INVESTING IN REPUTATION INSURANCE
By Doris Rubenstein
CityBusiness, April 27, 2001
A recent Harris poll shows that businesses with poor
corporate citizenship records suffer on the bottom line when customers make choices about
purchases and investments. The most important factor in achieving a high rating in
reputation was emotional appeal: trust, admiration and respect, and general good feelings.
A good reputation is not something a company can buy with a
quick-fix advertising campaign. Since Minnesota was the first state to settle a tobacco
industry suit, the case of Philip Morris and its Kraft Foods subsidiary is a prime
example. Despite its recent advertising blitz spotlighting its corporate contributions and
employee volunteer programs for hunger projects that relate to Kraft, Philip Morris
remains at the bottom of the list for of the Harris poll list of good corporate
reputations. Philip Morris did too little too late and failed to change opinions, although
more people now are aware of the corporation’s philanthropy.
Research conducted by Business for Social Responsibility (www.bsr.org) shows that companies with established
reputations as good citizens are more likely to be "given a second chance" by
stakeholders when problems occur. In other words, good corporate citizenship is a form of
"reputation insurance."
Minnesota Attorney General Mike Hatch (DFL) has attacked
Allina for various forms of malfeasance. When he did so, he incurred the wrath of some
powerful, but unlikely, DFL champions for Allina’s cause. No sooner were Hatch’s
allegations made public, but they were rebutted in the Star Tribune by the likes of
Met Council Chair Ted Mondale, Minneapolis Mayor Sharon Sayles Belton, and Hennepin County
Commissioner Peter McLaughlin. This powerful trio defended the reputation of both Allina
and its CEO Gordon Sprenger, citing the outstanding citizenship activities in healthcare,
job-training, and crime prevention that Allina and Sprenger have fostered and led.
Corporate citizenship is playing a role in the struggle for
the hearts of Richfield residents and land in that city by Best Buy and Walser Automotive
Group. Both businesses covet prime property at I494 and Penn Avenue. Each claims they have
the best interests of Richfield at heart and launched campaigns to demonstrate their
commitments to the community: Walser with its long-term support of such projects as the
Richfield July 4th celebration and other charitable gifts, and Best Buy with a
volunteer student mentoring and tutoring program in the middle school. Part of the
thinking seems to be "whoever is the best corporate citizen will win the moral
battle, and hence the financial spoils." Citizens of Richfield are not impressed with
this misuse of corporate largesse by either of the contenders. Best Buy and Walser both
stand to lose more in terms of reputation than they hope to gain with Richfield residents.
They may learn much by studying Philip Morris. Good reputations cannot be bought
post-factum.
Insurance is one of the most costly expenses that
businesses incur. They must buy insurance for the health and life of their employees, for
liability, for loss, fire, and innumerable other purposes. These costs can be compounded
by negative publicity about corporate behavior that can lower stock prices for a minimum
of six months, according to study by the University of Southwestern Louisiana. But
companies with a long record of a good reputation are less susceptible to be adversely
affected by negative publicity or alleged scandals, reported the Conference Board report
last year.
There is no commercial policy available to insure a good
reputation. Good corporate citizenship in the form of a well-developed plan and
well-implemented program is the best form of reputation insurance available. It’s an
investment in the company’s image, employee morale and loyalty, and the goodwill of
all its stakeholders.
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