Archive for January, 2007

We have been very busy in reputation-land. Our global 500 CEO Departures study was featured in the Financial Times with a sidebar and chart. Interest seems quite strong which makes me think once again that there is an insatiable appetite for CEO news and information, good or bad. Bloomberg International was also interested in the changing CEO churn and broadcast a feature in Europe and Asia-Pacific (with yours truly). I should add that both the FT and Bloomberg are wonderful to deal with.

Other interesting tidbits crossed my desk this week. Another reputation service has surfaced — www.dbuz.com. However, this one surprised me. My blog has covered other reputation defender sites but dbuz goes to a new level. One news story referred to it as digital dirt. Here is what the press release says:

Do you have skeletons in your closet? Do you think no one will find out what you did last summer? Do you have the dirt on someone that you would like to share anonymously? Dbuz.com can make your life a living nightmare or an absolute breeze. Members write comments about anyone they know for the whole world to see, but there’s a catch. Those same people can write comments about you!

Visitors can browse Dbuz.com and post negative or positive comments about people they know. If you purchase a membership you earn the right to delete 30 per cent of the comments written about you. That way you can keep your darkest secrets off the Internet.

“Everyone has secrets. The best way to keep them secret is to join Dbuz.com,” says Dbuz.com CEO, name withheld. “Dbuz.com finally lets nice guys finish first while the rest are revealed.”

Another survey mentioning reputation appeared in the Financial Times on January 23rd. The survey by PWC researched consumers and pharmaceutical industry executives about pharmaceutical companies. They found that a large 78 percent of consumers report that they considera company’s reputation when deciding about drug treatment. The PWC study found wide gaps between consumers and pharma execs about the industry. No surprise there.

Additionally, trust in business and the CEO post is always on the agenda at Davos. Edelman’s 2007 Trust Index was released at the WEF and business received the highest ranking in the U.S. since 2001, while government received its lowest level. Deep distrust of CEOs continues. Hopefully, that will change too.

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Global 500 CEO Departures, Weber Shandwick, Financial Times, Bloomberg International, CEOs, dbuz, reputation defender, PWC, pharmaceutical industry reputation, Edelman Trust Barometer, business trust, CEO reputations
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We just released a new analysis on CEO departure rates in the world’s largest companies. Robert Nardelli’s exit from Home Depot and John Browne’s early retirement from BP clearly show that CEO departures have lost none of their business impact or controversy. Thought I would share on my blog.

Upheaval in the chief executive suite is not in the exclusive domain of one region when it comes to the super class of CEOs in the world’s largest companies. Overall, a sizeable 15 percent of the world’s largest companies experienced a chief executive change in 2006 (10 percent in North America, 18 percent in Europe and 16 percent in Asia Pacific). The findings are based on CEO departures at the world’s 500 largest revenue-producing companies and show that disruption in the chief executive suite is clearly a worldwide phenomenon.

On a positive note, the proprietary analysis reveals that the overall departure rate of global 500 CEOs declined from 17 percent in 2005 to 15 percent in 2006 – an 11 percent drop proportionally. On a regional basis, the world’s largest companies headquartered in North America experienced the most marked decline, from 18 percent in 2005 down to 10 percent in 2006. In contrast, the world’s largest company CEOs in Europe saw a modest rise (from 15 percent in 2005 to 18 percent in 2006) while Asia Pacific witnessed no change.

Considering that the world’s leading 500 companies are responsible for generating approximately $19 trillion in revenue (or one third the GDP), quality CEO succession planning, leadership training and board accountability have far-reaching consequences, not only for individual companies but also for members of the worldwide business community.

We identified other significant shifts in the chief executive suite of the world’s largest companies:

** CEO Departures Cross All Regions
** Annual Global CEO Turnover Is Declining
** Countries with the Highest CEO Departures are the United States, Japan, Britain, Germany and France
** Reasons for CEO Turnover Take Many Forms – Nearly one-third (31 percent) of global 500 CEOs left against their will and over one-half (57 percent) retired or left office for reasons such as planned succession, promotion to chairman, political appointment or a new position at another company. The remainder (12 percent) exited due to mergers, illness, interim positions and corporate governance changes.
**More Insider Executives Become CEOs

Despite the good news that overall CEO churn among the world’s largest 500 companies appears to be slowing down, uncertainty from CEO change is felt from the boardroom to the mailroom. Whether CEO departures are due to standard succession planning, mergers, poor financial performance or wrongdoing, boards everywhere must fill the leadership pipeline with the best and the brightest for the challenging times ahead.

The challenge to our world’s business leaders is demonstrating to the best and brightest that the CEO position is worth aspiring to. When one global Fortune 500 company CEO leaves every five days, you have to ask yourself whether the job is worth it. How can we bring back the luster to the chief executive suite? I leave you with that question.

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Global Fortune 500, world’s largest companies, CEO Departures, Weber Shandwick CEO Departures Study, super class of CEOs, $19 trillion in revenue, upheaval in the chief executive suite, North American CEOs, European CEOs, Asia-Pacific CEOs, board accountability, financial performance
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Robert Eccles, Scott Newquist and Roland Schatz have written a terrific article on Reputation and its Risks. For all those reputation junkies, this article is a must read and appears in next month’s Havard Business Review.

I recently met Bob. He is a partner in a consulting firm called Perception Partners and now joins the ever-widening circle of reputation hounds. It is a true case of six degrees since we seem to know alot of people in common and it is surprising that we just now met.

The article helps to explain the reality-perception reputation gap at BP and at other company reputations. Hope you enjoy.

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Reputation risk, Robert Eccles, BP, perception-reality gap, company reputation, MediaTenor, Scott Newquist, Roland Schatz
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We all know all about the Baker report on BP’s safety culture and the early retirement of CEO John Browne. As the expression goes, you would have to be under a rock to have missed the headlines. According to Google, there were nearly two million hits for “Baker Panel.”

There is, however, another story that has not been covered — the smooth transition to new CEO-elect Tony Hayward. The fact that Hayward is an insider CEO and groomed at the feet of Lord Browne is a tale worth writing. Don’t companies get A+’s anymore for good CEO transitions? Clearly BP did its homework and did not feel the need to pull in an outsider to dramatically turnaround the organization.

It is understandable that the focus on the BP transition remains in the shadows. After all, 15 people died in Texas City when the refinery exploded and countless others suffered injuries. But I still believe that there are lessons to be learned from a seamless transition and Browne’s deep smarts in retiring even earlier than originally planned. They deserve at least an A.

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BP, John Browne, Baker Panel, Texas City Refinery, reputation, CEO transition, insider, CEO-elect, Tony Hayward, grooming successor
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Been traveling in Europe this week and have lots to report back on. However, I wanted to mention that I met another member of the small club of company officers with reputation in their titles. I was part of a presentation today on Safeguarding Reputation in Madrid and was joined by Marisol Garcia-Bango of Repsol YPF. She has the title of Subdirectora de Reputacion Corporativa. In English, I believe it means Deputy Director of Corporate Reputation. Marisol spoke about how they are tracking reputation at Repsol YPF and have a committee of business heads that review reputation progress. It was a pleasure to meet another member of the reputation tribe.

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Reputation, Repsol YPF, Madrid, safeguarding reputation
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The first two weeks of 2007 have certainly hit home that big-time CEOs are no safer than most of us. Home Depot’s CEO ouster last week started off the new year with a bang and this week closed with the earlier than early retirement of BP‘s Lord John Browne. Browne is leaving in July instead of 2008 when he reaches the BP mandatory retirement age of 60. Nearly all the news reports indicate that Browne and the board mutually agreed that it was best for him to leave early and let a new CEO take on the oil major’s long reputation recovery. The decision is totally understandable and should have been no surprise as the Texas City refinery explosion task force report is expected to come out on Tuesday. The Browne departure is a thunderously loud signal that the report will be devastating to the safety culture of BP and leadership of Browne.

The question surrounding Browne is whether he will be able to recover his tarnished reputation now that his legacy is under scrutiny and damaged. The tragic deaths at Texas City refinery, Alaskan pipeline corrosion and accusations of illegal propane gas trading have all hammered BP’s once fine reputation. Three strikes and you are out certainly resonates with this unfortunate chain of events. Although Tony Hayward will now take the reins at BP in July, the recovery will not be easy. Weber Shandwick‘s research shows that recovery takes three and one-half years which makes BP’s potential restoration near 2011.

One thing is clear. The “R” word will be used judiciously at BP over the next few years. They have a ways to go in reclaiming trust.

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CEO departures, Home Depot, BP, Nardelli, Lord John Browne, Texas City refinery, reputation recovery, reputation restoration, Weber Shandwick, legacy, damaged reputation, the R word
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I took a stroll through the comments listed on Fortune’s Best Places to Work blog. Definitely a host of people not agreeing with the companies that made the top 100 list. I certainly would not want to be a company with an employee posting that the company is actually a miserable place to work. Many of the comments revolved around working many hours for little pay. For instance: “I’ve worked at 2 of the Big 4 and in each case the number of hours are ridiculous and the pay is less than minimum wage on a per hour basis. They claim to have a “work-life balance” but its mostly just work. There is high turnover and people aren’t happy for the most part. I believe these surveys are skewed and don’t tell the whole truth. Posted By Sam, San Francisco, CA : Mon Jan 08, 12:44:16 PM “

Some companies are adored such as Wegmans. I visited Wegmans when my daughter lived in Syracuse and it is truly fabulous. Employees seem to think so too. “I worked at Wegmans and grew up in Rochester NY, they helped pay for college and gave me a job every holiday and summer break. It’s a fantastic company year after year. Posted By BMark, NY NY : Mon Jan 08, 05:23:19 PM “

Another person wrote in response to the survey: “I worked for one of the companies on the list for over 10 years. I can say that the environment on the inside is completely different that what is portrayed to the media. Ever since, I don’t put any faith in this listing and just check the list to get a chuckle.”

Interesting mentions from people at Intel, Deloitte, Quad Graphics, Bank of America (someone loves the company), and the list goes on. Take a look. It’s interesting.

Attracting talent and building a good culture is critical today to building a good reputation. We can see from this blog how some comments can stir doubt in an employer’s reputation. I always remembered something from reading former GE CEO Jack Welch’s Straight from the Gut. He reminded leaders to ask themselves if their employees would recognize the company described in their annual report. Still is a very insightful question after reading some of these chilling comments.

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Fortune, Best Places to Work blog, employer reputation, Wegmans, Intel, Bank of America, Jack Welch, Straight from the Gut, annual report
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I was very surprised by one thing during the feverish coverage last week of CEO Nardelli’s ouster from Home Depot. As the media reports, one of the main reasons Nardelli was asked to leave was his unwillingness to reduce his compensation package. Surprisingly, there was a picture of Nardelli’s home in Atlanta, Georgia in the The New York Times coverage. Needless to say, the CEO’s home is grand with manicured and luscious grounds. It took a split second for me to make the connection. The Nardelli homestead photo reminded me of the pictures that were displayed of the newly-built home of Enron’s former CFO Andrew Fastow as the scandal unfolded. Although I doubt that The New York Times was subliminally messaging readers that Nardelli’s actions were as criminal as Fastow’s, the home outing lingered in my mind all week.

Was Nardelli’s home photo meant to signal that this is the home that shareholders built? Why else would it be featured in the article if that was not what we were supposed to think? Personally, I have been to business people’s homes in Atlanta and they all look large to me. Despite the brouhaha over Nardelli’s pay and management style, the home shot was a cheap shot in my book.

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Bob Nardelli, Andrew Fastow, CEO homes, Home Depot, Enron, reputation
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Pretty amazing news that Home Depot’s CEO Bob Nardelli lost his job. Although there has been much media coverage about his high compensation package and alleged arrogance, what struck me is the size and stature of the home retailer. Home Depot is #14 on the Fortune 500 list and #13 on Fortune’s Most Admired Companies list. It can probably be said that increasingly more CEOs will be booted out of such royalty in the years ahead.

Here is the list of the top 15 Fortune 500 companies — ExxonMobil, Wal-Mart, General Motors, Chevron, Ford, ConocoPhillips, GE, Citigroup, AIG, IBM, HP, Bank of America, Berkshire Hathaway, Home Depot and Valero Energy. A large four or 26% of these titans lost their positions recently….Ford (Bill Ford brings in outsider Mullaly and technically fires himself), AIG (Hank Greenberg pushed out in a Spitzer frenzy), HP (Carly Fiorina fired by the board) and now Home Depot. One quarter is not a small number when it comes to companies of this size. Everyone is feeling the pain.

I also have to say that Board Reputation is becoming increasingly real. The Home Depot board was apparently under tremendous pressure to save their reputations from ruin. The board did not want to face angry investors and shareholders over Nardelli’s high pay (as the story goes). As I have noted before, Board Reputation as a science in its own right will be here before we blink twice.

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Home Depot, Bob Nardelli, CEO, CEO compensation, Board Reputation, Fortune 500, Fortune Most Admired Companies
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I was sent a report on intangible assets (customer loyalty, know-how, talent, patents, innovativeness, leadership, reputation, ideas, etc.) that I highly recommend. The report is written by the Institute of Practitioners in Advertising and underscores the importance of intangible assets in the 21st century.

Because reputation is a core intangible, the report drew my interest. As the reports rightly says, “Intangible value is the issue of the decade.”

Here is some compelling evidence:

• Intangibles make up 78% of the market value of the Fortune 500, 72% of the value of the FTSE 350 and 35% of the market of all listed companies worldwide.
• In 1955, tangible assets accounted for nearly 80% of the value of non-financial businesses; by 2005 that figure fell to just over 50%.
• The value of intangibles has tripled over the past 30 years.
• Some sectors are more dependent on intangibles than others — Media (91% intangibles); Pharmaceuticals (89%); Food, Retail and Telecom; Oil and Gas; Banking. Those more dependent on tangibles include Insurance; Electricity; Automotive and Manufacturing.
• The country with the largest proportion of intangible assets is Switzerland (probably because of Roche and Novartis), followed by India, U.S., U.K., and Canada.

These amazing facts once again prove the importance of reputation and the need to manage it well. CEOs and other top leaders are increasingly held accountable for managing reputation and making sure no harm comes to it. For this very reason, CEOs receive more of the blame for any reputation erosion (Weber Shandwick’s research just found this to be the case).

Reputation could become the fourth bottom line.

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Intangible assets, reputation, managing intangibles, managing reputation, CEO blame, reputation management, tangible assets, fourth bottom line
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