It has been a very busy week for many reasons, some business and some personal. I have not written in a few days and feel guilty. Therefore I will fill this blank post with a quote that I have saved for moments like this. I have saved this quote from Good to Great author Jim Collins for several years and use it often. Here goes.

He says it takes a company “…on average of four years to crystallize a coherent strategic concept and seven years of intense effort below the radar screen before a company would show a significant and sustained leap to great results.”

This fits with our assessment that it takes about four years to return a tarnished reputation back to its former glory and probably another three years to make it long-lasting.

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Corporate governance perceptions continue to rise as a prime factor in market valuation. A recent study found that there is a significant correlation between corporate governance and equity performance. The survey by Dr. Olaf Weber, CEO of GOE(Gesellschaft fur Organization & Entscheidung), is one of the first to tie the non-financial asset of governance to share performance.

I came across this research when I learned of a company called Asset4 in Red Herring. The firm helps institutional investors and hedge funds predict the performance of companies based on non-financial factors. The CEO of Asset4, Peter Ohnemus, has several high quality investors such as Goldman Sachs. According to Ohnemus, only 16 percent of a company’s performance is tied to financials. The remaining 84% is tied to environmental policy and social and governance factors. That is no small statement when it comes to reputation and perceptions. His team has been at work on this analysis for three years and has partners such as GOE, the Swiss Federal Institute of Technology, the International Institute for Management Development, and the Copenhagen Business School. According to Mr Ohnemus, “We intend to be the Bloomberg of extra-financial data.” Another big ambition.

Some of the criteria they look at are eco-friendly product innovation, emission reduction, community relations and board structure.

Worth sharing as the reputation landscape changes all the time.

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My week so far….just a few reflections….

I went to a breakfast this week for the new Conde Nast business publication, Portfolio. The issue is beautiful, elegant and as thick as Vogue. I intend to devour it this weekend and decide what I think. However my first impression is…what is there not to like. Their web site is also up and running with no glitches so far. The most emailed feature yesterday was “Alpha Dog.” Kind of fitting. Ironically my 20-something daughter was looking at the issue that I brought home and asked me what was so special about it. I replied that it’s all about the passion and excitement of business. She looked at me surprisingly. She said that she never thought of business in that way. Different strokes for different folks.

The Nike ad in last Sunday’s New York Times is not to be missed. Advertising Age had an article about the new Nike campaign that is all about the issues of race and sport and women. Dean Stoyer told Ad Age (he is their media relations guy): “We believe the elevated conversations around racism, sexism, inequality and disrespect in America need to move forward and not disappear when the events of the past weeks are no longer front-page news.”

Dick Martin wrote an article for BusinessWeek on the anti-reputation of America and the critical need for repairing it on a global scale. His book can also be found on amazon.com and is titled Rebuilding Brand America. He writes: “U.S. companies need to become as obsessed about their country’s reputation around the world as they are about free trade. The Bush Administration’s 2008 State Dept. budget request includes increases for proven programs such as language training, people-to-people exchanges, and targeted economic development.” Martin argues (rightfully so) that America’s reputation is at an all time low. Thomas Friedman sadly mentioned that today in The New York Times.

A poll on Wal-Mart found that consumers’ favorability of the big retailer has increased since last year. It was unusual that Wal-Mart Watch, Wal-Mart’s fiercest critic, sponsored the poll. Scores for “somewhat favorable” moved up from 69 percent to 71 percent. Going in the right direction.

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“What price do you put on your reputation? And the reputation of the news division means more to me than advertising dollars. Because if you lose your reputation, you lose everything.”

Spoken by president of NBC News Steve Capus. Well said. Looks like Imus’ reputation has been torn to shreds. Although I believe in second acts, I am not sure he will be back any time in the near and distant future.

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I think I am a little late (January 2007) on an interesting McKinsey article in their online journal. The article titled “CEOs as Public Lead roers” is about the greater role that CEOs are playing in sociopolitical issues of the day. I was particularly intrigued by the reasons given by CEOs for not taking the time to address public issues.

Among those executives who do play an executive thought leadership role, the main obstacle cited is lack of time. A large seven out of 10 (71 percent) report that time is a major barrier. Among those CEOs who play no role or some role in addressing public issues, lack of time is also at the top of their barriers list (50 percent).

What was interesting was that only 25 percent of those CEOs who play a public role cite fear of negative publicity for themselves or their company. Contrast this with 44 percent of CEOs who play no role or some role in publicly addressing important societal issues. It is unfortunate to think that fear of negative scrutiny and attention prevent leaders from tackling some of the greatest sociopolitical issues such as education, health care and public policy.

Many company reputations will only be enhanced in years to come when executives take leading roles in society. How CEOs stand up and stand for something important will safeguard reputations and secure their stature within their industry. Sorry to think that the world will miss out on great thought leadership for fear of publicity that is most often fleeting.

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There is another list worth noting as listmania continues proliferating. This one is titled Blue Ribbon Companies. It includes those companies that most often made the Fortune, Business 2.0 and FSB (Fortune Small Business) lists, including the Fortune 500, Fastest-Growing and Best Companies to Work For lists, in the past year. There are 109 companies that are dubbed Blue Ribbon Companies.

Seven companies earned the most awards — Amgen, Apple, Cisco, Eli Lilly, Intel, Microsoft and Motorola (in alphabetical order). Looks like any company whose name started with N to Z lost out. Wonder what that is about.

The Ethical Index is out. It is a survey among 1,000 UK consumers about the ethical reputation of 50 companies. The survey is conducted by The Fraser Consultancy and this is the second year that they have done it.

Karen Fraser writes that nearly 50% of UK consumers buy products that they disapprove of on ethical grounds. She calls them “conflicted consumers.” They are similar to what we call “swing voters” in the US. Swing voters are the ones who could go either way in an election and constitute a sizeable voting/purchasing bloc. They are usually well worth getting on your side.

The top 10 companies with the most ethical reputations in 2007 are:

The Body Shop
Marks & Spencer
Boots
Google
Co-operative Stores
Sainsbury’s
Tesco
Kellogg’s
BBC
Waitrose

A few observations:

1. Interesting that BP is much further down the list. Presumably the events of the past two years have dampened their ethical reputation.
2. American Express is also farther down the list. I wonder if this has to do with anti-Americanism.
3. In the survey, the industries with the worst reputations are: oil and fuel production, banking and financial services, and clothing and fashion.

Ethical reputations are increasingly important in the world of reputation. They rival the growing interest in corporate social responsibility among companies. We can expect to hear more about companies trying to show that they have integrity and moral values in the near future.

Will unethical companies have scarlet R’s one day?

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If there was any doubt that executive reputation matters, take a look at what happened to SAP when Shai Agassi surprisedly resigned. SAP’s stock declined 24 percent upon the news.

Apparently Agassi, head of SAP’s software products, did not want to wait for current CEO Kagermann to retire sometime in 2009. Supervisory board chairman and founder Hasso Plattner said, “It became apparent that Shai was not comfortable committing to a 10 to 15 year period which was not in keeping with his personal career timeline.” Agassi is 38 years old and was looking at the “possibility” of becoming CEO when he neared 50. Reports say that Agassi is going to pursue interests in global climate change and environmentalism. Good for him.

It is not surprising that the young SAP executive does not want to wait til his hair turns gray to become CEO or co-CEO with Leo Apotheker. Many executives who are promised the CEO job never make it to day one. Either the CEO delays their leave date or the tension of waiting creates an unpleasant working environment for all those involved. Agassi probably made the right decision since 10 to 15 years is a long time to be on hold for an ambitious talented individual.

Despite the drama over Agassi’s resignation, it is clear that the reputation of an individual executive can make a significant impact on company reputation and carry a premium on the share price that is hard to overlook.

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