CEO reputation

I feel like I have read this article before. The title in USA Today yesterday was "CEOs stumble over ethics violations, mismanagement." Is it 2002 over again when Enron, WorldCom and Adelphia made headlines over ethical transgressions and wrongdoing? I agree that there seems to be a rush of these events recently but I am not sure it is vastly different than it has always been. The Internet has certainly added to the scrutiny of corporate executives but the spotlights were just as glaring and intense as they were years ago. In fact, I tend to think that wrongdoing on the part of CEOs stayed in the news for a longer period of time than they do now. I am waiting for headlines about JPMorganChase CEO Jamie Dimon to be replaced soon.  Not sure what will substitute for him in the days ahead but I can bet $5 that something will surface in the next week to knock Dimon off the front pages (so to speak). And whistleblowers have been around for a long time.  It is not the first time I have heard about a note being sent to a board member about an executive transgression. The real difference is that there is zero tolerance for these missteps and for a simple reason -- "reputation." It was interesting to me that the word "reputation" did not appear once in the USA Today article. Boards are making split-second decisions about CEO tenures because they know the downside of having their reputations tarnished, trashed, torn and tattered. Not only are their own personal reputations at risk but that of the companies on whose boards they sit (and that impacts their compensation which is often in stock).  As Lucian Bebchuk, director of corporate governance at Harvard Law School said in the article, "Boards do seem to move faster to deal with scandals and public failings that attract shareholder and media attention."  Being in the headlines and chatted about online about reputation failure is the new scarlet letter. I hope that next time an article appears, the reputation damage that brings down share prices, dampens employee morale, attracts headlines and invites investor activists gets mentioned. The cost of reputation failings are higher than ever and the stain can be very deep. In fact, it takes years to wash out.

I don’t even have to do the math to figure this out. The increase in mentions about Jamie Dimon’s reputation is astronomical. Last year on May 14, there were nine mentions of Jamie Dimon with the word reputation.  Fast forward one year and there are 3,160 mentions just today. The articles all have a similar ring to them… no surprise considering that the bank he leads lost over $2 billion on a trading error. Pretty soon, I expect they will be calling for his head. “The reputation that Jamie Dimon honed for decades on Wall Street has been severely damaged in a matter of days.” “…tainted the reputation of the bank's high profile chief executive Jamie Dimon.” "We made a terrible, egregious mistake," said bank CEO Jamie Dimon, who had a reputation as a master of risk management.” “So here you are Jamie Dimon. You have a sterling reputation. Why? Because people say he knows how to manage risk better than anybody.” “A black mark for a survivor of the financial crisis.” The one thing I can safely conclude is that the word reputation is firmly embedded in our lexicon. I used to notice the mention of reputation once in a while but in the past year "reputation" shows up everywhere. It has become ubiquitous. This is not because crises and scandals are skyrocketing which is how it feels every day but is not the case. We had as many scandals and crises just two or three years ago when the economy tanked. It is just clear to me that "reputation" is such an economic competitive asset, that it is its own form of currency today.  Hence, it falls into the same rubric as dollars and cents.  Reputation is definitely playing a larger role in what drives our economy. There is no doubt about it.

I have to say that the headline in today’s WSJ re the $2 billion trading loss at JPMorganChase strongly resonated with me. The title is “J.P. Morgan Trades in Its Crown.”  In our research on safeguarding reputation, we start out by summing up reputation failures among the world’s most admired this way:

 

“The last decade has seen many of the world’s most admired companies descend from their once lofty positions. They were in a class by themselves — corporate reputation royalty whose invincibility was universally accepted by business executives around the globe. No one could have predicted that these companies would ever part with their crowns. How the world has changed!”

 

It looks like we now have another major kingpin to add to our Weber Shandwick “stumble rate” analysis that we calculate every year. You can find more about it in an earlier post.  But…between 2011 and 2012, 49% of the world’s largest companies experienced a reputational stumble, up from last year’s 43% but exactly the same as 2010’s rate.  There seems to be no more untouchables among the Fortune 500 with this recent news.

 

I was also intrigued by Jamie Dimon’s remarks about what he could have done differently to have caught this $2 billion blunder earlier. Dimon’s deadpan answer was paying more attention to the “newspapers” among other things. He was referring to earlier reports in the papers about the trading problem. Have to hand it to him for taking the blame and being brutally honest in his response. He’s been true to his reputation on that count.

“In hindsight, the new strategy was flawed, complex, poorly reviewed, poorly executed and poorly monitored. The portfolio has proven to be riskier, more volatile and less effective an economic hedge than we thought.”

Another side note of interest is that this reputation crisis did not start in social media. It has certainly taken off online but as far as we know now, there's been no social media assault that instigated this crisis. No online cloak and dagger here.

Will be interesting to see how this pans out reputation-wise. Will this tarnish the bank’s reputation for the long-term or just be a stain? No doubt it will be headline news for a while. Dimon is eminently quotable --the WSJ has his most notable quotes already listed. I hate to have to say it but another one hits the dust.

Years ago at my former job, the research we did caught fire due to one simple finding. In fact, I used to think of myself as the 50 percent woman. Our research on CEO reputation revealed that 50 percent of a company's reputation was attributable to the CEO. For some reason, this one simple factoid traveled around the world like wild fire. People just found it incredibly memorable. Part of the reason that the "50%" was so radioactive was because CEOs had became better known (Jeff Bezos, Steve Jobs, John Chambers, Jack Welch, Bill Gates, Carly Fiorina) and no one had really asked the question. Reputation as a body of knowledge was still nascent (not like it is now) but it was just about to tip. And tip it did. In our new survey on the corporate brand, we asked the question again.  It's been about 10 years since that earlier study. And despite all the ups and downs in the stock market, CEO compensation issues, scandals, Occupy Wall Street, celebrity CEOs, the Internet, etc etc, the executives in our study reported that 49% of a company's reputation is due to the CEO's reputation. As interesting, when we asked consumers -- the general public -- 66% say that their perceptions of top leadership also affect their opinions of company reputations a great deal to a moderate degree. Only 7% say that there is no link between the two.  So CEO reputations arenot going over their heads whatsoever. Thus as much as it might be politically incorrect to admit that the reputation of the CEO plays a significant role in how companies are viewed, it does. Of course, product quality matters most but leadership from the top, how they behave and what they communicate is not to be ignored. A large 59% of consumers cite leadership communications as influencing company perceptions. It no longer pays to be silent.

Another exciting day (despite the clouds and threatening rain here in NY). Weber Shandwick's research was covered in today's WSJ. B8. In the print edition. Can't send you a link (although here is one if you can get in) to the online version since you have to subscribe! But you can get all the relevant info here from the press release and the executive summary. Back at the beginning of the year, we released a terrific study (I really feel an affinity for this one) about the growing indivisibility of reputation and product brand. We had so much great data that we figured we would release at intervals. So here we are with the second installment of the global research, The Company behind the Brand: In Reputation We Trust – CEO Spotlight which explores the importance of executive leadership and communications to helping reverse the tides of waning trust in companies and solidify reputation. Here are some big learnings from the survey with KRC Research among 1,950 consumers and executives in two developed (U.S. and U.K.) and two developing markets (China and Brazil) :

• A full two-thirds (66 percent) of consumers say that their perceptions of CEOs affect their opinions of company reputations. Executives, like consumers, don't overlook the importance of a leader’s reputation – they attribute nearly one-half (49 percent) of a company’s overall reputation to the CEO’s reputation. Say goodbye to the days when purchases were made solely on product attributes. Today’s consumer is savvy, well-informed and privy to a wide array of purchase options. Decisions are now increasingly based on additional factors (yes siree) such as the company behind the brand, what the company stands for and now....even the standing of its senior leaders. 
• Nearly three in 10 consumers (28 percent) report that they regularly or frequently talk about company leaders with others. When consumers are asked what influences their perception of companies, approximately six in 10 (59 percent) say they are influenced by what top leaders communicate. Things have radically changed when you can say that consumers -- the public square -- are reacting to what leaders say. Corporate leadership communications are important across the globe, but to an even greater extent in emerging markets. Nearly two-thirds of Chinese consumers (64 percent) and nearly three-quarters of Brazilian consumers (72 percent) rely on executive communications when learning more about a company. For those companies growing in emerging markets, this is important.
• Respect for corporate leaders – CEOs and other corporate leaders – has taken an especially large hit in developed markets – 72 percent of U.S. and 71 percent of U.K. consumers have lost respect in the past few years. Not such a surprise to me because the past few years have been hard on everyone. A bit different in developing markets however: Chinese consumers are evenly split on their changing opinions of corporate leadership (35 percent lost respect vs. 38 percent who increased respect). Brazilian consumers are more likely to have increased their respect for top executives than decreased their respect (33 percent vs. 21 percent, respectively).

Here's the last word that holds a lot of punch in my book....a large 60 percent of a company’s market value is attributed to its reputation. Sixty percent. That's no small change. Get those execs on the communications trail sooner than later.   .

Just came across some research from ReputationInc that holds some very interesting information. Here are the main facts they discovered by examining the curriculums of the leading Executive MBA programs identified by the Financial Times. They were looking to see how reputation was incorporated into the course work.

 

•       1 in 5 leading EMBA programs teach none of the 10 core reputation disciplines

•       Just one of the 50 leading EMBAs has ‘Reputation’ as a core module

•       Communications & relationship building skills are taught in less than 20% of programs

•       Government & policy relations is covered by fewer than 1 in 5 EMBA program

•       Governance and ethics is the most popular reputation discipline being taught to business leaders today (no surprise there)

 

ReputationInc cites McKinsey research that found that one-half of global CEOs say managing external affairs is one of their top-three priorities. Yet one fifth of the world’s top 50 global Executive MBA programs do not offer any training in the core disciplines of reputation management. They report that the missing disciplines include CSR, stakeholder engagement, government relations, communications, and reputation management strategy.

 

More worrying still, just two of the top 50 business schools surveyed offer a dedicated reputation

module and 80% offer no training on either public affairs or external communications – the two core “hands-on” skills executives need to build reputation. “The results reveal a frightening gap between the reputation skills business leaders must possess in 2012 and the cursory attention they get in the traditional executive MBA.” 

                                                         

The programs with the highest ranked scores for including reputation are Henley Business School, Essec/Mannheim, and the University of Texas at Austin: McCombs.

 

I wholeheartedly agree with this statement: “On this evidence, companies and shareholders should be concerned that Executive MBA programmes risk creating ineffective business leaders who leave academia without the skills to actively manage the precious asset of corporate reputation,” said John Mahony, CEO, ReputationInc.  “Reputation management skills are vital for today’s CEO who sets the tone and mood for a corporation and must lead from the front in communicating the purpose of the brand and its value to society. Many managers are not born ready to meet this challenge and will benefit from coaching and confidence building in reputation, something today’s Executive MBA courses fail to adequately provide.”

 

 

P&G is announcing its new corporate campaign that is a "global serenade to mothers." It is covered in an article today. The reason this is big news to me (and I am not an Olympian's mother) is that it is part of the P&G initiative to focus on the corporate brand behind the products they sell. Our research on The Company behind the Brand: In Reputation We Trust is all about the increasing interdependence between corporate and product brand reputation. As the global CMO says, "P&G is in the business of helping moms." Or he could have said that P&G is in the business of building its corporate brand reputation. The new campaign is focused on the moms of athletes, particularly Olympians. Right on. As we learned in our recent survey, 87% of executives report that the corporate brand is as important as the product brand. And consumers also agree -- 70% of consumers in markets around the world say that they avoid buying products if they do not like the company behind the brand. We are releasing some more information shortly from the study on the link between CEO and reputation as well as the impact of leadership communications so check here soon.

Thought I would check out Pinterest and see if anyone was posting on reputation or CEO reputation. Why am I not surprised that the pickings are slim.  Pinterest is not exactly the place where people want to pin interesting items and favorite photos or sayings on reputational matters or CEO quotes. But I had to take a look. For "reputation," there are a bunch of quotes and the same infographic over and over. Seems to be a favorite. It is about how to manage your personal e-reputation and its from a reputation management agency in Geneva. Good for them. As for CEO reputation, there are two items pinned of photos of people.  But mostly a non-pinterest event.  Thought I'd see a little more but no. Infographics seems to be popular on pinterest. They add visual splendor.  I have a pinterest account but never started it. I might just do that today. Might be fun. We will see.

Just read this article in Forbes about Amazon's Jeff Bezos' number one leadership secret. I've followed him for years and enjoy reading about how Amazon has grown from a bookseller to an everything store online.  I had already been thinking about about the importance of employees and customers for new CEOs when I read that Bezos' number one leadership secret is that the customer is always right. There is this example described in the article that when Bezos calls meetings, he leaves an empty seat at the conference table for what he calls the customer's seat.  A potent reminder to bring the customer's point of view to the table. The article hints at the fact that Bezos has built his hugely successful business bent on "coddling his 164 million customers, not his 56,000 employees."  This has me wondering that in this age of the Internet and social media galore, if customers are now more important than employees, maybe because of sheer size? The pendulum seems to be swinging again anyway. It used to be that all business activities were primarily all about customers, then all about employees and now... it's all about equal parts' employees and customers but with customers gaining the upper hand again.  The Internet has created a sense of urgency about how satisfied your customers are.  Probably because they spread word of mouth more quickly and seem to have more power than employees. They can advocate or criticize your business approach or customer service online for all to see. They have more power because they have so many choices from which to buy from.  The answer for new CEOs, however, appears to be focusing on employees with a healthy dose of understanding what your customers want and quickly scaling to reach them online to confirm what employees are telling you. Something to think about over the next few weeks. Whose more important -- employees or customers for new CEOs and CEOs who've been in office for some time?

Reputation Institute came out this week with their RepTrak Pulse survey for the US. It measures the reputation of 150 largest US public companies among consumers.  In addition to the usual who's up and who's down, RI reveals some interesting stats that confirm our research results on Companies Behind the Brand. I was delighted. As RI says in its press release, "Since 2009, U.S. companies have been competing in a new Reputation Economy, where WHO THEY ARE matters even more than WHAT THEY PRODUCE, according to general public sentiment. Framing this in the context of critical consumer behaviors, including purchase consideration, loyalty and recommendation–company or “enterprise” perceptions explain 60% of these behaviors, with product perceptions only accounting for 40%." This is a big shift which we agree with. In addition, RI asked Chief Reputation Officers (CEO, CMO and CCO) several questions and learned that 51% name the CEO as the person with the responsibility to set reputation strategy. Fascinating results.