THE REPUTATION JOURNEY: Pratfalls and Pitfalls, Sights & Sounds

1 © 2014 Reputation Institute, all rights reserved.

Dr. Charles J. Fombrun Chairman Reputation Forum

Lima, Peru

8 May 2014

2 © 2013 Reputation Institute, all rights reserved.

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Adam Smith

(1723-1790)

MARKET

The Invisible Hand

Max Weber (1864-

1920)

ORGANIZATION

The Visible Hand

Frederick

Taylor(1856-1915)

SPECIALIZATION

The Division of Labor

© 2013 Reputation Institute, all rights reserved. 9

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Externalities

& Market

Failures

Government

Regulation

Institutional

Control

Self

Regulation

Reputation

Markets

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Adam Smith’s Economics

• Small powerless buyers/sellers

• Perfect Information

• Moral Behavior

• Investment Capital

The New Economics

• Big powerful actors

• Asymmetric Information

• Opportunistic Behavior

• Social Capital

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Powerful

Companies

Connective

Technologies

Powerful

Stakeholders

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In this brave new world,

what you say

doesn’t matter as much…

It’s whether you

are trusted & believed!

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17%

32%

68%

80% 81%

83% 68% 32% 20% 19%

0%

20%

40%

60%

80%

100%

1975 1985 1995 2005 2009

Shifting Composition of S&P 500 Market Value

Intangible Assets Tangible Assets

Source: Ocean Tomo

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Source: Brand Finance GIFT 2013

USA $11,916 68%

Switzerland $978 61%

Australia $875 58%

United Kingdom $2,050 58%

France $1,273 54%

Canada $1,012 53%

Germany $1,032 52%

Netherlands $466 49%

India $626 48%

Brazil $648 44%

Hong Kong $520 42%

China $1,169 35%

Italy $280 28%

South Korea $221 16%

Japan $266 6%

Total Global $28,305 50%

Value of Intangibles

(Billions of $US)

% of

Enterprise Value

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…a new world in which people buy products, take jobs, and make

investments based primarily on their trust, admiration and appreciation

for the companies and institutions that stand behind them.

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Products

Market Push

Authority

Clarity

Monologue

Messages

Expressive Pull

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Winning Companies build strong emotional bonds with their stakeholders by engaging with them…

Do Well

Do Right

Do Good

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…and help to solve social problems

Adj-R2 = 0.827 RepTrak™ Pulse Score

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

30.00 40.00 50.00 60.00 70.00 80.00

% R

espondents

who W

ould

Recom

mend

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Transport & Logistics 58 62.9

Financial - Insurance 105 51.0

Airlines & Aerospace 50 47.7

Services 112 47.4

Financial - Diversified 45 41.3

Energy 73 37.5

Consumer Products 39 26.6

Telecommunications 68 26.1

Chemicals 17 22.8

Tobacco 4 18.5

Automotive 25 17.0

Food - Manufacturing 63 15.4

Construction & Engineering 56 13.1

Computer 19 10.6

Utilities 63 10.0

Raw Materials 52 8.8

Industrial Products 42 6.6

Electrical & Electronics 15 3.5

Information & Media 56 2.4

Conglomerate 19 -15.1

Pharmaceuticals 33 -15.9

Retail - Food 56 -17.7

Beverage 26 -18.4

Retail - General 148 -46.1

Financial - Bank 118 -243.3

Total 1362 112.6

United Kingdom 379 228.3

USA 261 151.3

Germany 52 84.1

Italy 69 74.9

Australia 58 60.7

France 36 59.4

Norway 41 43.6

Mexico 36 39.9

Brazil 118 12.7

Sweden 33 -5.1

South Africa 19 -15.8

Switzerland 37 -45.6

Ireland 50 -46.3

Denmark 36 -53.4

Canada 53 -105.9

Portugal 32 -144.4

Spain 52 -225.9

Total 1362 112.6

Countries

Industries

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Company Country RepTrak®

Pulse 2013

Change in RepTrak® Pulse

(2007-2013) Cobham United Kingdom 80.6 12.3 Deutsche Post Germany 71.7 9.2

Indesit Italy 78.5 8.3

Volkswagen Germany 83.9 7.5

Siemens Germany 79.1 7.5

Unilever United Kingdom 71.2 0.7

Virgin Group United Kingdom 74.7 1.0

Illy Cafe Italy 79.4 0.3

FedEx USA 76.4 0.2

Boeing USA 69.9 0.1

Berkshire Hathaway USA 70.1 0.0

Mayo Clinic USA 80.8 0.0

Lloyd's of London United Kingdom 66.2 0.1

Statoil Norway 73.5 -0.6

Ryanair Ireland 39.0 -4.1

BP United Kingdom 52.4 -4.1

Vestas Denmark 65.0 -10.8

HMV United Kingdom 56.2 -10.9 H&M Sweden 56.4 -11.8

La Caixa Spain 42.4 -15.8

Danske Bank Denmark 35.8 -17.8

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“Stakeholder interests, risks,

and opportunities are deeply

integrated in every business

decision that we take.

Helge Lund, CEO

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“We missed the issue of obesity and

the value of healthy and nutritional

food. We were behind, while Nestlé was

riding that wave. Not being in tune with

society, with the benefit of hindsight,

can cost you dearly.”

- Paul Polman, CEO

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Increase tourism

Attract Investment Attract talent

Increase exports

31 © 2013 Reputation Institute, all rights reserved.

FULL INTEGRATION INTO

LONG-TERM STRATEGY

& INVESTMENTS

15% 38%

33%

13%

1%

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© 2013 Reputation Institute, all rights reserved. 33

Gracias!

Argentina-Australia-Belgium-Brazil-Canada-Chile-China-Colombia-Denmark-Finland-France-Germany-Greece-India

Ireland-Italy-Japan-Mexico-Netherlands-Norway-Panama-Peru-Portugal-Puerto Rico-Russia-South Africa-Spain-Sweden

Switzerland-Turkey-Ukraine-United Arab Emirates-United Kingdom-United States

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18th Annual International Conference on

Corporate Reputation, Brand, Identity and

Competitveness

Oportunities to network with cross-functional

practitioners across a diverse range of industries

Knowledge sharing on reputation-based best practices

CEO speakers and CMO, CCO cohorts

Academic Scholars & Reputation Experts

Executive Only Member Summit Sessions