Reputation Assurance - The good name game

As the pace of cross-border deals quickens, corporations are being taxed by ever-greater commercial risks. Threats are no longer solely financial, however. Multinationals can falter and lose ground to competitors following assaults on their public image by pressure groups. Nike, General Motors, PepsiCo and Shell all have cautionary tales to tell about how political or non-governmental groups can destroy a corporation’s standing almost overnight, across global media and almost without comeback.

Coining a new phrase – reputation assurance – PricewaterhouseCoopers partner Glen Peters sets out a framework through which companies can manage their reputation. In his book ‘Waltzing with the Raptors: a practical roadmap to protecting your company’s reputation’, he suggests that auditors can play a role by validating how far companies conform to values such as customer, employee or supplier relations.

In this edited extract from the book, Peters advocates a considered approach to managing reputation and describes how corporations and pressure groups can work out mutual goals.

It’s easy to forget that good business is the cornerstone of a successful locality, country, and world. It’s also easy to forget that a business functioning in a truly competitive environment provides more value for customers, better innovation, and perhaps most important, the opportunity to afford the basic rights which we write about so eloquently. It is a salutary fact that the taxes that a single company like Exxon generates worldwide could pay to eliminate hunger and illiteracy and have sufficient change left over to go some way to resolving Third World debt – all in one year.

Velociraptors were among the most deadly of dinosaurs. About as tall as humans, they could achieve speeds of up to 70 miles per hour, rarely failing to overpower their prey as they hunted in pairs. Their nine-inch long claws sank deep into flesh, wounding, disabling and finally killing their prey. It was a painful death for the unfortunate quarry, all in preparation for the raptors’ dinner.

When activists target your company, they too can be deadly. They may have long dreamed about bringing some multinational to its knees. Capitalism equals greed. Business is essentially anti-social. Shareholder interests always come before all else: safety, education, conservation or human rights. Corporations need to be taught a lesson and being the first to humble some lumbering corporation would bring recognition, more members, more subscriptions and inevitably, more resources.

The opportunity might lie with a disgruntled insider willing to discuss lax health-and-safety procedures with an activist. The activist network could mobilise around the world, with the allegations being disseminated first in a covert way to collect more evidence and then finally in a press conference to present the matter to the world.

Newspaper stories could appear on front pages everywhere. The activists could be more organised than your company. The autonomy of the different units in your company might make it impossible to get a handle on whether the allegations are real or fictitious. You may have never bothered to monitor such issues in the past.

Vote-hungry, publicity-seeking politicians might take up the cause without further investigation, inciting anxious citizens to boycott your company or even cause damage to installations.

Sales begin to plummet. Investors withdraw their stock. The market value collapses. Your company is in tatters. The raptors have their prey.

But imagine a different world, a world where you engage the raptor. Instead of trying to outwit it or keep it penned in some high-voltage Jurassic Park, you find out why it wants to attack you. You provide alternatives that sate its hunger and placate its killing instincts. In a way, you provide the musical accompaniment of a calming waltz.

Together you find that life seems simpler. While other organisations are still trying to outsmart raptors, you are streaking ahead with your partner-in-arms.

This partnership is not only protecting you, but also putting you at an advantage. Whether you are a corporation concerned about protecting shareholder value, or indeed an activist organisation keen to protect the planet or the global civic society in which we live, you’ll find this waltz helping you achieve each other’s aims.

BP-Amoco is one of the biggest oil companies in the world. It pumps billions of barrels a year from gigantic oil fields in Alaska, Colombia, the North Sea, the Caspian Sea and elsewhere. It processes the oil in giant refineries around the world and transports it to service stations for our consumption. As consumers, we don’t even see the fuel we pump into our tanks, or often consider the carbon monoxide we expel from our exhaust pipes in the name of transportation.

Before its merger with Amoco, BP painted its service stations green, and Greenpeace saw red. Here was a company releasing millions of tons of carbon dioxide into the atmosphere and rapidly growing its hydrocarbon reserves as its geologists and explorers got better and better at finding huge quantities of what many referred to as black gold.

BP would be responsible for depositing more and more of those damaging gases into the finite, precious air this planet has for its seven billion citizens. All from the company putting on a green face.

The raptors pounced. They boarded platforms in the North Sea, disrupted production, breached countless safety procedures, and scored a publicity coup. They came with the sophisticated media trappings any CNN team would have been proud of. BP responded by taking action through the courts to fine Greenpeace for every day they continued the occupation.

It was about this time that BP’s chief executive officer John Browne decided to waltz. There were a series of consultations with Greenpeace and their fellow activists Friends of the Earth, who wanted BP to get out of the oil business in ten years. And do what?

What of the 65,000 employees around the world? The endless array of competitors waiting to take their place? Wasn’t energy part of the lifeblood of economic regeneration in this world we live in today?

Browne offered them a plan – an ambitious plan. He promised to create a $1bn business in solar power over five years. Solar power, a renewable and non-polluting source of energy, definitely has the blessing of Greenpeace.

The cost of solar energy was the next big obstacle the oil company had to tackle: solar energy is about five times more expensive than fossil fuel-produced electricity.

BP, through its joint venture with Tata Industries in India, set up the production of solar panels where production costs were lower, and allowed Tata to create more jobs in a developing country. Solar power is still more expensive than electricity from the power station, but the costs are coming down.

Are we seeing evidence of a rebalancing going on? Are consumers feeling that corporate power is stifling their right to choose the food they eat?

Is society tired of being continually asked to accept noise or air pollution? Are workers being asked too often to work for meagre wages in exchange for the dignity of work? Are shareholders feeling the need to have more say in the organisations in which they invest?

‘Industry is the main player in society … That’s why we need to talk to them,’ said Thilo Bode, head of Greenpeace International in 1996. Many senior managers seem to agree this is happening. In 1998, Harris Research surveyed 160 senior managers in large global companies. These were all people who held main board positions.

Harris asked them why they thought corporate responsibility was relevant to a wide constituency of stakeholders such as customers, society, employees, and suppliers, and whether it was strategic in building and protecting reputation. They rated change in societal expectations higher than differentiation or customer awareness, and put it at about equal pegging with image.

Today’s society is prepared to challenge the previously unquestioned authority of government, other traditional institutions, and large corporations. Previously compliant German consumers now complain with impunity about poor service from Deutsche Telekom. Aggrieved employees the world over sue for victimisation or sexual harassment and win huge payoffs in compensation. Communities affected by polluting companies seek redress and win. Shareholders oust sluggish management, precipitate takeovers, and pass resolutions against management’s wishes at general meetings.

Stakeholders are becoming more aware of their own powers and calling the shots. Companies ignore them at their peril.

First, companies have a responsibility to listen to a wide constituency of the various institutions and people who inhabit their world. Until recently, senior executives have been comfortable making decisions in the belief that, as experienced managers, they can interpret the wishes of their shareholders, employees, customers, and the society in which their organisations operate. But, given the fast-changing, complex world in which corporations now trade, it is becoming dangerous to make these assumptions.

For example, Shell made the assumption that approval by the British government was sufficient for the company to proceed with the sinking of Brent Spar in the North Sea. Millions of Shell customers, made aware of the situation by activists, took a different view and forced the company to reconsider.

Similarly, PepsiCo thought that, by continuing relationships with the Burmese military government, the company had gained access to that country’s markets. Kids on American campuses thousands of miles away didn’t like the idea, causing PepsiCo eventually to reconsider. Companies will have to learn new ways of conducting a dialogue with both primary and secondary stakeholders that inhabit their world.

The techniques that companies use to listen to these stakeholders are only just becoming understood, and stakeholders themselves are getting more savvy in their ability to communicate with companies.

In May 1998, in association with the University of Notre Dame, PricewaterhouseCoopers surveyed 140 of the world’s most significant non-governmental organisations.

Respondents included Amnesty International, Care, Pax Christi and many more.

The main findings of our study were that little dialogue occurs between transnational corporations and NGOs, and that these interactions are frequently antagonistic. However, NGOs look to a future in which there will be more dialogue, and relationships will be largely cooperative.

So who are these NGOs? Over the past decade or so these agencies have mushroomed. It’s difficult to say how many exist now: some of them are large global organisations in their own right, with millions of members. Others are minnows that are poorly funded but believe passionately in their cause. These organisations represent a valuable channel for companies to tap into to determine the potential risk to their reputation or to identify unfulfilled demand.

Companies cannot look to external regulation as a guide to their codes of conduct. Regulation is cumbersome and expensive to implement, and has been shown to inhibit growth and prosperity. The best answer for companies that want to build sustainable reputations must lie in self-assessment.

Companies have to take responsibility for safeguarding reputation by developing management processes which assure their stakeholders that they do not indulge in corrupt practices; they have respect for the environment; their products are safe; and they make a fair contribution back into society in proportion to the value which they extract. I believe that what the Total Quality movement accomplished in the 1980s could be applied with similar effectiveness in the development of these processes in the coming years.

READER OFFER: YOU’VE READ THE ARTICLE, NOW READ THE BOOK …

Accountancy Age readers can order a copy of ‘Waltzing with the Raptors’ by Glen Peters at a discount of 25%.

To order, send a cheque made payable to John Wiley & Sons Ltd for £13.75 (RRP £18.50) plus £2.95 p&p to: John Wiley & Sons Ltd, 1 Oldlands Way, Bognor Regis, West Sussex PO22 9SA.

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