Reputation Erasers

In our study on Civility in America this year, we asked about opinions on the "right to be forgotten" law. The what law? The easiest way to explain it comes from Wikipedia: The right to be forgotten "reflects the claim of an individual to have certain data deleted so that third persons can no longer trace them. It has been defined as 'the right to silence on past events in life that are no longer occurring.' The right to be forgotten leads to allowing individuals to have information, videos or photographs about themselves deleted from certain internet records so that they cannot be found by search engines." A law like this exists in the EU. Of course, it is a lot more complex than I am making this out to be and I am simplifying the discussion and ongoing debate in this post.

What I want to share is the results when we asked Americans "if search engines such as Google were required to erase negative commentary or pictures that appeared online upon request, would you take advantage of the opportunity to erase things about yourself?" We were curious what Americans would choose to do if given the opportunity to clean up their digital profiles. One out of two (50%) say they would take advantage of a reputation eraser but a sizeable 3 out of 10 are not sure (hmmmm) and 2 out of 10 say they would not take advantage (they either have nothing to hide or don't mind airing their dirty laundry). As expected, younger people are significantly more likely to say they would opt for deleting foolish things they've done to reshape their personal brands. That makes sense because Millennials and GenXers grew up with the Internet for the most part. The older generations have less digital footprints to worry about.

When we asked who should be given the right to be forgotten, Americans were most likely to say that those under 18 years of age should be given the right to erase parts of their digital identities (68% said so). Those naughty high school pictures would all but evaporate online if this were the case. Less than one-third of Americans think that school teachers (33%), doctors (26%) and religious leaders (25%) should be allowed to airbrush their digital footprints. The group with the least right to eradicate what they have done wrong or where they have acted uncivilly are politicians (only 18% felt they had the right to undo their past). Americans clearly demand to know as much as possible about the character of our politicians. From what we learn every day in the headlines about corruption and wrongdoing on Capitol Hill, it is a good thing that our political representatives cannot delete their pasts from us. 

The reason that this law has not taken hold in America has to do with our constitutional rights to freedom of expression and freedom of speech. We do not believe in keeping useful information out of the public domain. Ultimately, when it comes to reputation in the age of the Internet, we are never forgotten. We have to get used to it.

 

A Reputation Recovery

The title of the article says it all, "Sailing through a scandal." Rupert Murdoch and his empire have turned the corner on reputation recovery. As you recall, News Corp was engulfed in scandal over the phone-hacking of a murdered schoolgirl's voicemails. According to The Economist where I found this fascinating article, the Murdoch family has recouped more than double their wealth since the controversy. And Murdoch's sons who are running the now split businesses of entertainment and newspaper publishing are doing just fine. 

What hit home was the article's truthful statement that "a loss can turn into an unexpected win." That is so true in reputation recovery. I've researched and studied the reputation recovery phenomenon for a long time now and if there is one clear thread, it is that crisis morphs into opportunity. There is nothing like a scandal or reputation disaster to make a company even better than it once was. Better leaders are put in place, tough decisions are made, humility returns to the C-suite, and less risky business behavior takes hold. No one wants any further embarrassment to harm the reputational equity of the firm.

The articles says, "The Murdochs’ happy ending is a reminder of how forgiving the corporate world can be if bosses at the centre of a crisis act swiftly and adopt shareholder-friendly policies." True. How a company responds to crisis is the ultimate test and like they say, first impressions matter. But as the article also points out, if Rupert had been a hired hand at an ordinary company, he would have been shown the door.

The Economist ends the article by saying, "Being enriched by scandal may occasionally happen once, but rarely twice." As it happens, that is not entirely true. Many companies stumble after a major crisis because of all the distractions that ensue. It is even more likely, not less likely, that a company will re-dent their reputation after a major crisis. Additionally, media scrutiny is more intense afterwards and journalists and pundits will pounce on any missteps. Granted, the stumble may not be as devastating as the first one but doubt gets raised and before you blink, there are no more do-overs.

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.

 

Holiday reputation of retailers needs protecting

Some new research just came out from Toluna Research for web.com about consumer perceptions of big and small retailers this holiday season. Because of the recent spate of big retailer security breaches, consumers are expressing great concern. 

  • 69% are concerned about security when shopping online this season
  • 25% are likely to change their online shopping behavior
  • twice as many consumers (27% vs. 12%, respectively) are concerned about online security at large retailers than small retailers

The big box retailers' reputations will clearly feel the heat this season if consumers are concerned about their security privacy. To keep their reputations intact, they will need to reassure consumers that their credit history and information is iron-clad. Communications will be key to getting shoppers back into the stores and online with confidence. Information about what they are doing to protect consumers, such as special chips in their cards, and beefed up security technology can help. Additionally, communicating from the CEO on down about consumer concerns and acknowledgement that they are aware of a confidence gap in shopping would be beneficial. Having the senior executive team visibly active during the holiday season at the stores or online using social media might send the right message that they are on alert. Perhaps having senior executives shop in the stores for their holiday gifts and video-ing the transactions could help send a "trust" message. Training all employees about how to answer shoppers' questions about cyber breaches is important. In addition, employees need to know that they should not give out their passwords under any circumstances and the same with vendors since this is such a high security risk and easy way to get into retailer systems. One of the things I learned when working on our Employees Rising study was that one of the reasons that companies train their employees in the use of social media is to educate them about not giving out passwords because it only enables cyber thiefs to do ill.

Reputation is everyone's job during the holiday season and making that loud and clear this year will help. Let's wish for a non-cyber-hacking holiday in 2014.

Emergency CEO successions

The death of the chief executive of Total in a recent plane crash led to an article in the Financial Times by Andrew Hill about the sudden impact of CEO death. Hill points out that research by The Conference Board advises boards to be prepared because approximately 7 to 15 US public companies lose a CEO due to sudden death annually. Although companies might not think the odds are high enough, it happens and pure chaos erupts. As cited by Hill, research by professors from Stanford, Insead and Columbia found that in the year following an emergency succession, companies suffer an 18% decline in operating profitability. One of the best parts of the article for someone like me who likes to gather information was the table below which lists emergency CEO successions, the number of days until a replacement was found, the causes behind the succession, and share price change. The chart was compiled by Stanford Graduate School of Business.

One of the comments to the article had an important insight -- 50% of the CEOs died from a heart attack and the need for better medical checkups of these individuals. I also noticed that 75% of the successors were internal candidates which seems to indicate that a successor was in place, perhaps not ready but identified. Only two were under 50 years old (from a plane crash and overdose). All men (no surprise). The greatest stock decline (- 12%) on the day of the loss was for Herbalife whose 44 year old CEO had been at the helm for 20 years. Clearly a catastrophe for the company on many fronts. 

Interestingly, Total has a memorial section on their home page which also provides a place for people to leave tributes. There are many. 


Cybersecurity reputational risk

Just recently heard that our first US homeland security chief Tom Ridge is helping to launch an insurance product that specializes in corporate cyber security policies. In the article, I read that the global economy has lost more than $400 billion annually due to these cyber breaches that seem to be coming at us like a tsunami. Moreover, only one in four companies, if that much, have some form of cyber attack coverage.

I also learned awhile back when we did our Employees Rising survey on how employees were using social media to champion and possibly sabotage their companies, that one of the reasons that companies have chosen to train their work forces about being responsible social citizens was to caution them about how cyber hacking often occurs. And that is from employees themselves who can be unintentionally loose with passwords, clicking on errant links or not understanding well enough the safeguards of protecting confidential documents. Again, another reason for formal social media training at work and recognizing the importance of internal employee communications. 

Cyber breaches are clearly hurting the reputations of companies that find their customer data let loose online from hacking. This has become a major reputational issue and one that companies have to get smart about or they will be joining the ever growing long list of the largest data breaches. Plus the background stories in the media often reveal that companies and their leaders had some forewarning or were lax about privacy controls which only makes matters worse. Need I even add that CEOs have lost their jobs over cyber breaches! This is becoming a reputational issue of epic proportions.