CEOs wise up to poor corporate reputation

Oct 13 2003 by Brian Amble Print This Article

The increasing importance being placed on corporate governance by legislators, the financial markets, regulators, the media and consumers appears to be having an impact in boardrooms across the globe.

Half of the world's CEOs now believe that unethical corporate behaviour poses as great a threat to their corporate reputation as having major product or service problems.

And the potential impact of a poor reputation on recruitment and retention is uppermost in the minds of the 257 CEOs surveyed out by executive headhunters Korn/Ferry .

The findings reveals that CEOs think corporate reputation is more important today than ever. The overwhelming majority of CEOs Ė almost nine out of ten - agreed that a companyís corporate reputation is at least somewhat more important today than it was five years ago, and six out of ten believe it is much more important today.

But this sentiment is stronger among European CEOs, all of whom said that corporate reputation is at least somewhat more important today, than their American counterparts. The importance CEOs placed on corporate social responsibility (CSR) initiatives was also higher in Europe than elsewhere.

CEOs are very aware that the buck stops with them when it comes to managing their firm's corporate reputation. Two-thirds believe that reputation management is their own responsibility, with only one in seven placing responsibility on the board of directors and just over one in ten on their PR function.

What's more, almost three-quarters believe that the ability to manage reputation effectively carries a 'great deal of weight' when assessing potential successors. Nine out of ten CEOs also believe the reputation of a candidate's previous employer to be a 'strong' or 'moderate' recruitment consideration.

"The global business community has seen a welcome freshening up of corporate governance procedures and yet is clearly still to fully recover from recent financial scandals," said Bob Reynolds, Senior Client Partner at Korn/Ferry. "The effective management of corporate reputation is therefore a top priority for CEOs today."

Most at risk from a tainted corporate reputation is an organisationís reputation as a good employer. Recruitment and retention was cited by three-quarters of respondents as the primary business objective for corporate reputation, beating the promotion of transactions/strategic partnerships (cited by six out of ten) and enhancing stock price.

Recruitment and retention was also cited by seven out of ten CEOs as being in their list of top three objectives assigned to CSR initiatives.

These findings suggest that CEOs have been closely following the impact that which corporate reputation issues have had on society as a whole and particularly the growing importance of ethical issues to an organisationís employer brand.

Earlier this year, a survey by Select Appointment found that more than three quarters of people would not work for organisations they perceived as being unethical. A separate survey by recruitment website found that four out of ten consider a companyís CSR record to be the top priority when deciding whether or not to accept a job.

In the summer, a survey by Business in the Community found that more than half of employees complain that the recruitment spiel about values and CSR which helped attract them to their employer in the first place is never actually implemented. As a result, a significant proportion wanted to look for another employer.

Korn/Ferry's Frans Visscher agreed. "There is no escaping the fact that corporate reputation is a key element in the recruitment process", he said. "How can an organisation with a poor reputation hope to attract the best executives?Ē