corporate responsbility

  The holidays are over and work is back on my mind full-time. Actually it felt great getting back into the rhythm of work. Thankfully I work at a wonderfully-led, collaborative company. I do not take it for granted, believe me.

By the way, before I get going with this post,  I should mention that I have an article on Huffington Post titled “Do Companies Care about Ordinary People?” You are welcome to read it.

Over the holiday, I saved some articles that are worth sharing as this new decade begins and 2010 is in its infancy. The first one in my pile is from the Economist. With all the doom and gloom about business greed and corporate no-no’s in the past decade, The Economist identifies several arguments in the defense of business’s reputation. Resetting the reputation of business seems to be an apt activity to start off this new year. For sure, business could use some reputation-building to replace the reputation-bashing we’ve all been witness too. Here are two to mull over:

1. Business “is a remarkable exercise in co-operation.” Businesses manage to get thousands, hundreds and tens of people working together to produce ideas and solutions to problems. The fact that people collaborate for the common good is pretty remarkable when you think of it. I work with my colleagues around the world all the time and some of us have never met. But we all come together to build the Weber Shandwick brand and help clients.

2. Business is “an exercise in creativity.” When business people put their heads together to solve a problem, we can invent the most amazing things such as “devices that can provide insulin to diabetics without painful injections” and One Laptop Per Child.

I might add one more.

3. Business is “an exercise in sense-making.” When I close my book ,CEO Capital, I have a plea for CEOs to infuse companies with meaning. I said and I repeat here, “…it remains a basic human need to be part of something larger than oneself. This essential yearning has not disappeared despite networked computers and the triumph of the Internet.” I urged CEOs to motivate employees and instill companies with a common purpose in the pursuit of worthwhile goals. As Max DePree, legendary leader of Herman Miller wrote, “Leaders owe a covenant to the corporation or institution, which is after all, a group of people. Leaders owe the organization a new reference point for what caring, purposeful, committed people can be in the institutional setting.”

With luck, committed leadership and an improving unemployment rate, business might be able to improve its reputation in 2010 (2011?). I am banking on it.

Interested in building and protecting your corporate reputation? Boston College Center for Corporate Citizenship , along with support from The Hitachi Foundation , issued its fourth 2009 State of Corporate Citizenship report. The report  provides valuable insights from nearly 800 U.S. senior executives about their attitudes and perceptions on the value of corporate citizenship. Rightfully so, the authors preface the report by describing the difficult year that faced senior executives and the high expectations about continuing their support of corporate responsibility and giving initiatives. The good news is that nearly half of the executives surveyed believe that corporate citizenship is even more important in tough times and kept up their corporate citizenship efforts. Boston College Center says that this finding underscores how corporate citizenship has passed the value test. What do executives mean when they report on corporate citizenship? To them there are three important areas — ethical business practices (91%), treating employees well (81%) and accurate financial management reporting (76%).

When it comes to reputation, we have known for some time that reputations are enhanced when a company’s words match its actions in the corporate responsibility space.  Also, Weber Shandwick’s Safeguarding Reputation research found that companies with better corporate citizenship track records recovered their reputations faster than those with poorer corporate citizenship records.

Interesting to me is that the survey found that CEOs are now leading the corporate citizenship agenda in three out of four companies. Understandably and not surprisingly, CEOs recognize that their reputations need improvement and corporate citizenship is one way to communicate to employees and other stakeholders that they are concerned about doing the right thing. The survey also identified REPUTATION as the number one driver of corporate citizenship (70% for all executives, 82% for large-company executives). Reputation shares that top spot for the first time with company traditions and values.

 Reputation is increasingly becoming a driving force in shaping company and leadership action. That can only be viewed as a positive. Glad to hear that senior executives agree.

   Someone asked me where I got 99 tips to safekeeping reputation. I thought it was a good question and it made me think about the process. I started by reading the books I wrote, reread various reports we have done at Weber Shandwick on safeguarding reputation and reviewed our most recent study on online reputation. I then yellow-highlighted all the steps to safeguarding reputation that I thought were important in preserving reputation and keeping reputations safe.  I stopped at some number around 65 and thought that maybe I should pare the list down to 50. However, I liked the number 99 because that is what I originally set out to do. So I went back to articles I have written over the years to find more tips and before I knew it, I had about 103 reminders. It did not take much to reduce the 103 to 99 tips.

Looking through all the 99 tips to safekeeping company reputation, it appears to me that the mainstays of lasting reputation are transparency, ethics, leadership, culture and responsibility. Regardless of what companies do online or offline, these values must be in place and religiously adhered to to sustain reputational trust during good times and bad. Of course, reasonable financial performance must be in place as well. As someone else has said, flat is the new black.

As the recession lingers and trust in business erodes, company reputations are at greater risk than ever before. Since October is around the corner, my mind turns to the distribution of Fortune’s World’s Most Admired Companies ballots which should be out the door momentarily.  Respondents are soon to be asked to rate the world’s largest companies on their reputational success or failure over these past difficult 12 months. What will it take to gain admired status in times as unprecedented as these ? Not an easy question to answer but some of the answers are in those 99 tips.

 Today at Weber Shandwick we just issued a new reputation offering that I particularly like. As safeguarding company and brand reputation continues to rise to the top of executive agendas, 99 Tips to Safekeeping Reputation provides a simple visual roadmap to navigating crises and restoring reputations. We think it will come in handy for anyone interested in reputation. Enjoy and let me know what you think or would like to see added in our next version. I am thinking of doing this annually.

  Corporate responsibility is an integral component of reputation.  Even more so than ever because it matters to so many stakeholders – employees, customers, government, prospective talent, academics, media, bloggers and NGOs.  I think it might even matter to the financial community although perhaps to a lesser degree.  However, analysts have noticed its importance as we have seen with the proliferation of socially responsible investing funds.

In 2008, Weber Shandwick’s Planet 2050 corporate responsibility and sustainability practice conducted a proprietary analysis that demonstrated the rising prominence of corporate responsibility on leadership agendas. Corporate responsibility mentions in global Fortune 100 annual report CEO Letters to Shareholders increased 18 percent from 2003 to 2007. In 2007, energy efficiency and carbon emissions were the dominant corporate responsibility agenda initiatives addressed in Global 100 CEO Letters to Shareholders. These topics barely figured in CEO annual report Letter mentions in 2003. To a lesser extent, but still noteworthy, leaders in 2007 highlighted their eco-friendly products—such as hybrid cars and healthy food products—in their Letters to Shareholders. Volunteerism, a topic featured in 2003 CEO annual report Letters, appeared less frequently in 2007.

As business leaders seemed to increasingly  commit  to corporate responsibility initiatives prior to the economic meltdown, we thought we’d look into whether such efforts helped soften the financial blow of the stock market collapse in 2008.

Using the 2008 Fortune Most Accountable Companies list as the measure of corporate commitment to social and environmental goals, Weber Shandwick explored the relationship between accountability  and stock price performance within the Fortune Global 100. The Accountability Rating was first developed by AccountAbility and Csrnetwork and designed with Asset4.  Since nearly every company on this list experienced a share price decline during 2008, the analysis focused on the average percentage change of closing prices on December 31, 2007 and December 31, 2008. It was of particular interest that 9 out of the top 10 most accountable companies were European (GE was the only American company).

We found that the top 10 most accountable global companies performed better than the overall global Fortune 500 in terms of share price and profitability.  When compared to the 10 least accountable companies, the most accountable ones performed better. We were a bit surprised by the +1% lift in profitability among the least accountable and discovered that two highly profitable companies – Petronis at #99 and Berkshire Hathaway at #100 – were on the list, therefore driving the 1% increase. Even when we take Berkshire Hathaway out of the group, the difference is not as dramatic as we expected. The nine least accountable companies fell to -3% in terms of profitability. If Petronis and Berkshire Hathaway both come out the eight least accountable companies fall to -16%.

The analysis shows that even in an unprecedented  year like 2008, the most responsible companies  outperformed their peers. As my fellow colleague and founder of Planet2050 Brendan May said, “It is not surprising that effective and genuine corporate responsibility impacts the bottom line, in good times and bad.” Companies cannot afford to abandon their corporate responsibility efforts although it is understandable if progress slows in this economy.  Companies that abandon corporate responsibility and sustainability efforts are proof positive that it was all for show in the first place.

Where do I start?  Several people sent me a copy of the recent McKinsey Quarterly article on Rebuilding Corporate Reputations.  Its sub-headline read, “A perfect storm has hit the standing of big business. Companies must step up their reputation-management efforts in response.”  Sounded like a home-run article to me.  It was already in my inbox because I subscribe but I had not had a chance to read it. My heart sank thinking that McKinsey had come up with the perfect strategy for rebuilding reputations and that all my advice and research in this area was for naught.  I Twittered the article on my ReputationRx Twitter saying that here’s an article that had to be read. After all it was from McKinsey which I greatly admire and religiously read. Soon enough I began reading the article. I stopped in my tracks. I deleted my Twitter instantly.

There are two major problems with this article.

First, the authors misunderstand the business of public relations.  A few select quotes from the article reflect a misunderstanding about the business of public relations when it comes to reputation-building.

“Now more than ever, it will be action—not spin—that builds strong reputations. Organizations need to enhance their listening skills so that they are sufficiently aware of emerging issues; to reinvigorate their understanding of, and relationships with, critical stakeholders; and to go beyond traditional PR by activating a network of supporters who can influence key constituencies.”

“Moreover, traditional PR spin can’t deal with many NGO concerns, which must often be addressed by changing business operations and conducting two-way conversations.”

“Reputations are built on a foundation not only of communications but also of deeds: stakeholders can see through PR that isn’t supported by real and consistent business activity. Consumers, our research indicates, feel that companies rely too much on lobbying and PR unsupported by action.”

Authors’ Sheila Bonini, David Court and Alberto Marchi are under the general impression that PR practitioners actually believe that reputations can be built on words, not deeds or action. This could not be farther from the truth. In addition, the authors imply in several sentences that PR is only about the one-way conversation, not the two-way dialogue.  Again, far from the truth.  Public relations has always been about the art of conversation with and perceptions of one-to-one or one-to-many stakeholders. The business has always been about developing relationships with many publics, no matter how small, how large or how hard-to-reach.

The second argument I have with the article’s direction is its premise that there are three new ways to manage reputational threats in uncertain times. They are 1) understanding key stakeholders and what matters to them (e.g., benchmarking competitors, quantitative research); 2) being transparent and action-oriented (e.g., more business activities, less lobbying); and, 3) engaging a wider portfolio of influencers through a variety of means to spread word of mouth (e.g., grassroots, partnerships with NGOs). These are good strategies for advising companies and their leaders about restoring and rebuilding reputation. No doubt about it.

These practices, however, are all commonplace in the public relations domain and have been for many years now. In fact, I would argue that this has always been the business of public relations – understanding a company or organization’s many publics, researching stakeholders on perceptions and concerns, getting the true story out, changing corporate behavior by doing the right thing, and engaging influentials in conversations that lead to deeper understanding.  These recommendations are part of the everyday toolbox employed by most PR professionals working now (and for decades). And in fact, PR professionals greatly expanded on these three recommendations years ago, particularly in the general public, corporate responsibility and social media space.

Today’s Financial Times had an article on business’ role in restoring reputation and mentioned the McKinsey article. The author seens to agree with me. Whew. Michael Skapinker wrote “This is all sensible but it strikes me as yesterday’s advice.”

Moving on….I do agree wholeheartedly with McKinsey’s conclusion that CEOs should lead a company’s reputation strategy. I have always said that CEOs are the guardians of company reputation. My first book on CEO reputation, CEO Capital (2003), argued exactly this point, as I am sure many others have too. 

After letting off some steam here, it occurred to me that PR firms have clearly not done a good enough job communicating what we do for clients or McKinsey’s authors would have known that their recommendations are core to PR engagements today. When I first joined the PR field from Fortune, I too had a limited understanding of what the industry did. Now that I have been in the field for nearly a decade, I recognize that PR is often misunderstood and we are partly to blame.

In short, it seems that McKinsey has succumbed to the stereotype of PR as an industry of spin doctors and no more. This is not true. And probably has never been true. McKinsey’s recommendations are not new and the best of them have been used by PR for some time now. What is needed is not as McKinsey proclaims, less PR but probably more PR.

  Not sure it means anything but we thought we’d take a look at whether there are more scorecards/rankings now vs. one year ago. We keep this large, complex and detailed database on which awards exist for companies seeking to be recognized as being the most responsible, best at diversity, most ethical, best leadership, best reputation, best training, etc.  The database looks at when applications are due, when they are announced, who fills out the surveys, how to apply, how popular the ranking  is, etc.  You get it.  The database, called Scoreboxx™, helps companies “credentialize” themselves and communicate how they lead the industry.  It is part of our reputation-building services.

Since we realized it would be next to impossible to determine if there has been a change in the number of scorecards year over year since many scorecards just disappear or just get added randomly, we took a look at response rates to some of the rankings in 2007 vs. 2008. Not a scientific analysis but interesting nevertheless.  Listed below is our brief analysis of some of them for what’s worth.

Some are up and some are down. Some are flat. Here is what Liz, my colleague, and I think. For those awards where recruiting or talent  are important, higher responses have been recorded year over year. More employers returned surveys for BusinessWeek’s Best Places to Launch a Career and Fortune’s Top 100 MBA Employers, more applications were received this year for DiversityInc Top 50 and more nominations came in for the World’s Most Ethical Companies.  It goes without saying that the lower number of respondents for BusinessWeek’s Most Innovative Companies means nothing since this has been a disruptive year for business and some executives were just holding your breath that they were not getting pink slips. And presumably many did.

What does seem interesting is that in a world where companies have stumbled catastrophically and reputational equity has been slipping away, the focus on talent, diversity and ethics might be a good sign of better things to come.

  A picture is worth a thousand words (or 765.8 billion yen, equivalent of $7.7 billion) in the past quarter. Toyota’s president Katsuaki Watanable is seen here deeply bowing in apology: “We were lacking in scope and speed in dealing with various problems and for that I am sorry.” This is CEO responsibility and accountabilty at its finest.

   Good news. Corporate responsibility makes it through the recession. Hurrah. An article in the Financial Times by Michael Skapinker supports his argument by citing that despite the recession where people are cutting down on premium foods, only about 10% have cut back on ethical produce. And Marks and Spencer (M&S) who made a big bet on sustainability with its Plan A (there is no Plan B!), is saving money on its CSR practices. So that’s all good news for those of us who believe that corporate responsibility is an integral component of reputation and one that has not let us down (nor have we let it down).  The last paragraph of Skapinker’s article says it well:

“This [saving money] is the key to companies’ stubborn adherence to corporate social responsibility. They have worked out how to make it pay. Many of their initiatives help to cut costs or sustain supplies. They allow customers to continue to regard themselves as ethical during difficult times. They also help the companies to improve their public reputations at a time when business is widely held to be responsible for the downturn.”

Not surprisingly when I first read this paragraph, I read public reputations as public relations. In a way, this confirms why I am in the public relations field – to improve public reputations. Since there is no such thing anymore as an UNpublic reputation (everything internal is external today), I can really say that I am in the field of public reputations. I like this twist.

On another but somewhat importantly-related subject, I was reading about last year’s Sichuan Earthquake in a newsletter published by knowledge@wharton (you should subscribe if you don’t already). I was in China weeks after the earthquake and wrote about it on my blog at the time. In fact, a lot of the media coverage I received was in response to whether I thought companies were doing enough. The recent article does an excellent job of explaining what I experienced about the fiercely negative images of some multinationals (MNCs) in terms of corporate giving perceptions. I saw that some MNCs were on these shame lists that were being circulated online and inciting boycotts and negative opinion. The general consensus in China was that MNCs were not contributing enough and not in a timely manner to the 70,000 earthquake victims who lost their lives and five million left homeless. At the time, I did not know that there was a term for these maligned MNCs but the article references them as “international iron roosters” – that is, birds that do not give up one single feather. In other words, tightfisted. Being sensitive to negative public sentiment, many of these MNCs increased their charitable donations and met with the Chinese Ministry of Commerce to understand what was expected of them in China. I should note, and so does the Wharton authors, that even Chinese companies were criticized for insufficient donations to earthquake victims.

The article points out three must-dos when it comes to China and maintaining your reputation in challenging times. These should be on every company’s What to Do list if something like this happens again and you want to keep your reputation intact. They are:

1.     Get Straight to the Top or Distribute Decision-Making. Since many MNCs have multi-layered levels of management and multi-faceted reporting lines, companies need to have a clear, direct lines to the top when decisions are urgent and reputations are at stake. Companies should prepare processes for determining when a decision is urgent. Much of the problems that beset MNCs were the bureaucracy that needed to be hacked through to get a decision made about how much could be contributed. If this is too hard, companies should give local managers the necessary decision-making authority.

2.     Decide Fast and Make Visible. Some companies were criticized because their contributions came late or they did not make their donations known. When Hurricane Katrina hit New Orleans, some U.S. companies kept their donations quiet because they did not want it to look like they were only donating to improve their public images. In addition, many companies in the U.S. are torn between being humble or vocal when it comes to corporate responsibility. But in China during an incident of such horrific magnitude, those companies that kept quiet were seen as non-contributors and blamed for being insensitive and profit-mongers. So speak up.

3.     Find your Advocates and Use Your Online Resources to the Max. Since such a large proportion of Chinese citizens are online, make sure you know what is being said about your company and its contributions. Your reputation matters and myths and rumors spread like wildfire. For all you know, you are on some boycott list and people are picketing your stores and products. Find your fans or advocates and make sure they are there to support your efforts or correct misunderstandings, online and offline.

Thanks to Skapinker and to knowledge@wharton for making this a good learning day when I should be outside.

In an article from Tom Friedman today on Pirates and U.S. foreign policy, he said. “The issues we have with them look less like problems that can be solved and more like conditions that we have to manage.” This made me think about social media – not easily solved but you need to manage. This week I was talking to a company about the importance of online reputation management and the need to be prepared and understand how to use this media if your “Dell moment” arrives.  I do not think I made much headway because they felt safer being under the radar.  Companies might not be able to solve the countless ways that their reputations can be harmed online (think Dominos pizza) but they need to try to manage their online reputations because doing nothing or next to nothing is irresponsible. You’ve got to think of your employees, customers and investors. That’s my two cents.

By the way, participated in a new business meeting with my colleagues in LA. They are damm good!