Reputation Trends & Risks for 2020
Here you go trends watchers in the reputation space. This was posted earlier on LinkedIn but so pleased to share here.
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A new decade ahead. Adios to the last one.
The last decade did not start off well for the reputation of business. The Great Recession aftermath, oil spills and automotive recalls, geopolitical unrest, uncivil Internet masses and a naive adoration of all things tech were just some of the factors with which businesses had to deal at the start of the decade and thereafter. No easy task. Many previously pristine brands were tarnished: AIG, JPMorgan Chase, BP, Toyota.
The decade ahead, despite the strong economy, appears to be starting on a similarly wrong foot with seemingly strong and promising companies suffering missteps and poor decision-making (think WeWork, Boeing, Wells Fargo for starters). Good reputation is more fleeting than ever.
The dark clouds of impermanence threaten even the best of business reputations. To keep those dark clouds away requires constant and hard work. Part of that due diligence is staying ever attuned to cultural, political and business trends and risk. For that reason, I venture my list of nine trends and risks for the coming year.
(NOTE: Many of these trends involve activism of one sort or another. I can only conclude that the factors underlying such activism reflects widespread dissatisfaction. We live in unstable and uncertain times and businesses must be on high alert.)
1. 2020’s Watchword: Purpose
Trust, Truth and Transparency are all familiar bywords used by companies in the past to encapsulate their reputational goals for the coming year. There is now a new byword – “Corporate Purpose” – to add to the list, a term whose mentions have increased 1,109% over its use in 2010.
Purpose generally applies when a company says it is committed to a goal beyond merely increasing the bottom line. Perhaps the most notable adoption of the term occurred this past August 2019 when 181 CEO members of the Business Roundtable signed an updated Statement on the Purpose of a Corporation. The BRT overhauled its earlier long-standing commitment primarily to shareholders and announced a new corporate purpose that’s more stakeholder-inclusive and socially responsible, encompassing not just shareholders, but also investors, employees, communities, suppliers and customers.
Many of the most reputable companies, of course, have already consistently invested in more than the bottom line. Unilever, for example, long ago incorporated the social purpose of sustainability into its DNA and reported on its progress year after year, warts and all. What is different is that the focus on such efforts may now be publicly heralded and even mentioned on quarterly investor calls: note that from the first to second quarters of 2019, there was an 100% increase in S&P 500 companies citing environmental, social and governance (ESG) factors on earnings calls.
Publicly stated corporate purposes have real ramifications. Count on the next generation to fiercely pursue employers who are purpose-led, to intentionally buy from companies that stand for something beyond profit and to call out organizations that do not walk and talk their purpose. Purpose may even serve as a salve to help counteract a widespread perceived lack of meaning in the workplace. According to a survey of over 2,000 workers by BetterUp Labs, 9 out of 10 said they would sacrifice 23% of their future earnings – an average of $21,000 a year – for meaningful work.
2. The #MeToo Reputational Fallout: CEO Departures Soar
Chief executives left their posts at a record pace in 2019. Although various business commentators point to reasons such as natural succession plans, aging-out CEOs, mergers and acquisitions and declining revenues, there’s another powerful force that should not go unnoticed – the rise of the #MeToo movement.
An often-whispered explanation behind many of these exits is the suspicion of allegations against a CEO as a sexual harasser. No solid proof is necessarily behind these suspicions, but they do fit a behavioral pattern that many wink at. At a recent business dinner I attended, conversation turned to a sudden CEO departure. A colleague surmised that some hanky panky may have been involved which might account for such surprising news without obvious justification so close to the end of the year. Recent well-known incidents of notable CEOs stepping down because of consensual or non-consensual relationships with middle managers have undoubtedly helped fuel this reputation-rumor mill. But then, it also makes sense for Boards to force departures preventably on the basis of reasonably-based suspicions rather than to risk the future possibility of more public and devastating disclosure.
Such misgivings about certain chief executives may be behind the increase in departures for “personal reasons” since the onset of #MeToo. An early look at the Conference Board’s 2019 CEO Succession Practices report by Fortune found only one CEO fired due to personal misconduct from 2013 to 2017 compared to five departures in 2018 alone due to non-performance related personal behavior and #MeToo allegations. Whether true or not, rumors of misbehavior will undoubtedly linger into the next decade as the problem of sexual harassment continues to play out. The increasing proliferation of made-for-TV shows and documentaries involving sexual misbehavior in the C Suite, such as Bombshell, Untouchable and Succession, evidence the likely lingering nature of this issue.
3. No Playbook for CEO Activists
Corporate activism, a rarity 10 years ago, is now mainstream. Over the past few years, companies and their leaders have increasingly weighed in on politically and socially sensitive issues, from gun control to immigration to climate change to LGBTQ rights. Even The New York Times has pronounced that CEO activism has become the “new normal.” In 2018, 38% of Americans reported being favorably disposed to CEOs who took a public position on hotly debated current issues versus 25% who were less favorably disposed. This sentiment was even stronger among Millennials (48% positive) who are currently the largest and most coveted generation in the workforce.
So, if CEO activism is veering mainstream, what are the rules for CEOs who speak out on contentious events? After observing businesses’ responses for nearly a dozen highly charged incidents over the past few years, I have reached a fairly simple conclusion: there is no single uniform CEO playbook to follow. Deciding if, how and when to respond to each issue depends on individual circumstances and looks different from issue to issue.
Speaking at the Fortune CEO Initiative in 2018, Apple’s CEO Tim Cook said no simple formula exists about when to respond. What he asks himself is: “‘Do we have standing? Do we have a right to talk about this issue...’” Former GE General Counsel Alex Dimitrief advises: “The stronger the nexus between an issue and a company’s mission (its products and services) or the way a company goes about fulfilling that mission (its culture and HR practices), the stronger the case for engagement.”
How to demonstrate activism also varies. Some CEOs join a list of signatories, others issue media statements, some distribute internal memos, others make donations or contribute in-kind services, and one, CEO Tim Cook, filed an amicus brief to the U.S. Supreme Court in his own name, not just Apple’s, over repeal of the Deferred Action for Childhood Arrivals (DACA), a contentious American immigration policy.
In the years ahead, corporate reputations will increasingly be shaped by CEOs taking stands on socially charged issues. Even in the next 12 months, we will have to see how CEOs respond to presidential candidates – Trump included – who criticize them. Will they duck for cover or defend their positions? CEOs, their boards and their teams need to decide how willing they are to incorporate an activist risk assessment into their reputations.
4. Like Clockwork, the Activism Backlash is Unleashed
No one should be surprised that criticism has also risen along with the rise of CEO activism. After all there are always two or more sides to every activist issue. They wouldn't be issues worthy of taking a stand on if everyone agreed.
Thus, it is inevitable that a sizable segment of the population exists who is not favorably inclined towards activist CEOs on any particular issue, who are less likely to remain loyal to them and who are less likely to buy from their companies. As former General Counsel Dimitrief wisely wrote about the lessons learned from GE’s political stand opposing religious liberty and bathroom laws, both of which faced strong opposition from large segments of society: “Corporate activism is a contact sport.”
Two additional critiques are also making the rounds:
First, rumblings arose a few years ago about tech company CEOs selectively speaking out against the immigration ban, Charlottesville protests and bathroom laws. Business leaders, it was argued, were speaking out about social injustice at home but not raising their voices over human rights in other countries where they do business.
Although this point has its merits, it is a bit much to require companies to impose their views on all societies. I agree with Dimitrief’s point of view described in Directors&Boards: “…while we must comply with all local laws in countries where we operate, we use our presence and influence to try incrementally to effect changes in laws that do not reflect universal human rights values. We feel these incremental efforts to bring about change through our continued presence are more likely to address human rights deprivations than would withdrawing our presence.”
A second argument has emerged. A recent New York Times headline reads “C.E.O.s Are Not Here to Save Us.” Columnist David Gelles argues that business leaders, at the expense of tangible and measurable profits, may have gone too far in promoting “yoga babble” mission statements about elevating world consciousness and making a difference. He highlights WeWork, Peloton, Etsy, Nike and eBay and their obsession with discovering “woke” values at the expense of satisfying investors. Further criticism about CEO activism hypocrisy was recently raised in The Australian, citing how CEO activists have had an easy ride so far: “…it is more fun to outline your vision for humanity than for increasing EBITDA margins.”
In short, who are CEOs to think that they have some special moral authority to determine social issues, whether for or against?
Be that as it may, someone has to speak up for ideals, principles and values. Who would be better than CEOs who command attention, are listened to and are increasingly willing to put pressure on politicians and legislators to solve some of the world’s most intractable problems? Perhaps one or more of their stands will be proven wrong in time. Let the chips fall where they may.
5. Employees are on the March
In early May 2019, the former CEO of Aetna, Ron Williams, had this to say about employees actively campaigning against their companies: “I can’t imagine that happening 20 years ago… CEOs have to manage all that.” Welcome to the 2020s turbulence ahead.
Employee activism is now on the rise, buoyed by a strong labor market, technology’s reach and incited by some of government’s more controversial policies. Workers at Google, Amazon, Microsoft, and smaller tech companies like Tableau and Chef, have organized walkouts, demonstrations, and other acts of protest to pressure their employers into changing their behavior.
McKinsey & Company employees pressured the management consultancy to stop working with Immigration and Customs Enforcement (ICE). Online furniture retailer Wayfair found itself confronting an employee walkout against management’s decision to sell bedroom furniture to a government operating immigration detention centers on the U.S./Mexico border. One employee said: “We don’t want our company to profit off of children being in concentration camps.”
In Weber Shandwick, United Minds and KRC Research’s 2019 research, Employee Activism in the Age of Purpose: Employees (UP)Rising, 38% of American employees are Employee Activists, working men and women who have spoken up to support of and/or criticize their employer’s actions over a societal issue. Millennial employees, those between 23 and 38 years old, are even more likely to do so (48%). Similar is the finding that over three-quarters believe that employees are justified in speaking up about their employers’ stands and policies on societal issues even if they put their jobs at risk (79% agree). Leaders need to own up to the fact that employees are no longer mere bystanders as they were expected to be 10 to 20 years ago.
Employee activism is a worldwide phenomenon. Nearly one half of global employees expect employee activism to rise in the next two to three years. Employee activism will occupy more of employers’ time and post more risk as they face protests, worker manifestos, petitions, and demands for employees to sit on corporate boards.
6. Citizen Activism Looks Ahead
Global activism is on the move, not just by CEOs and employees, but by just about anyone as technology enables groups to more easily seek common purpose and to organize in the face of unsettled times.
Mobilizers are perfecting their craft. Hong Kong dissenters, for example, are getting on-site experience as daily clashes occur over the proposed Hong Kong extradition bill and other matters. What makes the Hong Kong protest so extraordinary is its ability to effectively organize protests with the use of social media regardless of a decentralized leadership. The protesters learned their lessons from the earlier more centralized pro-Democracy Umbrella Movement of 2014 where government was able to identify high-profile leaders of the movement. Now the movement has a collective existence apart from any specific leader or spokesperson. This structure will likely be copied elsewhere.
Hong Kong is not alone in its protests. Arab Spring protests took off in the early 2010s and spread throughout the Islamic world. The anti-austerity Indignados Movement in Spain was followed by the anti-1% Occupy Wall Street movement in the fall of 2011, spreading to over 600 communities in the U.S. and more than 950 cities across 82 countries worldwide. What these movements shared in common were the central role played by social media which enabled quick information flow and disruptive flash mob protests. As in the case of the Hong Kong Umbrella Movement, they are all learning experiences that shaped the last decade and from which to draw lessons for new protests in the coming decade.
One can only imagine what the 2020s will look like as citizens unite locally, nationally and even globally, as technology ignites pride, pain and advocacy, as the younger generation dominates our public squares and workplaces, and as protests are undertaken alongside boycotts, buycotts and who knows what other expressions of dissent.
7. Mentally-Healthy Workplaces Likely to Drive Future Reputations
As a reputation rankings maven, I used to joke how there was a reputation ranking for everything these days, even a “best workplaces for mental health.” The audience laughed no matter where I was in the world.
I am now a bit wiser and a lot more abashed. Mental health at work is no joke. When Gen Zs (born between 1997-2000) search for healthcare information in a study we did, mental health is a major concern. In another study, half of Millennials and 75% of Gen Zs reportedly left their jobs for mental health reasons compared to 34% of respondents overall. This is sobering. As stress-related disorders, work overload, anxiety, burnout and other mental health issues increasingly derail employees’ careers and corporate productivity, companies will be forced to create workplaces that better support employees’ mental health needs.
No wonder then that younger generations are going out of their way to seek mental health care. Befittingly, multinational professional services firm Deloitte has a Chief Well-Being Officer, Jen Fisher, who drives the firm’s strategy and innovation around work/life, health and wellness. Fisher is charged with getting employees to prioritize their well-being so they can be at their best both professionally and personally. Gone are the days where the best places to work are determined only by perks such as laundry services, catered meals and health care programs focused primarily on physical ailments. Robust offerings for psychological and well-being services need also be required for the company that wishes to be on the cusp of change.
8. Corporate Reputation is Omni-Driven Now: De-Risk Thyself
Year after year, corporate reputation had been driven by a relatively clear hierarchy of factors, namely the quality of products and services, management quality, financial performance and innovativeness. Other factors such as social responsibility and talent mattered in building reputation as well but to a lesser degree. Over the 25 years that I have been in the reputation field, this pecking order of primary and secondary factors was immutable.
But change is everywhere. Everything matters today when it comes to building, maintaining and protecting corporate reputation. With technology making everything seeable and all stakeholders having a voice, a well-earned corporate reputation can collapse over the most minor of stumbles. Going forward, a company will need all of its reputation drivers working in lockstep and at maximum output just to stay in place and be risk-free. 2020 reputations will hinge on staying ahead of all risks, responding quickly and empathetically, and always preparing for the worst. Everything will matter. All factors are primary.
9. Personal Reputationally-Based Scores are Coming
Science fiction meets reality as various nations develop centralized databases capable of recording intricately detailed personal and social traits of each of its citizens. In time, nation states may routinely establish extensive files on individuals with the same ease and casualness as the U.S. now allocates social security numbers or credit companies assign credit scores.
According to Wikipedia, China will establish a Social Credit System next year. It is a “national reputation system” that has been in pilot testing since the start of the last decade. Essentially every citizen and business will get a single social credit score based on financial transactions such as bank accounts, insurance premiums and debt as well as on social behavior such as purchasing history and public acts of citizenship. The score defines how trustworthy you or your business is. Other countries (such as Germany, Venezuela, United Kingdom, Chile and the United States) have or plan to establish similarly capable central database systems which may not be yet as advanced as that planned by China but can still be easily modified to be as comprehensive.
No detail is too inconsequential to be recorded in such a centrally based system. For example, your personal social credit score may get dinged if you play loud music, eat while on public transportation, jay walk, do not show up for a dinner reservation, do not sort your waste and so on. You can raise your social credit score by contributing to a charity, donating blood, volunteering or buying responsibly (more eco-sustainable toys and fewer video games).
If your score falls into the negative social credit arena and you are deemed untrustworthy or less reputable, you might find yourself on a black list which has adverse consequences such as being denied airplane tickets, rail tickets and admission to private schools and universities. Individuals with better reputational credit scores might earn advantages such as shorter wait lines at hospitals, theaters and buses, and getting better job offers and lower rates on loans.
The alleged justification for such a widespread national reputational system is that social behavior can be effectively regulated in a way that benefits everyone’s quality of life. The untrustworthy will experience more constraints on their lives while the trustworthy will have greater license to enjoy the finer things in life and reap more financial benefits. After reading several articles describing people’s firsthand responses to finding themselves suddenly blacklisted for one reason or another (e.g., being offensive online), I have concluded that the blacklisted would make every effort to upgrade their reputational status and earn back trust.
Of course, those controlling the system are given exorbitant authority to shape the lives of others through the application of these carrots and sticks. The crux of the matter is who decides what behavior is appropriate and how unwittingly this information has been gathered.
Too controlling? Or simply a more efficient governmental system? Orwellian or Utopian? For better or worse, people and businesses everywhere will undoubtedly be dealing with such amped-up, centrally based systems on a worldwide scale for a long time to come.
Happy new decade, my friends.