Good Reputation Pays

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May 15, 2011

Good Reputation Pays

  I follow the Fortune World’s Most Admired Companies survey almost religiously.  My fascination with its ups and downs have always intrigued me. The chart below is what I call the CEO Eye Chart.  CEOs like the numbers and zero in on them when it comes to managing their company’s reputation. Years ago I used to produce this chart on my own of  how the world’s most admired companies compared to the average S&P company or some other index. Since The Hay Group provides this for free on their online seminar on the Most Admired, I now wait for the chart and use it when asked what evidence I have that reputation matters and matters in particular to CEOs. Here is the latest analysis showing that regardless of time period, the world’s most admired companies outperform their peers on total shareholder returns. 
Simply put, reputation matters to the bottom line. Good reputation pays, bad reputation costs. However, today other factors increasingly matter to reputation-building that help drive the bottom line. My hunch is that those factors — corporate citizenship, how employees are treated, safe products — will continue to matter as well.  What I sometimes call purposeful reputation.

World’s Most Admired Companies Outperform Peers and the Market On Total Shareholder Returns

  World’s Most Admired Companies S&P 500
One year22.6%15.1%
Three years4.3%(2.8)%
Five years8.3%2.3%
Ten years7.8%1.4%

Source: The Hay Group 2011

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Leslie Gaines-Ross
Leslie Gaines-Ross
lesliegainesross@gmail.com

As Weber Shandwick’s Chief Reputation Strategist, I focus on the ever changing world of reputation. For the past 25 years, I have relentlessly observed, researched and commented on the rise and fall of reputations.

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