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CEOs Receive Nearly 60 Percent of the Blame When Company Reputation Is Damaged

2007-02-27 10:17 1034

Triggers of Reputation Failure Identified

Executives Underestimate Impact of Leadership Departures

NEW YORK, Feb. 27 /Xinhua-PRNewswire/ -- Global business executives assign nearly 60 percent of the blame to CEOs when companies lose reputation after a crisis strikes, according to a new Safeguarding Reputation(TM) survey by global public relations firm Weber Shandwick with KRC Research. This finding did not significantly differ among regions.

CEO RESPONSIBILITY FOR REPUTATION LOSS

Total North

Global America Europe Asia

Average percent of

blame attributed to

CEO after crisis

strikes 58% 60% 57% 57%

Source: Weber Shandwick Safeguarding Reputation(TM) survey conducted with KRC Research.

Note: Results for Brazilian executives are included in the total.

Weber Shandwick's survey also identified the key triggers of reputation failure that if caught early could reduce the chances and extent of CEO blame. A majority of executives surveyed cite major triggers of reputation failure as financial irregularity (72 percent), unethical behavior (68 percent) and executive misconduct (64 percent). Other frequently mentioned strikes against reputation revealed by the survey are security breaches (62 percent), environmental violations (60 percent), and health and safety product recalls (60 percent). Despite widespread media coverage, and in some cases severe consequences for any wrongdoing, key triggers continue unabated -- alleged stock-option backdating, corrupt governance, consumer information security, pipeline leaks and salmonella or e-coli scares, among others.

"Interestingly, many of the reasons causing companies to suffer reputation loss are self-inflicted. Financial irregularities, unethical behavior and executive misconduct are all issues that could be prevented if companies had better controls in place," said Weber Shandwick's Chief Reputation Strategist Dr. Leslie Gaines-Ross. "As more reputations deteriorate worldwide, companies need better reputation radar systems to identify and track approaching reputation threats -- 33 percent of the Global Fortune 500 experienced reputation deterioration in their 'most admired' status in 2005."

Also noteworthy is that today, global business executives underestimate the severity of a number of significant reputation threats. Approximately one-third of survey respondents place CEO compensation, online attacks or rumors and top executive departures low on the list of triggers that tarnish reputations. Companies continue to overlook how damaging threats from online activists and pressure groups can be if they are not prepared to respond quickly and decisively. The survey also underscores how executives around the world might be underestimating the negative impact of executive turnover.

Factors That Can Significantly Damage Reputation

% Always/Usually

Total North

Global America Europe Asia

Financial irregularities 72% 74% 70% 71%

Unethical behavior 68 66 69 61

Executive misconduct 64 59 65 56

Security breaches such as

loss of confidential

information 62 60 60 60

Environmental violations 60 60 59 55

Product recall based on

health and safety issues 60 47 64 58

Regulatory non-compliance 59 49 62 53

Factory breakdowns or

explosions resulting in

injuries 59 56 57 61

Labor strikes or unrest 40 31 42 39

Ongoing protests by

special interest groups

or NGOs* 38 29 41 34

Risky supply chain partners 38 30 40 33

Support of unpopular

public policy position 38 31 39 34

Public controversies over

high CEO compensation 36 29 36 40

Online attacks or rumors 25 16 28 27

Top executive departures 17 9 19 12

Source: Weber Shandwick Safeguarding Reputation(TM) survey conducted with KRC Research.

Note: Results for Brazilian executives are included in the total.

* Non-governmental organizations

Regional Differences

Overall, European executives appear more sensitive to reputation threats than their North American and Asian executive peers (most frequently respond "always or usually" to factors that can significantly damage corporate reputation).

Regardless of region, executives consider financial wrongdoing and unethical behavior the most significant threats to reputation. Compared to their counterparts in other regions, however, North American executives are more sensitive to environmental issues, Europeans to health and safety product recalls and regulatory non-compliance, and Asians to factory breakdowns or explosions.

Regional Top Five Factors That Can Significantly Damage Reputation

% Always/Usually

North America Europe Asia

Financial Financial Financial

irregularities irregularities irregularities

Unethical behavior Unethical behavior Unethical behavior

Security breaches Executive misconduct Factory breakdowns or

explosions resulting

in injuries

Environmental violations Health and safety Security breaches

issue product recalls

Executive misconduct Regulatory Health and safety

non-compliance issue product

recalls

Source: Weber Shandwick Safeguarding Reputation(TM) survey conducted with KRC Research.

"Companies need to put safeguards in place to protect their reputations," added Weber Shandwick President Andy Polansky. "Our groundbreaking research on how companies can safeguard and repair their reputation is the foundation for Weber Shandwick's ongoing reputation management services for clients around the world. We can help guide companies looking to identify the early warning signs of reputation failure and take the right steps to reputation recovery."

Safeguarding Reputation(TM)

Safeguarding Reputation was conducted by Weber Shandwick in partnership with KRC Research among 950 global business executives in 11 countries spanning North America, Europe and Asia. Brazil was the only Latin American country participating in the survey. All interviews were conducted by telephone between July 20 and August 8, 2006. The sampling error for the total sample is +/- 3.2 percentage points.

About Weber Shandwick

Weber Shandwick is one of the world's leading global public relations firms with offices in major media, business and government capitals around the world. The firm specializes in strategic marketing communications, media relations, public affairs, reputation and issues management, and offers corporate communications counseling services. Weber Shandwick also provides specialized integrated services including Web relations, advocacy advertising, market research and visual communications. In 2006, Weber Shandwick was named Large PR Firm of the Year (PR News U.S.), European Consultancy of the Year (The Holmes Report) and Network of the Year (Asia Pacific PR Awards). The firm also won the United Nations Grand Award for outstanding achievement in public relations. To learn more, please visit http://www.webershandwick.com.

Weber Shandwick is a unit of The Interpublic Group (NYSE: IPG), which is one of the world's leading organizations of advertising agencies and marketing services companies.

About KRC Research

KRC Research is a full service market and attitudinal research firm. Research partner to Weber Shandwick and other Interpublic Group agencies, KRC specializes in strategic communications research, including research to support product communications, corporate communications, public affairs, and social marketing. KRC provides a full range of primary research services, including surveys, focus groups, and executive interviewing. Find out more at http://www.krcresearch.com.

About reputationRx (http://www.webershandwick.com/reputationrx)

Weber Shandwick's new reputationRx Web site provides professionals interested in leadership issues with the latest news, research findings, insights, best practices and commentary on how to build and safeguard CEO and corporate reputation. It covers a full range of topics such as reputation care and recovery, CEO turnover, corporate responsibility, and strategies for communicating CEO and corporate reputation. The site is also continually updated to include the most recent newsmakers and fast-breaking trends that are transforming the business and reputation landscapes.

Contact

Laura Bachrach

Weber Shandwick

212-445-8467

lbachrach@webershandwick.com

Source: Weber Shandwick
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