Analysts: reputation, corporate value linked

NEW YORK: Hill & Knowlton has polled buy- and sell-side analysts - a group it felt was unrepresented in reputation-management surveys - to see what drives their decisions.

NEW YORK: Hill & Knowlton has polled buy- and sell-side analysts - a group it felt was unrepresented in reputation-management surveys - to see what drives their decisions.

"I have the highest respect for a number of studies out there, but I was hungry to really understand how the financial markets were being influenced by these buy- and sell-side analysts," said Judi Frost Mackey, SVP and director of the H&K US corporate and financial practice. "Clients were extremely hungry for this, and I couldn't find that information."

She added that clients had often found a lot of surveys too "inside baseball," with results pitched to a narrow audience of cognoscenti.

Market Opinion and Research International conducted research for "Return on Reputation," a report which featured 300 respondents from 14 countries in North America, Asia, and Europe.

More than 90% of respondents said that a company that fails to look after its reputation performance will ultimately experience financial woes.

"Analysts around the world unanimously agree that reputation has a direct correlation to a corporate value," Mackey said. "Reputation programs and behaviors, and communications from senior leadership teams are as important today as they ever will be with this most influential community."

While financial performance was considered the most important quality (87% of respondents gave it an "extremely" or "very important" designation), quality of the leadership team (86%) and making good on promises (85%) were virtually tied for the lead. CEO reputation was highest, while that of the chairman and independent board were least important.

Mackey also noted that transparent disclosure ranked high in importance (93%), while 88% said non-transparent disclosure negatively affected a rating. Poor communication with stakeholders caused a negative rating with 79% of analysts.

Most analyst respondents to the survey also said it takes two years to change their minds about a company, so a bad reputation might linger after an unsavory executive leaves, although the US analysts seemed to have a shorter memory than others in the world.

While buy- and sell-side analysts only concern themselves with public companies, "the results of this study should be heeded by both private and public companies," Mackey said, explaining that private companies often have venture capital investors that possess a "public company" mindset.

"Often, there are private companies on a path to become public, and it's very clear that if they were to become a public entity, these reputation issues would be more important to the groups that will be rating their company and providing stock guidance," she said.

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