The role of the CEO in building corporate reputation

Michael Alan Hamlin

Posted on June 17, 2009

A March 2009McKinsey Quarterly survey of senior executives around the world revealed that most senior executives believe trust in business (85%) and commitment to free markets (72%) have deteriorated. They are right. “According to the 2009 Edelman Trust Barometer, 62 percent of respondents, across 20 countries, say that they ‘trust corporations less now than they did a year ago.’” The results are hardly a surprise in the wake of the Global Financial crisis which has destroyed vast wealth and jobs worldwide.

However, McKinsey & Company consultants Sheila Bonini, David Court, and Alberto Marchi argue in a recent report, “Rebuilding corporate reputations,” that “today’s reputational challenge” is not just a consequence of the financial crisis and its aftermath. They are also the product of what they describe as “underlying shifts in the reputation environment that have been under way for some time.” They cite the growing importance of Web-based participatory media, the increasing influence of nongovernmental organizations (NGOs) and other influential third parties, and increased cynicism towards advertising.

The three authors further assert that companies which successfully rebuild and sustain confidence in their organizations will move beyond traditional PR “by activating a network of supporters who can influence key constituencies.” Doing that, they contend, requires increasing the sophistication of communications and internal coordination of efforts to manage corporate image.

Some of those sophisticated tools include attitudinal-segmentation techniques to better understand stakeholder concerns and cross-functional teams that gather intelligence and respond to reputational threats around the world. Getting such tools to work properly, however, the authors say requires commitment and leadership from enlightened CEOs who understand that delivering substance is as important as communicating it. “CEOs have an obligation to bolster the reputations of their companies and of free markets,” the authors conclude.

Earlier this month, The Wall Street Journal Asia announced the top 10 companies in the Philippine portion of its Asia 200 annual vote, which aims to identify the region’s most respected domestic and multinational firms. Jollibee Foods, which now operates multiple fast food chains in the Philippines, China, and the US, came in at the top of this year’s list, displacing Ayala Land, which fell to third. Its parent, Ayala Corporation, captured the second position.

The rest of the list, in order, was composed of San Miguel, Bank of the Philippine Islands, Globe Telecom, Banco de Oro Unibank, Philippine Long Distance Telephone Company, SM Prime Holdings, and Metrobank. There are a number of things that are interesting about this list. Foremost among them is that Ayala Corporation and its subsidiaries dominate the list. Three banks, which are extremely unpopular just about everywhere else, made it to the list. It includes two mall developers and two telecom companies. And one fast food firm, still young enough to be thought of as an entrepreneurship.

The other interesting thing about this list is less obvious. It is that it was voted on by the WSJA’s elite readership, primarily high-level executives in these very same firms and other major domestic and multinational corporations. So it is a list of firms admired by business executives, not the broader consumer market which most of these firms rely on for their revenues and profits.

So it’s not unnatural to wonder how that constituency would vote. The senior executives of these firms will say that consumers vote for them every day by investing in their products and paying for their services. Is that possibly because the CEOs of these firms have successfully bolstered the reputations of their companies and of free markets as Bonini, Court, and Marchi say they ought to be doing?

The answer for most of the companies on the WSJA list is probably, “Yes.” Jollibee Foods CEO Tony Tan Caktiong has become a familiar face in recent years on the conference circuit, but for many years the company has expertly communicated its Philippine roots, its David versus Goliath history with respect to its large multinational competitors, and its commitment to the Philippine palate and family values.

It’s not hard to look at these firms and see where, despite their success and their industry-leading positions, they have undertaken many of the communication initiatives recommended by the McKinsey consultants. Good governance and transparency are apparent in most of these firms, for example. Almost all of them work with various nongovernmental organizations to enhance educational opportunities and the quality of life in the Philippines’ poorest communities, and some have been very innovative in using new technologies to foster two-way communication with their customers.

And while there are the inevitable gaps in their communication strategies, which are more apparent in some companies on the list than others, it can also be said that their CEOs are visible, and committed to bolstering their companies.

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