Perception is as important as profit

Perception is as important as profit

Reputation increasingly has an impact on analysts' ratings

Clearing the aftermath of a series of high profile scandals that have
irreversibly changed the corporate landscape, we now live in a business world
where perception is valued as much as performance and profit.

People have seen the giant-killing powers of corporate reputation and the
need to establish trust and confidence is more recognised than ever.

But corporate reputation is a multifaceted concept that constitutes far more
than just avoiding scandals. External image has a direct impact on bottom line
shareholder value. It is now as much of an opportunity as it was once seen as a
threat.

For any company, promoting a positive image to the outside world helps
recruit and retain the best staff, increase sales and build successful strategic
relationships. But for listed companies reputation has an even more direct
impact on performance through the financial community that grades, rates and
invests in them.

Last week we published the results of our latest corporate reputation watch
study, in association with Mori, which examines the various ways investment
analysts assess company performance and shareholder value and identifies the key
factors driving investment decisions.

The study shows the extent to which analysts take reputation into account
when rating a business’s potential. Around 90% say that a company that fails to
look after its reputation will ultimately suffer financially. For the investment
community, responsibility lies in the hands of those at the top.

Other than financial performance, the perceived quality of management is the
single most crucial factor for an analyst’s rating.

Listed companies today need to promote the experience and expertise of their
senior management to inspire trust in analysts, and consequently investors.

Clear and consistent communication with key stakeholders and transparent
disclosure are crucial non-financial elements contributing to the assessment of
a company’s value. The great majority of the analysts interviewed have given
negative ratings on account of poor communication with stakeholders.

With invaluable insight into how analysts use reputation in their
assessments, listed companies should now be in a position to make sure an
accurate and positive external perception works to their advantage.

The study demonstrates the value to be gained from actively engaging on
matters of corporate reputation.

Stuart Wilson is head of corporate communications at Hill & Knowlton
London

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