CEOs receive nearly 60% of the blame when company reputation is damaged.

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 survey by global public relations firm Weber Shandwick with KRC Research. This finding did not significantly differ among regions.

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.

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.

“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™

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.

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