2021/2022 Reputation Trends for All

[I posted this on LinkedIn as well]

The arrival in 2021 of the Delta/Omicron variants, vaccines and boosters to combat them, rising employee activism and resignations, supply chain woes, political unrest and increasing CEO turnover all forced business leaders to ask themselves how it is possible to burnish a company reputation under such circumstances? Past rules of the road no longer seemed to hold. CEOs, undoubtedly feeling a bit like impotent Wizards of Oz behind a Zoom curtain, struggled to enhance their companies' images while they and their employees sat isolated at home, some in home offices, others around kitchen tables, and a few in basement retreats only steps away from crying children and yelping dogs.    

No one can seriously argue that corporate reputation is not important. This is why it is the top priority spending area, according to a survey by Provoke Media with in-house communications leaders. Reputation delivers immeasurable value, particularly these days when so many companies are practically virtual. Back in 2012, a World Economic Forum study estimated that reputation accounted for little more than 25 percent of a company’s market value; by 2019, a global survey of 2,000 executives put that share at a towering 63 percent. What might it be today? Perhaps 70 percent and climbing?

In addition, reputation has become an all-encompassing consideration. In previous years, one or two, maybe three drivers of reputation would appear to dominate. In 2021 and undoubtedly in 2022, this no longer appears to be the case. So much has changed in a world beset by a pandemic, rising nationalism, distrust of institutions and social media mayhem and misinformation. Today, the significant drivers of reputation are many. One or two may seem to be somewhat more influential than others, but none can be ignored.

A report from Sandpiper Communications among consumers across 11 markets in Asia Pacific found that “While some reputation drivers are stronger than others, all the drivers we studied are either very important or important to 80% of all respondents.” Although this finding refers to the Asia Pacific region, there is every reason to believe that it is true elsewhere. It is a global phenomenon. Corporate leaders everywhere are faced with the Herculean task of dealing with a vast multitude of reputation drivers all of which are significant and must be attended to.

With this brief backdrop on the state of reputation, what follows is a discussion of some of those reputation drivers and trends:

1. Purpose is Foundational

“Purpose” was on everyone’s tongue this year. Producing “high quality products/services,” the traditional “oldie but goody” driver of reputation, while still important, was all but eclipsed by efforts to seek out a meaningful corporate purpose. 

In academic and business circles, purpose-led companies were held up as outperformers. According to McKinsey, a large 82 percent of employees report that it was important for their organizations to have purpose. Business schools are doing their part as well. The Duke University Fuqua School of Business recently added a course to its core curriculum called “Business and Common Purpose.”

Yet, for all this purpose talk, as many as 42 percent of employees agree that their company’s purpose statement does not have much impact. Purpose-led companies may be more aspirational at the moment but they remain seriously in vogue as of this writing and undoubtedly in the immediate future. Whether it will have legs several years from now has yet to be seen.  

2. ESG Is Critical

Someone recently asked me if ESG was a spice. Nope. ESG metrics—environmental, social, and governance—are firmly set as a current and future driver of corporate reputation.

More than 2,000 academic studies have investigated the impact of ESG on returns on equity. Sixty three percent found positive results (versus only 8 percent that were negative). Bloomberg Law recently surveyed lawyers who advise on ESG matters, a typically by-the-numbers bunch. Enhancing company reputation was most often selected—by a large 83 percent—as the primary reason in preparing ESG disclosures in 2021.

ESG’s high return-on-reputation may be behind IKEA Foundation’s CEO Per Heggenes’ semi-threat on CNBC made during the recent COP26 climate summit. He opined that large firms that don’t accept climate targets “should be discriminated against.” When it comes to ESG and its effect on reputation, companies should pay it great heed. 

3. Non-financial Factors Matter Too

Ethics matter. Rectitude is essential. The sudden exit of multinational British bank Barclay’s CEO Jes Staley on November 1, 2021 is proof positive that directors cannot overlook non-financial risks to reputation. His scandal-scarred departure came from a dispute with British financial regulators over how the chief executive described his pre-Barclay ties with convicted sex offender Jeffrey Epstein (let’s just say that 1,200 email exchanges between the two is not nothing). Similarly, an independent investigation of Toshiba’s leadership in 2021, including its former CEO, revealed that they behaved unethically by colluding with Japan’s trade ministry to influence shareholder votes on director appointments and unfairly restricting activist investors’ rights. Wrong-doing comes in various forms today, past behavior from the top such as that entertained by Staley as well as group behavior in the pursuit of corporate advantage are just a few examples where directors must be hyper-vigilant. 

As recently articulated by JPMorgan’s CEO Jamie Dimon: “To a good company, its reputation is everything. That reputation is earned day in and day out with every interaction with customers and communities. This is not to say that companies (and people) do not make mistakes – of course they do. Often a reputation is earned by how you deal with those mistakes.” Dimon is right on about how leaders who poorly manage crises quickly erode corporate reputation and lose the sanctity of trust. 

Poor behavior affects individual reputations as well. A study in Harvard Business Review found that executives from scandal-tainted firms are paid six percent less, on average, than peers. For financial industry executives, the “scandal penalty” for new job compensation is 10 percent—and that’s if you can even get an offer by a new employer.

 4. Corporate Culture is the Heartbeat of Corporate Reputation

Establishing an enduring corporate culture is at the heartbeat of every organization. Doing so, however, is particularly difficult nowadays with the workforce so widely dispersed and isolated.

When polling chief executives at a Harvard meeting one year ago, chieftains ranked corporate culture as their top concern. This issue has only grown more urgent as employers increasingly try to attract and retain the best talent. Building a strong corporate culture when so many employees work remotely is complex and painfully difficult. Nothing replaces meeting other employees in-person, brainstorming ideas, hallway conversations and learning the ropes from a mentor. Zoom has been a life saver but it does not easily train new recruits, engage employees, build advocacy, guide decision-making, improve productivity or establish deep connections.

Even so, establishing a strong corporate culture is a must for the solid returns it generates. Gallup reports that strong cultures witness an 85 percent increase in net profit over a five-year period and over three years, a 50 point increase in employee engagement. Inattention to corporate culture can be fatal. Activision Blizzard’s CEO Bobby Kotick, for example, is facing intense pressure to step down over accusations that he did not respond early enough to sexual misconduct claims from employees. Even his directorship at Coca-Cola may no longer be viable since an investment group is reportedly demanding that he leave that board so that he can focus on Activision’s culture full-time. Corporate culture requires consistent, cultural vigilance.

5. Home Country is the Newest Stakeholder on the Block

On August 19, 2019, 181 CEOs signed the Business Roundtable’s Statement on the Purpose of the Corporation, the statement heard around the world. It redefined the primary focus of American business on shareholders to a commitment to all stakeholders. Two years later, new research by Weber Shandwick and KRC Research found that there’s another stakeholder group that should be seriously considered by business leaders, one that often goes unspoken—home country (defined as where a multinational company is headquartered). Their research among 1,200+ multinational executives found that nearly 6 in 10 (58 percent) named their home country as a top stakeholder when making “very” important business decisions. Executives in 9 of 12 markets reported that their home country is among their top three stakeholders. Notably, Weber Shandwick’s EVP of Geopolitical Strategy & Risk Michelle Giuda said that CEOs and presidents rate home country as the top most important stakeholder to their business and 53% strongly agree that a positive corporate/brand reputation helps a company weather a geopolitical crisis. 

As nationalism continues to have a strong foothold around the world and countries seek competitive and economic advantage, business leaders now have to manage geopolitical issues and contend with how home country concerns affect corporate reputations. For example, China pressured Apple to drop the tech company's homage to its home country, the “Designed by Apple in California” slogan, from the backs of iPhone in China. Nor is Apple alone in genuflecting before Chinese nationalism. The automotive BMW group, for example, is considering production of certain models, including the profitable X5, in China even though those models used to be built only in the U.S., so as to help diminish U.S.-China trade conflicts. Intel, on the other hand, is taking the opposite tact by spending $20 billion to build two major chip factories in Arizona to “enhance the competitiveness of the U.S. semiconductor industry and support key U.S. government initiatives.” When mapping out reputation management target audiences, it is now time to add home country to that list.

6. Diversity Pledges and Black Promotions Waver

A recent analysis of the 50 most valuable public companies found that only eight percent of top executives in the C-Suite were Black. The Washington Post analysis also asserted that those charged with promoting more Blacks into prominent corporate positions were struggling to achieve their goals. This parallels the findings of consultancy UnitedMinds’ that found that while some positive progress is being made, a large 78 percent of senior diversity, equity and inclusion (DE&I) officers believe that DE&I isn’t prioritized unless there is a visible or public problem. Only 45 percent believe that their role is seen as a “must-have” by corporate leadership. Sadly, these senior diversity officers report that recruiting and retaining diverse talent has decreased in priority, from 33 percent in 2019 to 21 percent in 2021.

Although this decrease may be attributable to the pandemic’s hiring freezes, it nevertheless fits with an overall pattern that corporate America’s post-George Floyd pledges are languishing. Creative Investment Research found that only $250 million of the estimated $50 billion pledged by U.S. companies to racial equity within the past year have so far been spent or assigned to a specific program. Corporate America will certainly be called out in 2022 for not taking enough action on diversity’s inclusion in business. This is a real flashpoint that will hurt progress towards an equitable workplace and place shame on organizations sooner than later.

7. America’s Reputation Abroad and Domestically Faces Serious Fault Lines

Last June, Pew Research Center’s survey of 16 non-U.S. countries found a large uptick in ratings for the U.S., with strong support for President Biden and his policy initiatives. A median of 75 percent of people outside the U.S. expressed confidence in Biden, compared with 17 percent for former President Trump. Such strong approval abroad seems to primarily reflect relief that U.S. leadership changed. Deeper, more serious concerns remain. Pew Research found that although the U.S. gets good marks for its technology, popular culture and military prowess, it is perceived poorly when it comes to its health care system, handling of the coronavirus and the existence of pervasive discrimination based on race or ethnicity. Americans too have their doubts. Americans view discrimination in the U.S. as a drag on its reputation. A large 77 percent of Americans think discrimination is a serious problem.

Perceptions of America as a beacon of democracy has also taken a nosedive. The Pew Research study, finds that a median of only 17 percent of outside publics say U.S. democracy is a good model for other nations to follow compared to 57 percent who used to think otherwise. Tragically, Americans mostly agree. Only 19 percent of Americans now think American democracy is a good model for others and a large 72 percent say it used to be a good example but not of late.

America’s reputation is a mixed bag that seems to quickly rise or fall depending on leadership at the top, the actions it takes and its inconsistent promise that all men (women) are created equal. A recent Financial Times article was aptly titled “Democracy is under threat, we must add a D to ESG.” What a good point. Advancing democracy will be the newest reputation metric to manage.

8. Culture Wars Define Brand Reputation

Senator Mitch McConnell, Republican of Kentucky and senate minority leader, recently said “My warning, if you will, to corporate America is to stay out of politics. It’s not what you’re designed for.” He objected to criticism of Republican efforts to potentially restrict voting access in Georgia and other states.

Despite McConnell's warning, CEOs have continued to interject themselves into the culture wars showing their activist colors. Some CEOs have already taken sides, be it for the red right (CEO Mike Lindell of mypillow.com and CEO Robert Unanue of Goya Foods) or the blue left (CEO Marc Benioff of Salesforce and CEO Tim Cook of Apple). The business world is reflecting the growing divide that has so deeply split society at large. As the cultural divide deepens, brands are becoming indelibly identified as red and blue brands. Don’t be surprised if in the future you find yourself asking if your new car shouts Republican (Ford, Chevy or Porsche) or Democrat (VW, Suburu or Acura)?

Yet there are indications that some activist business leaders are beginning to question the business viability of further forthrightness on social and political issues. Apple, for example, is not coming out as loudly on the left as might be expected in stating its opposition to the Texas’ abortion ban, a political hand grenade if ever there was one.

CEO Tim Cook announced in an internal broadcast to all employees that Apple's medical insurance would help cover the costs incurred by workers who need to travel out of state for abortions because of Texas' abortion access restrictions. He has also made it clear that the tech company intends to help fund the legal battle against the abortion law. Be that it as it may, the company could have done so much more. Apple has nearly completed a 133-acre campus in Austin, Texas to house 5,000 employees. Instead of using this major investment in Texas as leverage, Cook chose to moderate Apple's earlier no-holds-barred approach to political issues—e.g., its stand on separations of migrant families at the United States-Mexico border which Cook publicly condemned as “inhumane”—by working more quietly behind the scenes. As the CEO activist movement rebalances to protect reputation amidst the culture wars, we may also see more petitions and open letters, less individual declarations, that quell reputational discord. The 72 Black Executives who signed an open letter appearing in The New York Times called on companies to fight against Republican-led voting bills is a likely prototype for the future.

The culture wars are drawing companies into the red-blue divide. While they will undoubtedly continue to take sides, we can expect them to become more nuanced in their stands on particular issues in an attempt not to be fully engulfed by controversy. As long as social and political divisiveness reflect the society at large so will the pressure on companies and their CEOs to partake in the turmoil continue to persist. CEO and corporate activism may not align well with politics but the cat is out of the bag. Sorry Mitch McConnell!

9. Activism is No Laughing Matter

More of a warning than a trend, it is hard to believe CBS planned a television show to anoint the best activist. Originally scheduled for October 22, 2021, the new five part series of The Activist was to be held with co-hosts’ Usher, actress Priyanka Chopra Jonas and Kingry CEO Julianne Hough. As originally intended, “The activists will compete in missions, media stunts, digital campaigns and community events aimed at garnering the attention of the world’s most powerful decision-makers, demanding action, now.” The winners would get to go to the G20 Rome summit to hob-nob with corporate and global leaders to earn support for their causes. The backlash was so fast and intense that the original plan was called off. Instead, a primetime documentary special is in the planning stage to be hosted by CBS, Live Nation and Global Citizen. “It will showcase the tireless work of six activists and the impact they have advocating for causes they deeply believe in. Each activist will be awarded a cash grant for the organization of their choice, as was planned for the original show.” Global Citizen stated: “Global activism centers on collaboration and cooperation, not competition. We apologize to the activists, hosts, and the larger activist community—we got it wrong.” The idea that activism could be shaped into a reality show was a reputation debacle for its hosts and potentially for the mostly sincere intentions of the activist community. 

10. Reputation of Science is Riding High

In my last year’s roundup of reputation trends, I described the emerging Fauci Effect. Dr. Anthony Fauci, currently the Chief Medical Advisor to President Biden, has become the most credible interlocutor on the efforts by the medical community to control Covid-19. As such he has become emblematic of the effectiveness of science in dealing with medical and other catastrophic public health problems.  

Since Dr. Fauci and other medical spokespeople have begun expounding on ways science has been attempting to deal with the pandemic, the reputation of science has been on the increase. Medical school applications have increased 18 percent vs. one year ago. In research by the Wellcome Trust, nearly 80 percent of people from 113 countries said they trusted science as a field. About three-fourths of the 119,000 surveyed said they trusted individual scientists. For all the downside accompanying this horrific global coronavirus, respect in science’s reputation is climbing high. Finally, something good comes out of all this misery.

*****

It’s time to put these reputation thoughts to bed. The past year has been hard for everyone and we’ve seen reputations come, go and stand still. As for me, I would hope next year to add different reputation trends that so far have been glaringly absent from any of my past year-end predictions. Wouldn't it be great to write about trends that highlight how companies increased their acts of kindness, improved civil discourse, promoted democracy and took corporate action that made things better for everyone, including the Earth? Can't say that the cards indicate that this is likely to happen. But wouldn't it be swell if it did.