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Corporate Reputation Watch Prepared for Research conducted by October, 2003 Summary of Findings and.

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Presentation on theme: "Corporate Reputation Watch Prepared for Research conducted by October, 2003 Summary of Findings and."— Presentation transcript:

1 Corporate Reputation Watch Prepared for Research conducted by October, 2003 Summary of Findings and

2 1 Table of Contents

3 Executive Summary Founded 1938 An Opinion Research Corporation Company

4 3 n Corporate reputation is being managed from a strategic perspective l CEOs believe that Corporate Reputation is more important today than ever and evidence of its importance include (p.8) – ämost place the responsibility for managing corporate reputation on themselves (p.15) äreputation of a candidates company strongly impacts hiring decision (p.14) ägreat deal of weight placed on CEO by Board to protect and enhance reputation (p.13) l The primary objective achieved by reputation is to promote relationships, those with employees and business partners (p.9) n Drivers of Reputation l CEOs point to customers as having the greatest external effect on corporate reputation (p.11) l European CEOs acknowledge the importance of communications on reputational issues and the influence of print media (p.10, 11) n Corporate Social Responsibility l CEOs believe that corporate social responsibility initiatives contribute at least moderately to corporate reputation (p.18) l CEOs report that CSR initiatives have less effect than corporate reputation on bottom line issues of increased sales and enhanced stock price (p.9, 19) l Fewer CEOs take responsibility for managing CSR initiatives than for corporate reputation (p.21) n Corporate Governance l While CEOs agree a sharper focus on corporate governance is here to stay, less than a quarter strongly agree that it will lead to improved ethical corporate behaviour (p.24, 27) Executive Summary

5 Research Objectives & Design Founded 1938 An Opinion Research Corporation Company

6 5 Background & Objectives n The primary objective of the Corporate Reputation Watch study is to provide insights into how the C-suite views the role of reputation management and the increasing importance of corporate governance in a companys image n The 2003 CRW examines C-level perspectives on issues such as: l the importance of corporate reputation l influencers of corporate reputation l corporate governance standards l corporate social responsibility initiatives

7 6 Study Design n Methodology l Qualifying titles of CEO, President or Chairman l North American, Asian and European C-suite executives l Three-page mail survey with internet response option n Survey Returns l Over 250 responses (199 public companies, 54 private)

8 Corporate Reputation Founded 1938 An Opinion Research Corporation Company

9 8 Change in the Importance of Corporate Reputation n A vast majority of CEOs agree that a companys corporate reputation is more important today than it was five years ago n More than half believe it is much more important today n The sentiment is even stronger among European CEOs; almost all say that corporate reputation is at least somewhat more important today Q1: Compared to 5 years ago, would you say that, in general, a companys corporate reputation today is:Appendix page 29

10 9 Business Objectives Achieved by Corporate Reputation Percent of Time Among Top-3 n CEOs overall cite recruiting and retaining employees (73%), promoting transactions and strategic partnerships (61%) and increasing sales (56%) most frequently as the important business objectives achieved by their companys corporate reputation n Enhancing stock price is a key factor for European (51%) and Asian (65%) companies, but North American CEOs put less emphasis on corporate reputations impact on share price (34%) Q2: What are the three most important business objectives that your companys corporate reputation helps you to achieve?Appendix page 30

11 10 Internal Aspects of Company Effecting Reputation n CEOs overall identify the ability to communicate (48%) as the internal aspect of their company most influential on corporate reputation (excluding financial performance). Transparency (39%), human values (37%) and treatment of employees (37%) are also among the top three n European and Asian CEOs place great weight on transparency (41% and 53% respectively) n North American business leaders cite the treatment of employees as the top internal driver of reputation (52%) Q3: Which three of the following internal aspects of your company are the most influential on your companys corporate reputation, other than financial performance? Percent of Time Among Top-3 Appendix page 31

12 11 n CEOs overwhelmingly point to customers as the external force with greatest effect on reputation (78%). Print media (48%) and financial analysts (44%) round out the top three n European CEOs believe the greatest external force is exerted by print media (76%) n The internet, NGOs and labor unions are viewed as having negligible influence Q4: Which three of the following external forces are the most influential on your companys corporate reputation? External Aspects of Company Effecting Reputation Percent of Time Among Top-3 Appendix page 32

13 12 Threats to Reputation n CEOs rank unethical corporate behavior (50%) and product and service problems (50%) as the top two threats (other than financial performance) to corporate reputation, with criticism from customers (40%) and the media (38%) not far behind n In Europe CEOs fear the impact of media criticism on reputation (53%) n North American CEOs are primarily concerned by the threat presented by product / service problems (46%) and litigation and adverse court judgments (42%) Q5: Threats to a companys reputation can come from a variety of sources other than financial performance. Which three of the following threats are you most concerned about regarding your company? Percent of Time Among Top-3 Appendix page 33

14 13 Weight Placed by Board on CEO Candidates Ability to Protect & Enhance Reputation n All CEOs agree that a when choosing a successor for the CEO, the Board places at least some weight on a candidates ability to protect and enhance the companys reputation. n Nearly three quarters of executives now place a great deal of weight on that ability Q6: In choosing a new successor for the CEO, how much weight does your Board place on the individuals ability to protect and enhance your companys reputation? Appendix page 34

15 14 Effect of Tainted Corporate Reputation on Candidate Hiring n 90% of CEOs say that the corporate reputation of a candidates current employer has at least a moderate impact on the decision to hire Q7: If a candidate for an officer-level position in your company is coming from a firm with a tainted corporate reputation, how much impact does this have on evaluations and hiring decisions regarding that person? Appendix page 35

16 15 Primary Responsibility for Managing Corporate Reputation n Nearly two-thirds of CEOs (65%) place the responsibility for managing corporate reputation on themselves, ahead of the Board (14%) n 80% of North American CEOs place the responsibility on themselves (compared to 44% Europe and 45% Asia) n The Board plays a much greater role in managing reputation issues in Europe (38%), and Asian companies rely considerably more on Corporate Communications and PR directors (27%) Q8: Where in your organization is the primary responsibility for managing issues of corporate reputation?Appendix page 36

17 16 Measures of Corporate Reputation n Analysis of media coverage (66%), financial performance (64%) and financial analyst research (58%) are most frequently cited by CEOs as measures they use to gauge their companys reputation n Formal customer/stakeholder research is favored by just over half of CEOs n Only 3% of CEOs say that they have no reputation measures in place Q9: Which, if any, of the following formal or informal measures do you have in place to measure your companys corporate reputation?Appendix page 37

18 Corporate Social Responsibility Founded 1938 An Opinion Research Corporation Company

19 18 Contribution of CSR Initiatives on Companys Reputation n 80% of CEOs believe corporate social responsibility initiatives contribute at least moderately to their companies reputation; three out of ten believe the contribution is significant n European CEOs put the greatest weight on CSR initiatives: 44% say the initiatives contribute significantly to reputation, compared to 26% of North Americans Q10: How much do you feel that corporate social responsibility initiatives contribute to your companys corporate reputation?Appendix page 38

20 19 Business Objectives that CSR Helps to Fulfill n CEOs cite recruiting and retaining employees (71%) as the most important business objective achieved by their companys corporate social responsibility initiatives. Favorable media coverage (51%) and promoting transactions and partnerships (40%) round out the top three. n Asian CEOs mention favorable media coverage (57%) as the most important outcome n Increasing sales and enhancing stock price are mentioned more frequently as objectives of corporate reputation than corporate social responsibility (56% and 45% versus 35% and 21%, respectively). Q11: What are the three most important business objectives that corporate social responsibility helps to fulfill? Percent of Time Among Top-3 Appendix page 39

21 20 Primary Responsibility for Managing CSR Q12: Where in your organization is the primary responsibility for managing initiatives of corporate social responsibility? n Over half of CEOs (55%) place the responsibility for managing corporate social responsibility initiatives on themselves (but this is lower than for managing and protecting overall corporate reputation, 65%) In Europe and Asia there are greater shared responsibilities; 28% of European executives and 22% of Asians place responsibility for managing CSR initiatives on the Board, compared to only 4% of Americans Appendix page 40

22 21 Reputation and CSR Management Responsibility Q12: Where in your organization is the primary responsibility for managing initiatives of corporate social responsibility? n CEOs appear to take more responsibility for managing corporate reputation than CSR initiatives Q8: Where in your organization is the primary responsibility for managing issues of corporate reputation? Appendix page 36, 40

23 Corporate Governance Founded 1938 An Opinion Research Corporation Company

24 23 How Well Boards are Doing in Performing Oversight Role Q13: How good a job do you feel corporate Boards of Directors are doing in performing their oversight role in businesses in general? n Two-in-three CEOs believe Boards are doing a good or excellent job in performing an oversight role n There is room for improvement; only two-in-ten give them an Excellent rating Appendix page 41

25 24 More Stringent Corporate Governance – Permanent Fixture or Passing Trend n The vast majority of CEOs (81%) believe that the recent focus on more stringent corporate governance and board oversight is going to be a permanent fixture in the corporate landscape Q14: In your opinion, is the recent focus on more stringent corporate governance and board oversight going to be a permanent fixture in the corporate landscape, or is it part of another passing trend that will fade over time? Appendix page 42

26 25 Predictions for Most Lasting Reaction of Focus on Corporate Governance n Nearly three out of four executives cite increased disclosure as the top lasting reaction to the recent corporate governance focus, and over two thirds believe that a higher proportion of independent directors will be a long-term outcome n The separation of the Chairman and CEO scored highly among European (66%) and Asian (45%) CEOs, but not among their North American counterparts (19%) Q15: Among the reactions to the recent focus on corporate governance given below, please rank-order the three that you think will be the most long-lasting in the corporate world in general. Percent of Time Among Top-3 Appendix page 43

27 26 Initiatives Undertaken in Response to Corporate Wrongdoings n In response to increasing revelations of corporate wrongdoing the vast majority of executives revealed they have reassessed the ethical processes in their firms, including improving internal controls, reviewing auditor and accounting relationships and revising codes of conduct. n In Europe a high priority for business leaders was to scrutinize executive compensation packages (56%), though this was not a major concern for North American or Asian CEOs (33% and 23%) Q16: What sorts of initiatives has your company undertaken in the past year in response to increasing revelations of corporate wrongdoings in the business world in general? Appendix page 44

28 27 Will More Stringent Corporate Governance Lead to Improved Ethical Behavior? Q17: How much do you agree or disagree that more stringent corporate governance standards will lead to improved ethical corporate behavior? n While 61% of executives somewhat agree that more stringent corporate governance will lead to improved ethical behavior, only 19% strongly agree it will, suggesting they remain unconvinced Appendix page 45

29 Appendix Founded 1938 An Opinion Research Corporation Company

30 29 Q1: Compared to 5 years ago, would you say that, in general, a companys corporate reputation today is: Much more important Somewhat more important Important to same degree Somewhat less important Much less importantNA Total60%28%11%0% 1% North American55%30%13%0%1% European66%31%3%0% Asian59%23%9%0% 1%

31 30 Q2: Three most important business objectives that your companys corporate reputation helps you to achieve? Recruiting and retaining employees Promoting transactions and strategic partnerships Increasing sales Enhancing your stock price Helping to withstand the impact of a crisis Building support for public policy initiativesOther Total73%61%56%45%36%17%6% North American80%62%56%34%38%17%6% European78%48%50%51%35%18%3% Asian57%67%62%65%33%11%8%

32 31 Q3: Which three of the following internal aspects of your company are the most influential on your companys corporate reputation, other than financial performance? Ability to CommunicateTransparencyHuman Values Treatment of Employees Ability to InnovateCEO Reputation Total48%39%37% 34%33% North American50%31%44%52%29%34% European66%41%21% 31%39% Asian36%53%29%15%47%32% Adaptability to Change Handling of Social/ Environmental Issues Reputation of Board Members CFO Reputation Internet Communications Success in e-commerce Total31%24%11%4%2%0% North American23%21%6%4%2%0% European28%37%9%0%3%0% Asian46%20%19%5%1%0%

33 32 Q4: Which three of the following external forces are the most influential on your companys corporate reputation? CustomersPrint MediaFinancial AnalystsShareholdersIndustry Analysts Total78%48%44%41%33% North American82%42%40%34%38% European66%76%51%28%25% Asian76%51% 59%27% Regulators/ GovernmentBroadcast MediaNGOsInternetLegislatorsLabor Unions Total25%15%6%3%2% North American28%17%7%4%3% European25%19%9%0%6%0% Asian17%11%1% 0%1%

34 33 Q5: Threats to a companys reputation can come from a variety of sources other than financial performance. Which three of the following threats are you most concerned about regarding your company? Unethical Corporate Behavior Product/ Service Problems Customer CriticismMedia Criticism Disaster which Disrupts Operations Litigation/ Adverse Court Judgments Total50% 40%38%37%31% North American41%46%30%37%42% European56%41%35%53%28%24% Asian65%63%64%33%29%13% Personal Malfeasance by Individual Sr. Execs Interest Group/ NGO Criticism Government CriticismInternet CriticismOther Total21%12%10%4%2% North American19%14% 6%3% European31%22%9%0% Asian21%4% 0%

35 34 Q6: In choosing a new successor for the CEO, how much weight does your Board place on the individuals ability to protect and enhance your companys reputation? A great deal of weight Moderate amount of weightA little weight No weight at allNA Total72%25%2%0%1% North American74%23%3%0%1% European75%22%0% 3% Asian68%31%0%1%0%

36 35 Q7: If a candidate for an officer-level position in your company is coming from a firm with a tainted corporate reputation, how much impact does this have on evaluations and hiring decisions regarding that person? Strong impactModerate impactSmall impactNo impactNA Total50%40%8%1% North American50%41%8%1% European53%41%3%0%3% Asian49%39%9%3%0%

37 36 Q8: Where in your organization is the primary responsibility for managing issues of corporate reputation? CEOBoard Corporate Comm/ PR/Public Affairs Other Senior MgmtLegal Total65%14%12%2%1% North American80%7%5%1%2% European44%38%13%3%0% Asian45%20%27%1%0% CFOMarketing Human ResourcesOtherNA Total1%0% 1%3% North American1%0% 1%3% European0% 3% Asian1%0%1%3%1%

38 37 Q9: Which, if any, of the following formal or informal measures do you have in place to measure your companys corporate reputation? Media Coverage Financial Performance Financial Analyst Research/ Commentary Word of Mouth Customer/ Stakeholder Research Total66%64%58%52%51% North American66%61%52%59%55% European84%53%75%44%56% Asian58%74%64%42%43% Published RankingsPrice/ Earnings RatioMonitoring InternetOtherNo Measures Total46%21%16%3% North American42%18%20%3%4% European63%25%16%6%0% Asian47%26%9%1%

39 38 Q10: How much do you feel that corporate social responsibility initiatives contribute to your companys corporate reputation? Significant Amount Moderate AmountA LittleNot at AllNA Total30%50%17%3%1% North American26%50%19%3%1% European44%50%6%0% Asian30%49%19%3%0%

40 39 Q11: What are the three most important business objectives that corporate social responsibility helps to fulfill? Recruiting/ Retaining Employees Favorable Media Coverage Promoting Transactions/ Partnerships Help Withstand Impact of Crisis Increasing Sales Build Support for Public Policy Initiatives Enhancing Stock PriceOther Total71%51%40%38%35%27%21%4% North American78%45%43% 36%26%11%6% European81%64%25%28%32%24%25%3% Asian53%57%43%27%37%32%38%1%

41 40 Q12: Where in your organization is the primary responsibility for managing initiatives of corporate social responsibility? Q12: Where in your organization is the primary responsibility for managing initiatives of corporate social responsibility? CEO Corporate Comm/ PR/Public AffairsBoard Other Senior Mgmt Human ResourcesLegalCFOMarketingOtherNA Total55%14%12%7%4%2%1%0%2%4% North American66%11%4%7%3%1% 2%5% European41%19%28%0%3%0%3%0% 6% Asian39%19%22%9%4%3%0% 1%3%

42 41 Q13: How good a job do you feel corporate Boards of Directors are doing in performing their oversight role in businesses in general? Excellent JobGood JobFair JobPoor JobNA Total20%44%32%4%0% North American21%40%32%7%0% European22%50%28%0% Asian18%50%32%0%

43 42 Q14: In your opinion, is the recent focus on more stringent corporate governance and board oversight going to be a permanent fixture in the corporate landscape, or is it part of another passing trend that will fade over time? Permanent ChangePassing Trend Total81%19% North American78%22% European81%19% Asian88%12%

44 43 Q15: Among the reactions to the recent focus on corporate governance given below, please rank-order the three that you think will be the most long-lasting in the corporate world in general. Increased Disclosure Higher Proportion of Independent Directors Increased Scrutiny of CEOs More Activist Shareholders Separation of Chairman/ CEO Total74%68%42%30%32% North American73%79%51%26%19% European66%50%31% 66% Asian82%55%27%38%45% More Time/ Resources for CSR Less Incentive-Based Comp for ExecsShorter CEO TermOther Total21%20%5%4% North American18%22%5% European25%21%0%3% Asian25%13%9%1%

45 44 Q16: What sorts of initiatives has your company undertaken in the past year in response to increasing revelations of corporate wrongdoings in the business world in general? Enhance Internal Controls Review Auditor/ Accounting Relationships Revise Codes of Conduct Ethics-related employee training Outside Resources for Process/ Procedure Review Total76%64%55%44%39% North American72%70%49%42%44% European72%53%72%38%25% Asian86%57%59%53%35% Procedures to Ensure Board Member Independence Scrutinize Exec Compensation Reevaluate Qualifications to Chair Board CommitteesOtherNone Total33% 25%6%2% North American37%33%30%6%2% European31%56%28%9%0% Asian27%23%15%4%1%

46 45 Q17: How much do you agree or disagree that more stringent corporate governance standards will lead to improved ethical corporate behavior? Strongly Agree Somewhat Agree Somewhat Disagree Strongly DisagreeNA Total19%61%11%4%5% North American15%64%14%4%3% European13%59%9%6%13% Asian30%55%7%3%5%

47 46 n For more information on the Corporate Reputation Watch 2003, please contact: l Andrew Laurence, Chairman EMEA Practices, Hill & Knowlton Tel: l Andrew Pharoah, Head of Corporate Affairs UK, Hill & Knowlton Tel: l Bob Reynolds, Senior Client Partner, Korn/Ferry International Tel:


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