Archive for December, 2007

The conference board just issued a new report titled "Reputation Risk: A Corporate Governance Perspective." The report confirms that corporate reputation can create or destroy shareholder value and warns of the increase evidence of reputational failures. Input for the report was received at a Corporate/Investor Summit on reputation risk in 2007 in Washington DC.  Participants included representatives from companies, investors, professional institutions and other professionals. In short, the report advises greater board oversight of checks and balances for managing reputation and argues that reputation is a corporate governance matter of the highest order. Here are some of the recommendations made in the report:

• Boards of directors should reach a common understanding of what corporate reputation means.
• Boards should understand how management prioritizes stakeholders and how relations with them are being managed for the long-term.
• Boards should treat reputation risk as part of their enterprise risk management (ERM) best practices and not as separate and apart.  The report argues for greater cohesiveness within companies in managing reputation risk.
• Boards should paricipate in identification, categorization and priorization of business events that could have negative effects on the firm's reputation capital and address them in a timely fashion.
• Boards should take part and oversee the proper response strategies for each risk category affecting corporate reputation. Reputation metrics should be employed.

The report also makes a statement about communications that somewhat startled me: "Directors should be skeptical of any attempt at restoring stakeholder confidence exclusively through savvy communication tactics, and request that response strategies fully address underlying  operational risks. In a well-designed ERM program, communication tactics and better disclosure should be seen as tools to corroborate and complete a business risk response strategy, not to replace it."  My sense is that few communications companies would advise a company trying to restore their reputation with stakeholders to enlist pr tactics and the job is done. In fact, many boards do not even invite their communications officers to the table when facing reputational challenges (although that is changing somewhat). I find the report's statement abit harsh considering how many reputational challenges today are poorly handled in terms of transparency and responsiveness. Despite my concern over that one recommendation, the report is very comprehensive and timely. It brings together a great deal of information on reputation management and the board's oversight role in reducing risk to the enterprise.  Expect me to cover more from the report since it holds valuable information that I aim to share.

There has been much media coverage about the Pew Internet and American Life Project research (12.16.07) on Americans googling themselves for what I call reptuation checkups. I felt that I could not ignore it since it falls into what I also call my reputation bucket (all things reputation-related).  Afterall, your "good name" is all we have. Pew found that nearly one-half (47 percent) of Americans have searched for their own names to see whether they were receiving a thumbs up or thumbs down. This name-searching figure has dramatically doubled since 2002 when Pew found only 22 percent targeting themselves online.  I can't say I blame them. I have searched my own name several times since reputation is my middle name (just kidding).  Interestingly, most Americans don't search for their names online on a regular basis. Apparently they are not worried about what might be said about them. This bears out in the research -- the majority (six out of ten Americans) are not worried about how much information is available about them online. I assume they believe they can manage their reputations well enough. Probably a mistake as privacy gets increasingly scarce. Interesting tidbits in the Pew report include:

• Only 4 percent found disturbing or inaccurate information online associated with their name
• Most searches are innocuous -- looking for someone's contact info
• Those under 50 were more likely to be interested in their online reputations

As one of the co-author's wrote: "Nostalgia seems to motivate quite a few Internet users. the most popular search target is someone from the past -- an old friend, an old flame, or a former colleague." I imagine that name-searching is much higher among business executives who depend on their reputations for career opportunities and advancement and enhancing their own company reputations.  My guess is that the figure would be closer to 85 percent  vs. the 47 percent Pew found.  Either way, reputation checkups are important and will probably soar when Pew does its next research in 2012 (five years from now!).

We regularly get curious about things that happen in the communications and reputation space. Recently we were wondering if the frequency of "the company declined to comment" in the global media had risen or fallen in light of the intense media scrutiny that accompanies corporate crises and companies' growing recognition of the need to be transparent.  My hypothesis, which was proven wrong, was that there had been a preciptious decline in "no comment" over the past several years. I based that assumption on the fact that "no comment" is increasingly perceived to be "guilty as read." Instead no commentitis has risen steadily and although it has seen a few dips, remains standard operating procedure in the business world. Of course, every situation is different but reputations can be chipped over those two simple words.

  

I enjoyed reading Time's feature on Top 10 Everythings This Year while on a long flight back from the West Coast yesterday. Although some were silly (top 10 T-shirt worthy phrases), most were fun. At the end of the issue, an essay by James Poniewozik on the Power of 10 hit home. Since I spend so much time reviewing and gathering top 10 "best of" lists or "scorecards" for companies that want to boost their reputations, Poniewozik's list of why top 10 tables work so well provided me with some good tips. Here are a few "best of " points that I took away from his essay:

1. List mania started with our very own 10 Commandments (blame it on God, says Poniewozik)
2. Numbers Rule. Quantification trumps qualitative anytime.
3. Lists are Web-friendly. "Lists are inherently bloggy. They're bite size, they're opinionated and they're a guaranteed spur to conversation..."
4. Lists are memorable. They are brilliant marketing and branding tools.
5. Lists are authoritative. Time said the best and worst business deals of the year were so and so and that's good enough for me. Fortune named such and such company the most admired and now I don't have to think much more about it.
6. Lists are engaging. We can tell our friends and colleagues about them and sound informed.
7. Year-end lists are the king of the roost. They make us fast-forward backwards and recognize all the amazing things that happened over a 12 month period. Who doesn't want to know the most embarrassing moments of the year! Or the top 10 movies of the year.
8. Lists impose order. With all the infosmog circling above us, order helps us keep track of what's to know. Lists put an exclamation point on things that fill up our lives.

Since I am writing here about lists, I thought I would add that I just was voted onto one. I was named one of the 100 Most Influential People in Business Ethics for 2007 by Ethisphere magazine. And yes, I was delighted. Weber Shandwick was too. So my year ended with a bang and I have 12 months to stay relevant!

Fun piece on how dictionaries are figuring out how public relations works. In today's New York Times, the article covers how the word of the year is gaining traction as a publicity tool.  "Locavore*" is the 2007 word of the year at the New Oxford American Dictionary.  The editor behind this new word is out on the speaking circuit and receiving great coverage in the print world. "There are very few good ways to get publicity for a dictionary," remarked one of the Oxford's lexicographers.  Hey, what about wikipedia! The encyclopedia probably could have said the same a few years ago and fast forward to 2007 and it's a red hot publicity machine.  Another statement will go in my saved quote file for presentations: " The WOTY season now rivals our endless holiday shopfest, stretching from Halloween into January.  I can't help thinking that 10 weeks of WOTY** fever is about eight weeks more than anyone wants." This from the language columnist (Jan Freeman) at The Boston Globe. I think that the reputation of words and WOTY lists are great fun. The words for each year are a lens on our culture. Plus I feel better knowing that it's not just CEOs and companies worrying about their reputations but words too! Reputation fever is contagious.  *Locavore = someone who eats locally grown food. **WOTY = Word of the Year

I have always thought that the movie industry would turn its lenses on companies and their practices. I have also always thought that it would become its own genre (which it has). Michael Moore certainly was a driver behind this new communications channel on corporate affairs.  I was rather surprised by how quickly this came to past for private equity. The New York Times reported that a new movie is about to appear on the industry – “The War on Greed, Starring the Homes of Henry Kravis.” The industry now joins other industries under the Hollywood spotlight. Last night when I got home late from work, we had CNN on while hastily eating dinner. It is rare that I watch TV but I wanted to clear my mind. They were broadcasting the CNN Heroes awards at the Museum of Natural History. What a gala! It was like the Academy Awards. The first award of the night went to Chevron for environmental neglect. Talk about reputation damage. I checked out Chevron’s web site this morning and there was no response which is not surprising since criticism of all company wrongdoing is 24/7. While visiting their Web site, I did look at Chevron’s Energyville learning game which was fun. I actually picked up a few things about powering cities. Worth a look at and a good educational tool for classrooms.  All I can say is that reputation is tricky business these days.

An article in the Economist (December 1, 2007) writes about embattled British prime minister Gordon Brown: "Yet governments can reach a tipping point after which they find it impossible to govern. People neither like nor trust politicians, but usually suspend their disbelief when a new lot takes over. Once it seems clear that a prime minister is unlikely to improve things, and may not even be around for long, that suspension is over: the civil service starts leaking; cabinet ministers start briefing; the press looks for bad-news stories; and government becomes defensive and unfocused." Sounds to me alot like a CEO's first year...research has shown that by about nine months, employees have a second sense that things will either work or not work with their new chief executive.  Proof again that those first three to six months for leaders can make or break their reputations. First impressions are very costly. No time to waste.

We just released our new findings on Global 500 CEO Departures. Just as it was released this week, I see the news that Motorola's CEO Ed Zander stepped down. As I have noted many times, being CEO today is a treacherous job. The shelf life is short and reputations quickly tarnished. Here are some of the key findings.

• Over 10 percent of the world’s largest companies lost their CEOs in the first three quarters of 2007. This departure rate amounts to a CEO departure among the world’s largest-revenue producing companies nearly every 5 days.

Global CEO Turnover by Region: First Three Quarters 2006 vs. 2007
	2006		2007
Region	Total (#)	Percent (%)	Total (#)	Percent (%)
North America	16	8.7%	12	6.7%
Europe	17	9.3%	24	12.6%
Asia Pacific	19	15.5%	20	16.4%
Latin America	0	0%	1	10.0%
Total	52	10.4%	57	11.4%

2007 saw more chief executives exit during the first quarter than the following two quarters (26 vs. 15 vs. 16, respectively) and when compared to the first quarter of 2006 (26 vs. 16, respectively).   

Global CEO Turnover by Quarter: First Three Quarters 2006 vs. 2007

Overall, 28 percent of chief executives who left office in the first three quarters of 2007 exited involuntarily. European CEOs were more likely to be pressured to leave their jobs than their regional counterparts.  While only two European CEOs were forced out of office by the end of the third quarter in 2006, nine European CEOs exited involuntarily during the same time period in 2007 – a 350 percent increase.  

Ousted Global CEOs By Region: First Three Quarters 2006 vs. 2007
	2006		2007
	Total (#)	Percent (%)	Total (#)	Percent (%)
North America	3	18.8%	3	25.0%
Europe	2	11.8%	9	37.5%
Asia Pacific	8	42.1%	4	20.0%
Latin America	0	0%	0	0%
Total	13	25.0%	16	28.0%

For the first three quarters of 2006 and 2007, insider executives continued to outnumber outsider executives when new CEOs were selected to lead the world’s largest companies.  Interestingly, 2007 had an even greater proportion of insider CEO successions than seen in 2006 (70 vs. 64 percent, respectively).