Of reputation, roller coasters, and Wilde Rides on Wall St

Of Reputations, Roller Coasters, and Wild Rides on Wall St.

Dr. Charles FombrunChairman, Reputation Institute

Madrid, Spain7 May 20107 May 2010

Huge Centripetal Economic Forces are Pulling Us Apart

Copyright © 2010 Reputation Institute. All rights reserved. 2

While Geological Forces are Taking their Toll


Contributing to a Wild Ride in the Financial Markets



And Putting “Reputation” On Everyone’s Mind


Toyota is Reeling from Unintended Effects of Cost-Cutting


BP is Reeling from a Huge Oil Spill in the Gulf of Mexico


Clearly Reputations are Always at Risk

"It takes 20 years to build a reputation and five minutes to ruin it.

If you think about that, 'll d thi diff tl ”you'll do things differently.”

Warren BuffettWarren Buffett


RI has conducted Global Reputation Studies since 2000

34 Countries & 24 Industries –65,000 ConsumersAirlines & Aerospace • Automotive • Beverage • Chemicals • Computer • Conglomerate • Construction & Engineering • Consumer

Products • Electrical & Electronics • Energy • Financial – Bank • Financial – Diversified Services • Financial – Insurance • Food Manufacturing • Industrial Products • Information & Media • Pharmaceuticals • Raw Materials • Retail – Food • Retail – General •


Manufacturing Industrial Products Information & Media Pharmaceuticals Raw Materials Retail Food Retail General Services • Telecommunications • Transport & Logistics • Utilities

Lesson #1: A Corporate Reputation is an Emotional Bond

…and built on 7 Pillars


Lesson #2: Reputation Operates “Below the Line”

Strategic Goals

Business Results

CorporateInitiatives

Perceptions of Company

Supportive Behaviors


Lesson # 3: Improving Alignment Increases Reputation

What Companies

SayInconsistency

Say

How Companies are Perceived

Inconsistency

What C i

InconsistencyCompanies

Do


Lesson #4: Improving Reputation Increases Support

Improve Reputation by 10% – Increase Support by 10%

80

72

80

56

64

Rec

omm

end

40

48

nden

ts w

ho W

ould

R

24

32

% R

espo

n

8

16

26 36 46 56 66 76 86


Adj-R2 = 0.889

26 36 46 56 66 76 86

U.S. Pulse Score

Source: 2010 Global Reputation Pulse (U.S. Results)

Lesson #5: …and creates Financial Value

Top 30 in Reputation

Bottom 30 in Reputation

Ratio of Market ValueMarket Valueto Book Value

3.79 1.42

% Change in Market Value = 1.3 * % Change in Reputation

So, on average:

13%10% Improvement in Reputation

13% Improvement

in Market Value


Value

Lesson #6: So that Investing in Higher Reputation Firms Can Pay Off

40 .00%

HIGH REPUTATIONPORTFOLIO

CumulativeReturns

20 .00%S&P 500

0 .00%

S&P 500

-20 .00 %

-40 .00 %

-60 .00 %

Jan-00Apr-0

0Jul-0

0Oct-0

0Jan-01Apr-0

1Jul-0

1Oct-0

1Jan-02Apr-0

2Jul-0

2Oct-0

2Jan-03Apr-0

3Jul-0

3Oct-0

3Jan-04Apr-0

4Jul-0

4Oct-0

4Jan-05Apr-0

5Jul-0

5Oct-0

5Jan-06Apr-0

6Jul-0

6Oct-0

6


Ja Ap J O Ja Ap J O Ja Ap J O Ja Ap J O Ja Ap J O Ja Ap J O Ja Ap J O

Lesson # 7: But Reputation Requires Vision & Governance

Energy Autogy


Tobacco Banking

Lesson #8: And a Focus on Products & Innovation


Lesson #9: Companies have to Do the Right Thing

“You can make money without doing evil”You can make money without doing evil

Is Google a great Is Google a great place to work because place to work because its stock is at $483, or its stock is at $483, or is its stock at $483 is its stock at $483 is its stock at $483 is its stock at $483 because it's a great because it's a great place to work? place to work?

----Business Week, January Business Week, January 22, 200722, 2007


Lesson #10: As Well as Do Things Right


So a Mind-Shift is Taking Place From Brand to Reputation

Brand ReputationBrand

The promise a company makes

Reputation

The degree to which the companyThe promise a company makes to its stakeholders

“Owned” by the company

The degree to which the company fulfills its promises

“Owned” by stakeholdersOwned by the company Owned by stakeholders

A brand is a promise…h li t th t i b ild R t tiwhen you live up to that promise you build Reputation


Reputation Pulse 2010


The World’s Best Corporate Reputations (2010)


Corporate Reputations in Spain?


Documents

Of reputation, roller coasters, and Wilde Rides on Wall St