Financial sectors waking up to importance of corporate reputation, says study

The investment and financial sectors are finally waking up to the importance of corporate reputation, according to new research.

Financial sectors: are realising the importance of corporate reputation
Financial sectors: are realising the importance of corporate reputation

After six years of economic crisis triggered largely by poor corporate behaviour, the study by reputation management firm StockWell points to a sea change in how the financial community looks at companies.

It suggests that non-financial factors such as reputation and having a higher or social purpose now have a significant bearing on corporate valuations and investment decisions.

The research was carried out among senior leaders in the financial world, including investment bankers, analysts, investors, brokers, risk officers and IR directors. It found a near unanimous agreement that reputation had increased in importance in recent years. It also found overwhelming agreement that what it calls a strong ‘society brand’ is critical to a company’s long-term commercial future.

Nearly two-thirds of respondents agreed that companies with a poor society brand traded at a discount as markets and analysts built in reputational risk. The majority felt that in recent years there had been too much emphasis on companies’ financial performance.

"These may seem obvious ideas to the communications world, but they mean there has been great progress in the financial world – admittedly spurred by the financial crisis. Ten years ago we wouldn’t even be having this conversation," said George Hutchinson, partner at StockWell.

However the report reveals that the financial community has a very particular view of what constitutes social purpose. It is sceptical of corporate social responsibility and thinks it is not the answer to reputational challenges largely because it is seen as an add-on.

Nor did respondents think social purpose comes from outside the organisation. Rather, it revealed that the financial world regards doing business well as social purpose in its own right.

"Why do companies have to have a social purpose? They are principally there to make a profit, employ people and hopefully provide goods and services that benefit their customers. Those are social purposes in themselves, " said one respondent.

Have you registered with us yet?

Register now to enjoy more articles and free email bulletins

Already registered?
Sign in