A study released this week shows what crisis managers have known since the snake arrived in the Garden of Eden: Reputation matters.
Not only does it matter, as the PRWeek report below describes nicely, it carries significant value to be increased or decreased in parallel with reputational perception. [And thanks to my ever-vigilant and alert EMA colleagues Meredith Dropkin and Danielle Gerhart for passing this along.]
The combined value of the corporate reputation of the S&P 500 is worth almost $3 trillion, nearly 22 percent of its total market capitalization, according to a study released this week by Echo Research in association with Reputation Dividend.
Said Sandra Macleod, group CEO of Echo Research:
“Corporate reputation is not just PR or communications, but fundamentally it’s about business performance. Reputation is material, and you can put a price tag on it and track it over time.”
The sixth-annual “2013 U.S. Reputation Dividend” measured the value of corporate reputation by using data from more than 200 of the largest public companies in the US projected across the S&P 500 index in January.
It measured the value of corporate reputation based on three inputs: financial data, data from Fortune’s “Most Admired Companies,” and coverage of the companies in the mainstream U.S. business press.
Despite the average stock price rising 14 percent year-over-year, the value of corporate reputation in January was down 4 percentage points from January 2012, accounting for a loss of $170 billion of shareholder value, according to the study.
Macleod said this downward shift indicates that companies are “not fully appreciative of how important reputation is.”
“After the downturn, corporations are so focused on cost-cutting and have gone lean, that margins have gone up, but there is no investment in reputation,” she said. “The irony is, it does not have to be expensive.”
Apple no longer has the most potent corporate reputation, according to the study. It was knocked out of the top spot by Phillip Morris International and Exxon Mobil into third place, with a corporate reputation worth 54.9 percent of its shareholder value.
Fascinating, no? A company that builds devices that enhance billions of lives worldwide slips behind a tobacco giant and an oil company? Are you kidding me? It seems that in the case of market value, “reputation” is tied very closely to “stock performance.”
Ergo, we like companies that make money and make us money and we look the other way when it comes to the reputation of its product mix and the effect those products might have.
Macleod said this could be due to a number of factors, including controversy over [Apple’s] factories in China, competition in the smartphone market, and the death of former CEO Steve Jobs.
Phillip Morris International and ExxonMobil both had reputations worth 55 percent of their shareholder value.
Occidental Petroleum, Google, Chevron, Qualcomm, Caterpillar, Walt Disney, and McDonald’s are also in the top 10 companies with the most potent corporate reputations.
Quest Diagnostics, copper company Freeport-McMoRan, and forest products company Weyerhaeuser were among the companies that saw the potency of their reputations increase. Staples, Time Warner, and food safety company Sealed Air saw theirs drop by the greatest amount.
The sector that companies operate in also affects the value of their corporate reputation. For example, utilities, which have a “captive monopoly,” have a lower value of how much their reputation contributes to shareholder value, compared to more competitive sectors such as oil and gas and telecoms.
The content of this blog is about crisis management and mismanagement in a digital age. It originates with Steve Bell, who spent 30 years as a journalist for the Associated Press and in four top editor positions at The Buffalo News. He is now Partner/Director of Public Affairs at Eric Mower + Associates, one of the nation’s largest independent advertising, integrated marketing and public relations agencies, with seven offices in the Northeast and Southeast. Learn more about EMA at http://www.mower.com. Steve’s blog is based on his own opinions and does not represent the views or positions of Eric Mower + Associates.