High cost of reputation loss in China

September 02, 2014

High cost of reputation loss in China

Reputation loss is everywhere. Just saw this article about reputational issues in China and the importance of building trust in products and services and providing a foundation built on social responsibility. “According to official data, corporate trust failures in China are causing economic losses of around 100 billion U.S. dollars each year. Companies’ abandonment of corporate social responsibility in search of maximum profits clearly hurts not only the individuals operators, but China’s economy far more broadly.” The article advises companies to build reputation or else their sector will be hurt with “irreparable loss.”

One has to wonder why Chinese companies do not recognize the downside of reputation failure. I thought this was universal. Here is why: “Feng Zhongsheng, an official at the National Development and Reform Commission, said that the major reason for widespread consumer distrust is because companies or individuals pay a very low cost for their misconduct.”  However, even if there is no formal punishment for misconduct such as fines or lost sales or bad media coverage or CEO ousters, a company’s values and code of conduct should be enough to guide corporate reputation-building and navigating the thorny issues facing businesses today. 

The article in Xinhua News says that the central government intends to change this outlook on reputation and that there are signs that responsible companies will be asked by the government to explain who they are, how they intend to build trust and positively reflect on China’s national character. They mention that companies may be required to stand up to what is in their annual reports and provide contact names and more information than has been made available up to now.

Change will come.

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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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