Archive for May, 2006

WSJ Columnist James Stewart who also writes for Smart Money had a few choice words to say today (31 May 2006) about how he picks stocks:

“The Enron story is a sobering reminder that management integrity is the foundation of financial success. Since the Enron fraud emerged, I have moved swiftly to sell stocks in companies where top management is implicated in wrongdoing, and especially where they refuse to accept responsibility. I’ll continue to recommend that you do the same.”

When it comes to CEO reputation, ethical conduct is almost always at the top. Whereas years ago integrity ranked lower in terms of what drives a CEO reputation, today it is the number one factor. In Europe, integrity does not usually rank as high as it does in the U.S. because ethical CEO behavior is expected. European companies have recently had their own scandals leading me to believe that integrity will soon top their charts too.

Stewart’s comment about accepting responsibility also rings true. CEOs are ultimately held responsible for company behavior. Accountability is the watchword for the times.

As an observer of CEO departures for many years now, the new 2005 Booz Allen Hamilton study on CEO succession provides several illluminating trends. The survey is now in its fifth year and always provides new insights and patterns:

* More than one in seven of the world’s largest companies changed leadership in 2005
* Four times as many of the world’s top CEOs were forced out in 2005 vs 1995
* Outsider CEOs do not perform as well as insider CEOs (they start out well and lose their sizzle by year five)

As the report’s authors state: “Chief executives who can produce results are in greater demand than ever before.” That partially explains why boards are willing to give CEOs high compensation packages to attract and keep them from jumping to another company (apparently a new trend too).

The talent wars are back.

Little did I forsee the tragic news about Michelin’s young CEO Edouard Michelin when I last posted about boards being unprepared for sudden CEO departures. CEO Michelin died in a boating accident in western France on May 26th. The company decisively issued statements about the tragedy and who his successor would be. These statements were prominently displayed on the Web site. The coverage regarding new CEO Mr Rollier instilled confidence and assurance during a period of potential uncertainty.

US Michelin Web site: “Michelin has just learned the tragic news of the accidental death of Mr. Edouard Michelin, the company’s co-Managing Partner. It is an immense sadness for his family, as well as for all of our 130,000 Michelin employees throughout the world. In accordance with Michelin’s established governance policies, Michel Rollier, our current co-Managing Partner will ensure the continuity of the Group’s management.”

Michelin Corporate Home Page: Declaration of Michel Rollier, Managing Partner of the Michelin Group, after the accidental death of Mr. Edouard Michelin: “The tragic death, Friday last, of Mr Edouard Michelin is a trauma for all of us. My most profond thoughts are for his wife and their children and to Francois Michelin, who was very close to him. Pursuant to Michelin’s governing by-laws, as of today, I am assuming the full responsibilities as the head of Michelin. Our strategic orientations are clear. They remain unchanged.”

This tragedy should serve as a reminder to boards about having their CEO successors groomed and seasoned if such an event should happen to them.

Successful CEO transitions require preparation and intensive communications training. Even if the transition appears orderly, there are always missteps.

Former federal Reserve Chairman Alan Greenspan’s successor Ben Bernanke recently misspoke when making informal remarks to a CNBC anchor during dinner. The remarks created havoc with the stock market. Bernanke later said that it “was a lapse in judgment on my part. In the future, my communications with the public and the markets will be entirely through regular and formal channels.”

The RHR/Directorship research underscores the need for ready-to-go New CEO 100 Day Plans along with the more typical Crisis Preparedness plans that most companies already have on hand.

Bloomberg.com had a cool article today on how the reputation of Pino Grigio has improved over the past several years. This young wine is considered the Cinderella of wines. When it was first brought to the U.S. in the late 1970s, it was unknown and considered a fairly common taste because it took less work than most wines to produce. “Ask for a white wine in an Italian restaurant and chances are it’ll be a cheap pinot grigio,” writes John Mariani.

Apparently pino grigio has been busy managing its reputation all these years and the price per bottle (do they call it ppb?) has more than doubled. Excellent ROI metrics. The best-selling pino grigio is Santa Margherita which scored big in the U.S. with its campaign to consume it for those “momentous encounters.”

Mariani says that Santa Margherita has a few things going for it…good marketing, always available and easy to pronounce. I think you can say the same for highly regarded businesses as well. Starbucks did not take off like a rocket either but has great marketing, is everywhere you look and you can say the name without stuttering.

Enjoyed the article since it underscores how reputation counts no matter what sector you are in.

There are few professionals working today with “reputation” in their title. Today this group expanded by one when I joined Weber Shandwick as “Chief Reputation Strategist.” [According to Google, these are the Chinese characters for reputation. Sure hope so.]

GlaxoSmithKline (GSK) had someone with the title of VP of Corporate Image and Reputation last time I checked. Dow has a VP of Communications and Reputation. Coca-Cola’s new SVP and director of worldwide public affairs and communications Tom Mattia just announced that he is hiring a director of corporate reputation. “We’ve created a whole new function around corporate reputation to bring together corporate social responsibility pieces, foundation giving pieces, community action pieces, and environmental pieces so people understand all the good we do.” He adds that reputation is “the most important vector” in Coke’s communications efforts going forward. [PRWeek] Good move on Coca-Cola’s part. As it has been said before, you manage what you measure. Clearly Coke will be measuring their reputation now that it is someone’s job.

Although I have been in the “reputation” business for some time now and reputation continues to grow exponentially in importance, the Reputation Club remains small. You have to wonder why there are not more reputation-titled officers when you think about all the CEOs who talk at great length about reputation in their thought leadership initiatives and emphasize its importance in their Letters to Shareholders and on their company web sites.

I am glad to think that Weber Shandwick has recognized the importance of reputation by being one of the few companies to establish a reputation office. I look forward to the time when reputation officers are more mainstream in business circles. lgr

No doubt about it. The indictment of Hyundai Motor Company’s chairman Chung Mong Koo has thrown the company into disarray. Since South Korean companies are usually family controlled and operate top-down, a succession plan is not exactly in place. The embarrassment of government corruption charges among one of the country’s most charismatic and revered chairman is palpable. As a company spokesperson commented to The New York Times: “He is the Moses who brought us where we are today. We don’t know who could replace him.”

Knowing that this scandal has made headlines worldwide (the chairman’s image on this posting came up when I typed in Hyundai into Google Images), I went to the main Hyundai web site to see how it was being handled. Interestingly and not surprising, there was no mention of the chairman’s arrest and replacement. The chairman’s signed letter to web site visitors is still up.

The USA Hyundai web site also has no mention of the chairman’s predicament although I searched deep and wide. The new slogan at Hyundai USA is “rethink everything.” Sounds like the parent company should rethink what they are going to do next now that their chairman is issuing directions from a jail cell. The board needs to get professional management inside the company to keep it functioning and prevent paralysis. Another message I saw flashed on the Hyundai USA web site was a commitment to “open management.” Again, Hyundai needs to carefully review its promises as the world swoops in and carefully monitors how they are handling this crisis.

The Hyundai board needs to begin rescuing its reputation and showing leadership strength. One of the first steps in stopping the bleeding is to disclose the situation honestly and quickly. There is a small window of opportunity (and good will) that will suddenly close if Hyundai does not act soon. lgr

As I have recently changed jobs, I thought it appropriate to begin a new blog. I am now the Chief Reputation Strategist at global public relations firm Weber Shandwick.

Naming this blog was not easy but once I thought of “reputationXchange,” it felt just right.

Here’s my thinking behind reputation(e)Xchange. An Exchange (like the New York Stock Exchange or London Stock Exchange) is a market where securities, options, futures or commodities can be bought and sold. In my world, reputation is its own form of currency. An organization, leader, company or country trades its reputation on the open market for the best talent, partners and investors that it can attract. The entity also uses its reputation to bolster its standing and win support in times of crisis or uncertainty.

Join me at the reputationXchange (formerly www.reputationwatch.blogspot.com). Boxes are being upacked as we blog. lgr