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Home > Business Strategy Best Practice > The CEO’s Role in Reputation Management

Business Strategy Best Practice

The CEO’s Role in Reputation Management

by Leslie Gaines-Ross

Executive Summary

  • The importance of the CEO in the reputation management of his or her company.

  • Why the CEO’s role is of paramount importance for the reputation of the enterprise.

  • How the CEO can manage reputation.

  • The rising focus on corporate reputation in an age of unprecedented reputation risk and the CEO’s increased responsibility as steward of this reputation.

  • Five recommendations for CEOs who recognize their accountability in safeguarding their firm’s reputation. Each is based on extensive research conducted by the author over the course of two decades.

Introduction

“Our reputation is more important than the last hundred million dollars.” Rupert Murdoch, Chairman and CEO of News Corporation

Corporate reputation matters more than ever, as Rupert Murdoch would be the first to admit today. An increasingly complex business environment, marked by higher standards of corporate governance, citizen journalism, a more cynical public, and emerging special interest groups, places ever more pressure on leadership to protect corporate reputations. In fact, after financial risk, loss of reputation is the biggest risk cited by corporate board members in a recent study by accounting consultancy EisnerAmper LLC (2011). Even annual reports are recognizing the magnitude of reputation as a factor in business health; companies such as Goldman Sachs and AIG are now reporting “adverse publicity” as a risk factor in their 10-K filings.

One statistic often gets the attention of chairmen and CEOs. More than four in 10 of the world’s most respected companies lost reputational status in Fortune’s World’s Most Admired Companies survey 2011. This is the “stumble rate” that we at Weber Shandwick study closely, which is based on the performance of companies that lose their no. 1 most admired status in their respective industries. As Virgin Atlantic founding CEO Richard Branson confirms about the loss of reputation: “Your reputation is all you have in life—your personal reputation and the reputation of your brand. And if you do anything that damages that reputation, you can destroy your company … and it’s going to be very difficult for that brand to ever recover.”

Not surprisingly, 100% of CEOs report that they think frequently about their company’s reputation (Gaines-Ross, CEO Capital, 2003), and almost six in 10 believe their company’s reputation to be under threat. CEOs have taken the reins as guardians of reputation for their organizations. They know that, ultimately, they will earn credit when their companies are doing well, and get all the blame when reputation is in jeopardy. Executive recruiter Korn/Ferry has quantified this sense of CEO responsibility. In a survey of global executives, the CEO was cited most often as the person directly responsible for risk management (Korn/Ferry Institute, 2010). Similarly, Weber Shandwick’s “Safeguarding reputation” study with KRC Research found that 60% of senior global business executives blame the CEO when companies lose reputation after a crisis. The proverbial buck stops with the CEO.

Before recommending different ways that CEOs must take responsibility for any reputational risk that their companies face, one thing cannot be overstated enough—that reputational risks are often the result of ethical lapses in the culture or leadership of an organization. The CEO has tremendous influence on setting the tone and, consequently, the destiny of the company. Recognition of how leadership behavior and actions are perceived has a disproportionate effect, both positive and negative, on how employees behave.

So, what can a chief executive do to manage his or her company’s reputation? Based on numerous studies of reputational best practices and years of monitoring global corporate leadership, five ways are recommended that CEOs can follow when seeking to safeguard their company’s most valuable intangible and competitive asset.

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Further reading

Books:

  • Gaines-Ross, Leslie. CEO Capital: A Guide to Building CEO Reputation and Company Success. Hoboken, NJ: Wiley, 2003.
  • Gaines-Ross, Leslie. Corporate Reputation: 12 Steps to Safeguarding and Recovering Reputation. Hoboken, NJ: Wiley, 2008.

Articles:

  • Colvin, Geoff. “Behind the Murdoch scandal? Scandalous governance.” Fortune 164:3 (August 15, 2011).
  • Eccles, Robert G., Scott C. Newquist, and Roland Schatz. “Reputation and its risks.” Harvard Business Review (February 2007). Online at: hbr.org/2007/02/reputation-and-its-risks/ar/1
  • Favaro, Ken, Per-Ola Karlsson, and Gary L. Neilson. “CEO succession 2010: The four types of CEOs.” Strategy+Business 63 (Summer 2011). Online at: tinyurl.com/3l5eqbt [PDF].
  • Gaines-Ross, Leslie. “Reputation warfare.” Harvard Business Review 88:12 (2010): 70–76. Online at: tinyurl.com/3ckwlxl [PDF].
  • Gaines-Ross, Leslie. “Reputation stumble rate still high.” ReputationXchange (April 29, 2011). Online at: tinyurl.com/3b9n3hb
  • Korn/Ferry Institute. “Korn/Ferry survey notes that risk management is an increasing priority for corporations.” Korn/Ferry Institute website (August 11, 2010). Online at: tinyurl.com/2com94h
  • Krakovsky, Marina. “Admitting missteps may boost stock prices.” Stanford Graduate School of Business Research News (August 2004). Online at: tinyurl.com/6ks48bq
  • Lafley, A. G. “What only the CEO can do.” Harvard Business Review (May 2009). Online at: hbr.org/2009/05/what-only-the-ceo-can-do/ar/1
  • Nash, Jeff. “Risk climbs to top of corporate to-do list.” Financial Week (April 28, 2008). Online at: tinyurl.com/3o2g43j
  • Schwartz, Nelson. “Can BP bounce back?” Fortune (October 31, 2006). Online at: tinyurl.com/3ctdzv3

Reports:

  • EisnerAmper. “Concerns about risks confronting boards. Second annual board of directors survey 2011.” 2011. Online at: tinyurl.com/3c3q65m [PDF].
  • Harris Interactive. “The 2011 Harris Interactive annual RQ summary report.” April 2011. Online at: tinyurl.com/3dh8uww [PDF].
  • Knight, Rory F., and Deborah J. Pretty. “Reputation and value: The case of corporate catastrophes.” Oxford Metrica, 2001. Online at: tinyurl.com/2b6e4em [PDF].
  • Weber Shandwick. “Socializing your CEO: From (un)social to social.” 2009. Online at: tinyurl.com/5rzs9cf
  • Weber Shandwick. “Meet FireBell: Weber Shandwick’s social crisis simulator.” 2010. Online at: www.webershandwick.com/firebell
  • Weber Shandwick and Forbes Insights. “Socializing your brand: A brand’s guide to sociability.” October 2011.
  • Weber Shandwick and KRC Research. “Safeguarding reputation” survey. 2006. Executive summaries online at: tinyurl.com/44u5wld

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