Archive for December, 2006
1. The reputation of CEOs rebound with fewer transgressions and greater integrity. No jail sentences for chief executives in 2007.
2. Un-admired industries repair their reputations and regain respect.
3. A few celebrity CEOs come out for the entertainment value alone. It is getting dull out there.
4. No one ever hears the word pretexting again.
5. CEO churn loses steam and CEOs stay in office longer.
6. Credibility replaces greed the world over.
7. Reputation management becomes the new corporate strategy.
8. When companies fail, they pick themselves up and build back better companies.
9. Talent wars don’t turn into bidding wars.
10. More reputation officers join my tiny club of those with “reputation” in their titles — as of now, five and counting.
11. Social reputation (CSR) becomes as prominent as social media.
12. America’s reputation abroad gets a lift (somehow).
13. Corporate philantrophy spreads like wildfire.
14. Companies get serious about culture.
15. Offices are designed with people in mind.
16. Compliance officers are not in such great demand.
17. Leaders heed the warning signs of reputation failure and move fast.
18. Image is everything! (just kidding)
19. The first living annual report is published.
20. ReputationXchange and ReputationRx get hotter than ever!
Six degrees of reputation. I like the sound of it. This phrase came up while I was searching on Google for hits on “reputation.” As the title of a report, six degrees of reputation in this context has to do with online and recommendation systems such as seen on amazon for book reviews.
However, I think it applies to how companies are perceived in their industries today. One of the greatest changes I have seen in the reputation landscape is how one company wrongdoing can impact an entire industry reputation and its competitors. Industry peers are only six degrees of reputation away from each other when one competitor missteps. Sometimes I feel as if companies are only separated by one or two degrees of reptuation, no less six. When I read about the problems in the automotive, pharmaceutical and oil industries, I cannot help but wonder if they are really all alike, give or take a degree. Companies probably need to do a better job of distancing themselves from each other. How about ten degrees of reputation!
Reputation scorecards or league tables are getting more competitive. Today’s Financial Times (21 December 2006) reported how Citigroup and its rivals (Morgan Stanley, Goldman Sachs, Lehman Brothers) are duking it out over who is going to get last minute credit in the league tables over the Statoil-Hydro merger. Apparently Citigroup hurriedly offered to write up a fairness opinion for Hydro to boost its ranking (so says informants). Citigroup is now in second place, lagging behind Morgan Stanley who has advised the most companies in Europe in 2006. Goldman is in third place. As the year comes to a close, the fight for “bragging rights” among these financial heavyweights heats up to a boil.
Reputation scorecards, league tables or “best of” lists are important for companies to market themselves. As third-party endorsements, they are extremely valuable and a popular way to build reputation.
I bet that Statoil had no idea that their surprise $30 billion merger would create such a race to the top. Only five more business days to the final close.
I just read a truly forthright interview in The Chronicle with new Sun Microsystems CEO Jonathan Schwartz. Since I follow CEOs in their early tenure, the Q&A was disarmingly honest. Here are a few choice excerpts:
“Q: What has been the toughest part of the past few months?
A: Physical endurance probably ranks at the top of the list (laughs). We are a global company that serves some very important customers, all of whom would like to sit down with me and talk about the future of computing. That requires a lot of energy and stamina.
The hardest part is really just recognizing that the disparity between how big we are today and how big we can be, given the size of the market, and just thinking through how we scale the company to go serve the planet.
Q: Scott was CEO for more than 20 years. Was it ever difficult when you started talking to analysts, other CEOs and customers who were used to dealing with Scott?
A: It wasn’t difficult. It was terrifying.
Q: For them or for you?
A: For me. Here is the guy who established a reputation and created the company that we are today, and (to) have him throw the keys to me and say, “I’ll talk to you in six months. Call me if you need me,” was pretty daunting.
We have a perch in the industry, we have a presence and a reputation which I don’t want to just uphold, I’d also like to amplify. Any new CEO who says he is not scared on the first day of his job is lying.
Over time, being aware of the opportunity and just understanding the depth of my team and the depth of the talent we have across Sun — that all becomes a lot less worrisome. Now, I’m more worried about the opportunity than I am about the first impression or the first experience. “
Schwartz is not the first CEO to mention that day one as chief executive is terrifying. Many CEOs will comment on its loneliness, how the buck stops at their door and how there is little or no training for the grave responsibility. New CEOs also soon realize that once they have their teams in place, the outlook becomes clearer and less overwhelming.
The book I wrote, CEO Capital, is about what CEOs must concentrate on during those first 100 days and beyond. First impressions matter more than you may think.
A new study by McAfee, Inc. (the security technology company) and Dr. Jonathan Liebenau (Department of Management at the London School of Economics) found that companies are increasingly vulnerable to reputation risk as compliance-related legislation spreads around the world. “The research — believed to be the first of its kind — warns that a firm’s reputation could be damaged by disclosure laws now in force in the U.S. that look set to become more widespread worldwide.”
I did not realize this but the law requires companies to make public any security breach. This went into effect in 2004 when Sarbox was enacted. According to Dr. Liebenau, security breaches are hovering around 8 to 10 per week. Maybe this does not sound scary but Liebenau reports that nearly 94 million records containing sensitive information have been involved in security breaches. The new research among CIOs, security officers and IT directors forecasts that as other regions require similar notice of security breaches, reputation will be harder than ever to protect. We are reaching the compliance tipping point.
The research is particularly interesting because our research on safeguarding reputation found that security breaches are one of the key triggers of reputation failure. As security breaches mount (and they will), risk to reputation becomes even more tenuous.
I have often reported on the expanding Reputation Club in this blog. Looks like there will be a new member coming aboard. The Allstate Corporation is running an ad for a Director of Reputation Management. The Allstate ad reads: “The Director of Reputation Management will provide the overall strategy and direction to ensure The Allstate Corporation’s reputation is protected, managed and enhanced.” Music to my ears.
The mini-club already includes people with reputation in their titles from Dow, Coca-Cola, SABMiller and of course, yours truly, Weber Shandwick.
On his blog, New Sun Microsystems CEO Jonathan Schwartz asked the SEC in November to let his company and others to disclose financial information on blogs. He believes that investors have a right to this information. Schwartz makes a good point and below is how he argued his position.
“I’ve been an officer of a public company for a while, and I’ve had access to confidential information for a good while longer. And I’m used to holding my tongue on issues that’d be deemed material to Sun’s financial performance. Like a pending acquisition or big sale, or data related to how our quarter’s going. In a public company, there are very strict laws surrounding how information’s disclosed.
So a couple years ago, when I first started blogging, I and our illustrious general counsel were far less worried about what I was saying, than where I was saying it. For example, I couldn’t use my blog to announce our quarterly performance, or disclose a material transaction. I had to use a press release, or a conference call (with a telephone operator, no less!).
Why? A regulation known as “Reg FD,” or Regulation Fair Disclosure – which attempts to ensure no one audience gets preferential access to material non-public information. It’s a great concept, designed to prevent selective disclosure, or actions that might advantage one investor over another.
Unfortunately, Reg FD doesn’t recognize the internet, or a blog, as the exclusive vehicle through which the public can be fairly informed. In order to be deemed compliant, if we have material news to disclose, we have to hold an anachronistic telephonic conference call, or issue an equivalently anachronistic press release, so that the (not so anachronistic) Wall Street Journal can disseminate the news. I would argue that none of those routes are as accessible to the general public as a this blog, or Sun’s web site. Our blogs don’t require a subscription, or even registration, and are available to anyone, across the globe, with an internet connection. Simultaneously.
Now we happen to have a like-minded Chairman at the United States Securities and Exchange Commission (the ‘SEC’), Christopher Cox. So Mike and I sent along a rather formal note last week, requesting a clarification to Reg FD, one that would permit our (and everyone else) using the internet (eg, a company blog or web site) to release material information. Without a press release or operator assisted conference call. We are, after all, the primary source of such material information – there’s no point in going through an intermediary if what we’re after is fair disclosure and full transparency. Let the light shine in, don’t buy a flashlight.”
Schwartz raises good points about how laws enacted pre-Internet and pre-blogging do not apply today. My word processing software does not even recognize the word “blog.” Transparency is critical to company credibility and reputation.
I have not heard whether Schwartz heard back from the SEC.
Blog, Jonathan Schwartz, New CEO, Sun Microsystems, SEC, Reg FD, financial disclosure, Christopher Cox, transparency, credibility, reputation
The Harvard Business Review had an interesting article on Facing Ambiguous Threats in its November 2006 issue. Due to our recent research on reputation recovery, I am particularly interested in identifying threats before they overturn reputations. Many companies experience early warning signs or pre-cautionary signals before threats appear and crisis takes its toll.
The article describes how hospitals will issue a “code blue” alert that calls a rapid-response team into action to aid patients undergoing cardiac arrest. Patients apparently exhibit early signs of distress such as respiratory rate changes and deviations in their appearance prior to the need for a full-fledged code blue alert. Hospitals are now codifying these patient early warning signs for nurses and other staff members in order to help staff identify them before it is too late.
Reputations can also be salvaged by paying more attention to early warning signs that precede crises. When former IBM CEO Lou Gerstner arrived at the troubled computer giant, he noticed that there were 339 satisfaction surveys, 128 different CIOs and 142 different financial systems. He warned others to take note of corporate bloat as a sign of impending deterioration.
Every company has early warning signs of danger. If we could only identify them, we’d hopefully safeguard more reputations from deterioration.