CEOs take the majority of the blame when companies lose reputation after a crisis, according to a survey of global business executives by global public relations firm Weber Shandwick with KRC Research. The Safeguarding Reputation survey found little variation between regions when executives were asked about responsibility for reputation loss.
The 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).
“Interestingly, many of the reasons causing companies to suffer reputation loss are self-inflicted,” says Weber Shandwick’s chief reputation strategist Leslie Gaines-Ross. “Financial irregularities, unethical behavior and executive misconduct are all issues that could be prevented if companies had better controls in place. As more reputations deteriorate worldwide, companies need better reputation radar systems to identify and track approaching reputation threats.”
The survey also found that 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. And 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
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
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.
“Companies need to put safeguards in place to protect their reputations,” says Weber Shandwick president Andy Polansky. “Our 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.”