CEO's Role in Reputation Increasingly Vital
Charting the future of public relations
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CEO

CEO's Role in Reputation Increasingly Vital

“In the media, we have taken the CEO and used him as a symbol of his company,” says John Byrne, Business Week reporter and co-author with General Electric CEO Jack Welch of the new book Jack: Straight From the Gut.

Paul Holmes

“In the media, we have taken the CEO and used him as a symbol of his company,” says John Byrne, Business Week reporter and co-author with General Electric CEO Jack Welch of the new book Jack: Straight From the Gut.
 
“Corporations are abstract and faceless. CEOs are not. They have passions and beliefs. They are people who have tremendous influence over the lives of many other people. When a business journalist goes inside a company and evaluates that company, what he is really doing is using his judgment to evaluate the leadership team, and the CEO. His impression of the CEO will influence his perception about the entire company.”
 
As media coverage of business issues has increased in recent years, it has become increasingly apparent that one of the most important responsibilities of a chief executive is to represent his or her company in the public realm. Communication skills are vital to the success of a CEO, who must be able to articulate the company’s positions to a myriad of audiences: employees, investors, customers, regulators, and, of course, the media.
 
Four years ago, international public relations agency Burson-Marsteller began to research the role CEOs play in corporate reputation, underscoring the relationship between the CEO’s image and that of his or her company. Now the firm has unveiled—at an event featuring Byrne and others—new research on Building CEO Capital suggesting that CEO reputation is even more important today.
 
“The first thing we learned is that CEO reputation matters,” says Leslie Gaines-Ross, chief knowledge and research officer at Burson-Marsteller. In fact, the study found that as much as 48 percent of a company’s reputation is attributable to the reputation of its CEO—that’s up from about 40 percent when the same question was asked four years ago. And while the importance of the CEO’s reputation holds true across all stakeholder groups, it’s a particularly large factor in the media’s assessment of a company.
 
This trend is not isolated to the United States. A companion survey among influential stakeholders in the United Kingdom confirms the U.S. findings with 49 percent of corporate reputation attributed to the CEO, while in Germany the CEO accounts for 64 percent of the company’s reputation.
 
“CEO reputation matters the world over,” says Christopher Komisarjevsky, the agency’s president and CEO. “Four years of research confirms that the CEO is arguably a company’s most critical intangible asset driving the brand and the reputation of the company both internally and externally.”
 
The study also found significant returns on investment in CEO reputation. Nearly all business influentials reported that CEO reputation influences their decisions to invest in a company (95 percent), to believe a company under pressure from the media (94 percent), to recommend a company as a good alliance/merger partner (93 percent), and to maintain confidence in a company when its share price is lagging (92 percent). 
 
Moreover, business influentials are more likely to recommend a company as a good place to work (88 percent) if the CEO is favorably regarded.
 
But CEO’s need to manage their reputations not only in order to see their company’s reputations enhanced but also for reasons of survival. CEO’s who don’t build solid reputations among key stakeholder groups are increasingly vulnerable.
 
“CEOs are operating in a very complex, very punishing time,” says Gaines-Ross. “CEOs are under a microscope.” There has been a 61 percent increase in media coverage of CEOs since 1990, and the Internet has become an important source of information about CEO activity. Four years ago, 5 percent of survey respondents said they got information about CEOs from the Intenet; today, that 22 percent are using the Internet—and the media is getting significantly more of its information about the CEOs it covers from online sources.
 
Meanwhile, CEO turnover is up. From January to June of 2000, 456 CEOs either resigned or were dismissed from their jobs. From January to June this year, the number was 555.
 
“When we looked at why CEOs fail, we come up with four major reasons,” says Gaines-Ross. “First is lack of strategic vision. Second is the failure to execute. Third is loss of credibility. And fourth is poor earnings performance.”
 
In such circumstances, the pressure on CEOs to perform immediately is higher than it has ever been, Burson-Marsteller says. In fact, various stakeholder groups will give a new CEO just eight months to develop a strategic vision, nine months to win the hearts and minds of employees, 14 months to develop a top quality management team, and 17 months—longer than some might have expected—to earn credibility on Wall Street.
 
The keys to building that credibility include believability, high ethical standards, the ability to communicate a vision inside the company, the ability to attract a quality management team, and caring about customers.
 
“We found three major dimensions to CEO credibility,” says Gaines Ross. “Credibility, conduct, and communication. To be credible, a CEO has to be consistent, and h He has to deliver on what he says he is going to do. CEOs also need to demand and deliver the highest standards of ethical conduct, to be good global corporate citizens. And they need to communicate a clear vision inside and outside the company.”
 
While the Burson-Marsteller research suggests that CEOs need to be skilled communicators, a high public profile is not in itself enough to ensure a good reputation. A second study, conducted by Naomi Goldberg of Rutgers University and the Reputation Institute and drawing on the Reputation Quotient study the Institute conducted two years ago, found no clear relationship between the volume of coverage of a CEO and his company’s standing.
 
Media coverage of individual corporations is driven by several factors, according to Goldberg. “The CEOs of companies with umbrella brands are more likely to have stories written about them,” she says. “So Michael Dell is more likely to be in the media than the CEO of Procter & Gamble. It’s also true that significant investment in advertising and research and development and philanthropy leads to greater CEO visibility.
 
“The CEOs of large companies get more coverage than the CEOs of smaller companies, and the CEOs of overseas companies get less coverage than the CEOs of domestic companies. And in the time period we covered, which included the dot-com boom, the CEOs of older companies received less attention than the CEOs of new companies, and CEOs in the technology sector received more coverage than the CEOs in the healthcare business.”
 
One assumption going in was that CEOs with greater visibility would, in general, enjoy better reputations. Research studies into corporate reputations have shown a clear and consistent link between familiarity and favorability, and there was no reason to believe that connection would not hold true for CEOs too. “But it’s not that simple,” says Goldberg.
 
For example, Johnson & Johnson CEO Ralph Larsen enjoyed one of the best reputations of any in the study group, but had “very few articles written about him,” says Goldberg. Meanwhile, Bill Gates—the subject of so many stories he couldn’t be included in the same chart as the other CEOs studied—enjoyed a mixed reputation, a reflection of the fact that the study was conducted at the height of the Microsoft anti-trust trial.
 
“We asked all the stakeholder groups in our study—boycotters, customers, investors, and the general public—what were the most important factors in driving reputation, and they told us that the quality of a company’s products and services was most important, followed by its record of social responsibility. Financial performance came in last out of five factors. If a company produced high quality products and services and had a good record in social responsibility, there was a feeling that good financial performance would be the end result.”
 
The CEOs who help build reputation capital for their companies are those who can communicate product benefits, who understand the relationship between their organizations and the society in which they operate, and who articulate a clear and compelling vision.
 
“The point is not the visibility of the CEO,” says Goldberg, “but what the CEO communicates through all the stories that are written about him.”
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