Higher-Ambition Boards

A client turned me onto the concept of Higher-Ambition leaders and I’ve kept the article close. It outlines what drives great corporate reputations and the kinds of CEOs that lead them. Higher-ambition CEOs are stakeholder-centered and purpose-driven. Their sense of purpose goes hand in hand with their focus on financial performance. They understand the challenges of running a company but also understand the importance of earning trust and commitment from their many stakeholders. The good news is that higher-ambition CEOs outperform their peers in terms of economic, social, organizational and stakeholder returns (including shareholder returns) and they do so for successive generations.  Here is a short description on what they do from the HBR piece where I first read about them:

“They forge a more powerful strategic vision by drawing on an expansive view of their companies’ heritage and cultural, organizational, and social assets.

They build the widespread commitment and capabilities to achieve that vision by developing the organization into a community of shared purpose, marked by high levels of emotional connection, trust, and respect.

They have the strength of character to commit themselves and their organizations to that vision over the long term.”

Little did I know that there was a Center for Higher Ambition Leadership and an annual Summit. And I recently just learned that there is a working paper on Higher-Ambition Boards. The central question the authors –Edward Ludwig, Elise Walton and Michael Beer -- asked was whether higher-ambition companies and CEOs had higher-ambition boards to guide them through their many business decisions and protect the company’s values for generations to come. They studied 14 higher-ambition companies* (see below) and their boards to find out how boards could contribute to the sustainability of purpose-driven companies. The findings are fascinating if you want to learn more about how these boards operate:

·       Only 2 of the 14 companies indicted that the CEO was explicitly measured on nonfinancial metrics. Despite most board’s implicit support for higher-ambition companies, most are not explicit. Here is an example from Herman Miller’s explicit higher-ambition board evaluation of their CEO: “The board doesn’t jut look at money and math as an outcome. The company/CEO scorecard has volunteerism, environmental, inclusiveness, safety—and more. It’s a broader spectrum than the balanced scorecard of most companies.”  CEOs should encourage their boards to be explicit about discussing what it means to be a higher-ambition company and not just accept that it is a given or intuitive in how they govern the company. 

·       Higher-ambition boards have a responsibility of taking an active role in talent management. In the research, they found one company where the individual directors took a more personal role in developing talent for the next generation by sitting down with executives and sharing their personal leadership journeys one-on-one. The directors also helped teach the leadership courses given to top executives and rising stars to demonstrate the importance of their involvement and trust-building.

·       Higher ambition CEOs should engage and bring along their board members to be purpose-driven. They should recruit directors based on their values and commitment and should build in processes to sustain the commitment to higher-ambition practices. One company has each board member evaluate the board as a whole and then individually with non-attribution. Each board member gets their results. If the board chair learns from these evaluations that someone is not performing in a way that helps to drive high-performance, the board Chair steps in and sometimes has to take action.

*Aetna, Becton Dickinson, Con-way Trucking, Cummins Engine, Guardian Insurance, Henry Schein, Herman Miller, Steelcase, NYSE/Euronext, Terex, United Rentals, United Stationers, WESCO, Wyndham Worldwide

Presidential Apologies

Lately, it seems to me that every day brings a different teachable moment to those of us worrying about reputations and communications. Recently I had been following the heartfelt tweets of CEO Tony Fernandes of AirAsia. 

Yesterday's acknowledgement by President Obama about not sending someone more senior to the Paris peace rally last Sunday was the right thing to do. I had wondered myself about how this could have happened while being glued to the television set. It made me wonder about the discussion the communications team must have had with the President about sending a higher-ranking individual to attend the march while all those world leaders were taking center stage. Do you say something that you think can potentially harm a boss's reputation or do you let it just slide (hoping nothing harmful happens in the end)? Hopefully the former. President Obama's spokesperson Josh Earnest took the message to the people yesterday by saying, “It’s fair to say that we should have sent someone with a higher profile to be there." Although I assume that he was talking about the royal "we" and that the President approved the statement, it was not an outright apology which would have started with "We regret..." Instead, what we got was more a statement of fact. Despite the misstep, the acknowledgement was honest and swift and may have slowed the criticism to some degree. I thought it was good that the President admitted he erred and showed he could be wrong and could change course. Some leaders would have been insistent that the individual sent was high enough and what was all this commotion. I also learned while reading about the error that Obama had visited the French Embassy in Washington DC last Thursday to sign  a condolence book which made me feel better in the end.

Why reputation continues to matter

We all know that bad reputation costs and good reputation pays. Thought this survey of more than 1,000 people in North America demonstrated those attitudes once again.

  • Nearly half of employees say they would need a 50% increase in compensation to join a company that does not have a good reputation. Women would require more than men in terms of pay increases to make such a leap.
  • Nearly everyone (93%) would leave their jobs today to work for a company with a good reputation. To do so, they’d need an approximate 33% increase in pay.
  • And wow, slightly more than three-quarters (76%) would not take a job – even if unemployed – from a company with a poor reputation. That’s an argument if ever there was one for reputation-building.
  • And a hefty 72% consider it important to work for a company whose CEO cares about societal or environmental issues. This is even more important to women than men (75% vs. 69%, respectively). In research we’ve done over the years, we consistently find that corporate citizenship is more important to women than men in their employment preferences.

Another powerful argument for why reputation matters.

 

 

Society Brand Reputation

A Society Brand. That's an interesting way of phrasing the importance of corporate responsibility for companies and its impact on stakeholders. An article in PRWeek described a study by StockWell where they interviewed 26 financial leaders in the UK -- financial analysts, investment bankers,  investors, brokers, risk officers and IR directors -- about corporate reputation today. Interestingly, they learned that financial performance is not the end-all be-all of what drives a company's reputation. Although financial value is fundamental to a company's reputation, the relationship with the wider community is now recognized as having the potential to put that reputation and financial value at risk, especially if tampered with. The moneyed group now strongly believes that reputation is more important than ever and that a strong "society brand" is critical to a company’s long-term commercial future. As the report says, "...non-financial performance factors now have a significant bearing on corporate valuations and investment decisions."

However, this group is very sceptical of CSR initiatives and CSR reports and do not see them as solving reputational challenges. Yet, that does not surprise me when it comes to financial perspectives on CSR. Although they may be perceived as window dressing, CSR is not. It focuses leadership and as government directs fewer resources towards citizen well-being such as health and education, companies have a critical role in safeguarding families and communities in these areas. What surprised me was that nearly half of these financial leaders could not name three companies that had reputable Society Brand reputations and 12% could not even name one company that fit this bill. Paltry to say the least.

  • Almost all (96%) saw reputation as having increased in importance over the past few years.
  • Over two-thirds (69%) considered reputation a critical area for corporate risk management.
  • Four-fifths (80%) agree that a strong Society Brand is critical to a company’s long term commercial future.
  • More than half felt there was too much emphasis on the Financial Brand.
  • 81% saw Society Brand as relevant to all investors, not just SRI funds.
  • 46% felt that a Society Brand was reasonably or very relevant to investment decisions.
  • 46% couldn’t list three companies with a good Society Brand.
  • 61% agreed that companies with a poor Society Brand trade at a discount as markets and analysts build in reputational risk.