Posts Tagged ‘Schumpeter’

Corporate reputations on the rocks?

Monday, April 30th, 2012 by Jon Clements

For all the talk in PR circles about the value of corporate reputation – and reputation in public life – there’s been precious little concern shown for it in a host of recent events.

News Corporation chairman, Rupert Murdoch’s appearance at the Leveson Inquiry into media standards, the Prime Minister, David Cameron, and Culture Minister, Jeremy Hunt’s response to the BSkyB email revelations, Chancellor George Osborne’s handling of the economy, Barclays Bank’s attitude to executive pay and the Bahrain Grand Prix – the list goes on.

First, Murdoch: compared to his mostly defiant appearance before the Parliamentary Select Committee investigating phone hacking at News International, his performance at Leveson was sparkling. Who would have imagined hearing Rupert Murdoch say “I failed”? However, when the well-rehearsed mask slipped, the full-blown ugliness of his attitude towards any outside challenge was revealed. What could have been an opportunity to rebuild, or salvage, some remnant of reputation for himself and his organisation was jettisoned. And this could, as Reuters suggests, compound his problems with the Parliamentary Select Committee’s report into phone hacking, out this week.

Taking the Government’s current predicament as a whole, there appears to be too great a willingness to reach for the smoke screen. Shielding Jeremy Hunt behind the running order of the Leveson Inquiry just makes him look guilty as hell for mismanaging his and his special adviser’s relationship with BSkyB. Want to protect your ministerial reputation? then get on with an investigation and be transparent. And on the economy, George Osborne is sticking doggedly to a plan that is not only being roundly rubbished for its incompetence but has reversed the country into recession part 2. But, instead of acknowledging its own poor fiscal decisions, the Government resorts to blaming its preferred punching bag, Gordon Brown.

For Barclays Bank, it’s taken shareholders anger for the reputation card to be played, with a third refusing to back the company’s executive remuneration report, citing the effect of colossal pay deals on the bank’s reputation. Meanwhile the decision to progress with the recent Bahrain F1 Grand Prix carries a reputation risk for its sponsors, according to risk management consultants Maplecroft, Torbjorn Soltvedt, noting  a “risk of indirect complicity for sponsors and organisers in human rights violations carried out by state security forces.”

So, what price reputation? At this rate, it will be consigned to the bargain bin of corporate concerns.

But does it matter? Not so, according to The Economist’s Schumpeter, which takes a swipe at what it calls the “reputation management industry”:

BP’s expensive “beyond petroleum” branding campaign did nothing to deflect the jeers after the oil spill in the Gulf of Mexico. Brit Insurance’s sponsorship of England’s cricket teams has won it brownie points in the short term, but may not really be the best way to build a resilient business. Many successful companies, such as Amazon, Costco, Southwest Airlines and Zappos, have been notable for their intense focus on their core businesses, not for their fancy marketing. If you do your job well, customers will say nice things about you and your products.

Branding? Sponsorship? Fancy marketing? Schumpeter’s own central conceit is undone by its own misunderstanding of what reputation management is. Little wonder some corporate and top flight political attitudes to reputation are, proverbially speaking, all over the show.

Maybe, if the purpose of commerce and politics was solely to be successful and retain power, Schumpeter would be right. But aren’t there broader responsibilities to society  for companies and our elected representatives?

As Dr. Charles J. Fombrun, founder & Chairman of the Reputation Institute says in response to the Economist’s article: “In the short run… it’s true that many companies can and will prosper without directly focusing on building reputation. But these companies are also likely candidates for going awry in the long run because lax practices mean they stockpile huge risks that later prove costly to mitigate (consider, for instance, the tobacco industry’s current payouts and regulation). Lacking a solid reputation, many of these companies also fail to take advantage of the opportunities they have to outperform rivals along the way.”

If those in society’s highest places are treating their reputations with the level of derision currently demonstrated, what does that mean for the value of reputation more generally?  Surely, the bargain bin isn’t where it belongs?

 

 

About Jon Clements

Jon Clements is a Chartered PR consultant specialising in B2B PR, corporate and marketing communications and is the founder of Metamorphic PR. Connect at: JonClements ''