In A Global Market, Corporate Reputations Need Polishing

Over at BusinessWeek, there’s a great article about corporations, their images and reputations, and whether those reputations affect their stock price.

Many investment pros scoff at suggestions they can be influenced by image manipulation. And to most CEOs, corporate image is not something to fret about—at least, not until a crisis erupts, like an options scandal, employee class action, or ecological disaster. Even when execs try to be proactive, it’s often by gut. Want to be viewed as a good corporate citizen? Order up a PR blitz on your charity work or efforts to go green. Eager to land on a magazine’s most-admired list? Gin up a strategy to game the selection process.
But a more sophisticated understanding of the power of perception is starting to take hold among savvy corporations. More and more are finding that the way in which the outside world expects a company to behave and perform can be its most important asset. Indeed, a company’s reputation for being able to deliver growth, attract top talent, and avoid ethical mishaps can account for much of the 30%-to-70% gap between the book value of most companies and their market capitalizations. Reputation is a big reason Johnson & Johnson (JNJ ) trades at a much higher price-earnings ratio than Pfizer (PFE ), Procter & Gamble (PG ) than Unilever (UN ), and Exxon Mobil (XOM ) than Royal Dutch Shell (RDS ). And while the value of a reputation is vastly less tangible than property, revenue, or cash, more experts are arguing it is possible not only to quantify it but even to predict how image changes in specific areas will harm or hurt the share price.
Of course, spin alone can’t create a lasting public image. A company’s message must be grounded in reality, and its reputation is built over years. And if there is a negative image based on a poor record of reliability, safety, or labor relations, “please don’t hire a PR company to fix it,” says strategy professor Phil Rosenzweig of Switzerland’s International Institute for Management Development. “Correct the underlying problem first.” The biggest driver of a company’s reputation and stock performance is, after all, its financial results, notes Rosenzweig, author of The Halo Effect, a book that details how quickly reputations can turn.

I think this meshes very nicely with “Turning Chinese,” my new column on Talent Zoo.
In today’s world, business is conducted globally and thanks to the Internet, we get to see and hear what companies and their brands are doing around the world. And if you’ve been following the news recently, then you know about the quality control problems that are raising concerns about Chinese goods. Everyone in the advertising industry is directly affected by this in some way, whether it’s professionally or personally. We can’t ignore what’s going on in other cultures or countries, the world is simply getting too small for that.

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About Dan Goldgeier

Blogging on AdPulp since 2005, Dan Goldgeier is a Seattle-based freelance copywriter with experience at advertising agencies across the U.S. He is a graduate of the Creative Circus ad school, and currently teaches at Seattle's School of Visual Concepts. In addition, he is a regular columnist for TalentZoo.com. Dan published the best of his TalentZoo.com columns in a book entitled View From The Cheap Seats: A Broader Look at Advertising, Marketing, Branding, Global Politics, Office Politics, Sexual Politics, and Getting Drunk During a Job Interview. Look for it on Amazon in paperback and e-book editions.