Actions speak and pay—the value of reputation


Corporate citizenship is not only a department in your company; it is more importantly the combination of how your company exercises its rights, privileges, obligations, and responsibilities—throughout all of its operations. What is the ecosystem of value that it creates for its stakeholders and for society?

Market ValueWhat is derived from the combination of actions is reputation—the collective perception of those actions by others. Even before the advent of modern reputation management, savvy business people like Henry Ford and Elizabeth Arden understood the value that can be derived from how their companies were perceived. It takes years to build a good reputation. Thinking through all of the firm’s opportunities to act in ways that will build positive valuable reputation is an important responsibility of corporate citizenship professionals. A good portion of the intangible value in the companies pictured in the chart to the left can be attributed to goodwill or intellectual property, but even accounting for those assets, there is value in excess, which is attributed to brand value or reputation.

Benjamin Franklin famously remarked that, “It takes many good deeds to build a good reputation and only one bad one to lose it.” This is true especially in our culture of short attention spans and long grudges. Though we are slow to reward the work that goes into building a reputation, consumers and the general public will hold companies to account sometimes for decades after negative events have happened—regardless of where the event occurs in the firm’s supply chain, and especially if they perceive that the negative event could have been prevented.[1]

Balancing long-term commitments to create business and social value is challenging. Many great corporate citizens are working to improve their operating contexts, reputation, and profitability. Whether it is restaurateurs and retailers addressing wealth inequality by voluntarily raising the minimum wages of their workers and offering education subsidies, or technology companies advocating for immigration policy and offering vocational training—these companies have decided to take a long view and proactively address a social problem that will negatively affect the success of their business if left to progress with no intervention. Companies can do more to tell people what they are doing and why.

More and more is being written in the business press about the opportunity for investors to take positions in high-performing companies with long-term horizons. It would be great to see more companies tell this story as well. If enough jump into the narrative, consumers and investors may just follow. The corporate first movers will have put in the years required to build that positive reputation and lead the pack.

[1] Julia Hartmann, Sabine Moeller. “Chain liability in multitier supply chains? Responsibility attributions for unsustainable supplier behavior.” Journal of Operations Management (2014)