "I certainly think there's more we can do to convince companies of the importance of reputation. While we think word of mouth and media are important, we would encourage companies to continue to consider formal methods for measuring reputation."

The poll found the majority (93%) of top executives rate customers as "extremely influential on reputation. In what might be viewed as positive for internal communications efforts, CEOs listed employees not far behind their customers as shapers of reputation.

The survey reveals that PR agencies interested in positioning reputation management as a serious communications issue for corporate America have their work cut out.

"It would seem PR firms have to work to raise awareness of the importance of reputation and convince firms that they are the ones to deal with these issues, said Argenti.

CORPORATE REPUTATION REPORT

- 6% of CEOs measure corporate reputation formally

- 73% rely on word of mouth to understand corporate reputation

- 8% feel that stock price is enhanced by corporate reputation

- 42% view unethical corporate behavior as one of the biggest threats to a company's corporate reputation

- 49% identify criticism of their company or its products in print or by the broadcast media as the biggest threat to corporate reputation

- 32% rely on media coverage to measure corporate reputation

SOURCE: The H&K/Chief Executive Magazine/Harris Interactive Report.

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