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Presented by: John Dalton Director of LSPR Worldwide Dalal Nageh Course Director PR Ethics & Reputation.

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Presentation on theme: "Presented by: John Dalton Director of LSPR Worldwide Dalal Nageh Course Director PR Ethics & Reputation."— Presentation transcript:

1 Presented by: John Dalton Director of LSPR Worldwide Dalal Nageh Course Director PR Ethics & Reputation

2 1. PR and its practice cannot be divorced from business ethics 2. Since the collapse of ENRON & WorldCom – PR and applied ethics has become as focus for western companies 3. Evidence shows that compliance and an ethical approval helps sustain long term - growth.

3 Background Corporate Governance (CG) Socially Responsible Investment (SRI): Ethical Investment Corporate Social Responsibility (CSR) CSR and Reputation Management How to manage Reputation Stakeholder theory & reputation management

4 Introduction Corporate Governance & Business Ethics Standard and Poor’s defines corporate governance as: “ Corporate governance refers to the rules and incentives by which shareholders control and influence a company’s management so as to maximise profits and the value of the corporation”.

5 What issues does CG deal with? Compliance with laws and regulations Accuracy of corporate financial reporting – providing accurate corporate data Transparency – allowing shareholders and others access to information: the question of disclosure. Accountability – who are the directors responsible to?

6 What issues does CG deal with? General standards and principles Developing accounting standards – ensuring auditor independence Monitoring and measuring the performance outcomes of CSR initiatives: the impact of corporate citizenship Role & responsibility during merges and acquisitions - problems of hostile take overs

7 What issues does CG deal with? At the centre of CG is the recognition of the need to separate ownership from management control, thereby preventing conflict of interests Conflicts of interest will inevitably occur – e.g. what influence should institutional investors (pension funds & insurance) have on individual corporations

8 What issues does CG deal with? In the UK, pension funds represent 1/3 of the total market capitalization of the London Stock Market. Following the meltdown of ENRON and corporate scandals surrounding TYCO & WorldCom in the US, the SEC introduced a host of new governance measures backed by George W. Bush.

9 What issues does CG deal with? In the UK, in January 2003, the Higgs’ report tackled the problems associated with non – executive directors

10 Why has Corporate Governance become so important? Historical – the term was hardly seen a decade ago, but following high profile scandals such as BCCI, Barings, Robert Maxwell & Enron, the media and public have rightly became highly suspicious of corporations. CEO & Board Behaviour Failure of corporate reporting systems Attitude of MNEs to human rights, pay and conditions

11 Why has Corporate Governance become so important? The influence of institutional investors and the issue of proxy votes made by mutual funds not being disclosed Rise and power of NGOs and campaigning organisations Rise of shareholder activism and ethical investing

12 Socially Responsible Investment (SRI): Ethical Investment Screening Shareholder activism Cause – based investment – community investment

13 Corporate Social Responsibility (CSR): licence to operate The European Commission defines CSR as follows: “essentially a concept whereby companies decide voluntarily to contribute to better society and a cleaner environment” The concept of the triple bottom line - economic - social - environmental

14 Benefits of CSR Reduces exposure to risk and accusations of irresponsible behaviour - helps cushion & vaccinate during time of crisis. Enhances employee recruitment Improves stakeholder communications Reduces risk exposure, improves investor confidence and the ability to raise capital

15 Benefits of CSR Encourages innovation Encourages a more inclusive corporation

16 CSR, Reputation & Financial Performance Does CSR Pay? What issues does CSR address? Pollution of the environment Supply – chain management Human rights Ethical investment Good governance Political & social Employee rights Training Stakeholder engagement and dialogue Clean technology Overall reputation

17 CSR Initiatives The Global Reporting Initiative (GRI) OECD Guideline for Multinational Enterprises ISO Standards SA 8000 UN Global Compact Ethical Trading Initiative (ETI)

18 The Concept of Sustainability The Dow Jones Sustainability Index The FTSE4Good Index

19 Risk Uncertainty of outcomes, based on probabilities Risk = uncertainty (or probability) x impact Pre entry risk Ongoing risk – issue management

20 Risk Categories of risk Operational Strategic Marketing Brand reputation Financial Intellectual Property Technology and e – business Human or personal Price or market Merges and acquisitions Event – based: political, terrorism, weather

21 Good PR and reputation acts like a vaccine Brands, especially corporate brands, are the best psychological vehicles for delivering meaning and value This raises the question of the role of PR, brand and relationship management within corporations Does PR now equal reputation management? If the answer is yes, what are we doing about it?

22 What is Corporate Reputation? The interplay of identity and Image A single precise definition does not exist Whatever definition is agreed upon, reputation must be considered in its historical context i.e. the track record of a company. Whereas corporate image refers to the “ latest beliefs ” someone holds about a company, corporate reputation represents the long-term collective assessment of a corporation ’ s integrity.

23 Factors that build Corporate Reputation Corporate Advertising Quality of products and services Brand value Innovation and creativity Customer satisfaction Corporate citizenship Financial performance Organisational structure and culture Vision and leadership CEO performance and reputation Internal communications/employee satisfaction Core competencies Collaborative networks

24 Corporate Identity: self-presentation This has traditionally referred to the physical ways a corporations defines itself i.e., the identity mix: e.g Logo and trademark Products and packaging Colours Annual reports Web design Staff communications Uniforms, signage and livery Advertising Building design

25 Corporate Identity: self-presentation However, identity is more than just the visual elements of a corporation and how these differentiate one company from another. It must also take into account the day-to-day operational reality, which employees, suppliers and other key stakeholders (including consumers) experience. In this regard, identity and image overlap.

26 Corporate Image: perception is all Corporate image reflects the set of beliefs or attributes that people ascribe to a corporation. It is in part identity, but is evaluated on what consumers “ perceive ” at specific points in time. Image is a construct of cognitive and emotional (psychological) attributes that are holistically evaluated by consumers. It is affected by identity, positioning and how the company behaves i.e. peoples ’ experience of the product/service.

27 Corporate Image Once corporate identity and image are established (over time), a corporate reputation emerges, either positive or negative If an individual ’ s own values accord and fit with the company ’ s image, then that individual will probably be of the opinion that the company has a good reputation Therefore, corporate reputation is the sum of all the values that stakeholders attribute to a company based on their perception and the interpretation of the image that it communicates and its behaviour over time Reputation represents the long-term and collective assessment of a corporation ’ s integrity

28 Stakeholder Conflict No one corporate image exists Every one has their own image, hence the problem posed by stakeholder conflict One of the key challenges that exist for PR practitioners is to manage this conflict

29 Benefits of Good Reputation Attracting new business partners Securing investment Cash flow and profits Attracting new customers Entering new markets Influencing legal and political affairs Human capital: attracting good employees Better M & A Better relationships with NGOs Issue and risk management More effective brand extensions Sustainability in the market Better relationships with suppliers and distributors

30 The Growth of Reputation Capital Globalization and the rise of MNEs Recent scandal: poor corporate reporting Investigative journalism: pluralism The demand for company metrics: extension of TQM and BPR The rise of knowledge management: The Balanced Score Card

31 The Growth of Reputation Capital NGO activity The ascendancy of corporate citizenship Technology The emergence of non-financial performance indicators

32 How to Create Image from Identity The Experience of Products and Services Behaviour and Attitude of Employees and CEOs Corporate Social Responsibility Organisational structure and Culture Corporate Communications Physical Environment Innovation and Creativity Managing Shareholder Value

33 The Role of Branding and PR in Reputation Management Brands: the smart delivery systems Intangibles: 1. Brands 2. R&D 3. Intellectual Property (IP) 4. Infrastructure assets 5. People – employees 6. Customers 7. Reputation The Impact of Relationship Marketing

34 Stakeholders: Context: why is stakeholder theory important? What is the link with reputation management? The emergence of stakeholders: a licence to operate? Who is a stakeholder? Multiple Stakeholders: a relationship model

35 Stakeholder Audience Typology Organisation Shareholders Employees Suppliers Partners Customers Recruitment Influence

36 The Six Market Domain Model: 1. Customers 2. Internal markets 3. Recruitment markets 4. Suppliers and alliance markets 5. Influence markets 6. Referral markets

37 Modelling the communications mix, Stakeholder typology and communications interface concepts. Organisation Communications Marketing Communication Management Communications suppliers customers influence partners employees shareholders recruitment Organisation Audiences Main Communication interfaces

38 Supplier and Alliance market Managing the supply chain and understanding the origins of products and services is now a complex process in certain industries. Yet it these very industries and markets that are most at risk from reputation damage by investigation from NGOs and journalists. Examples: Nike Cadbury Schweppes UK

39 Supplier and Alliance market Alliances and new technology Influence markets Referral markets

40 Measuring Stakeholders’ Views Image surveys Attitude Surveys Perceptual mapping Customer satisfaction surveys Awareness surveys Retail audits Consumer reports Postal surveys Competitor intelligence Online research and focus groups Marketing method research

41 Conclusion Risk cannot be managed through insurance Risk and reputation are linked Corporate governance & CSR initiatives reduce risk Corporations need to became more inclusive Brands need to become citizen brands Reputation management does pay

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