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Corporate Social Responsibility (CSR) is an idea that corporations have to consider the interests of customers, employees, shareholders, communities, and ecological considerations in all
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green@work : Magazine : Between Blue & Yellow : May/June 2004

Between Blue and Yellow
What's In a Name?

by Katie Sosnowchik

That question headlined the first cover story published in green@work. Our inaugural issue, introduced more than four years ago, featured an interview with Bill Ford just a few months after he assumed the role of chairman of the automaking giant that bears his family name. Ford had much to say on the subject of the environment, automobiles and, in particular, his company, but what I remember most was a comment he made toward the end of the interview: “It’s my family name here. I want my children and my grandchildren to be proud of that. I don’t want them ever to be in a position where they have to apologize to somebody for it.”

I was reminded of Ford’s statement recently when reading the results of a World Economic Forum survey of CEOs from 1,000 leading global companies. Surprisingly, one of the report’s key findings is that these business leaders say that corporate reputation is a more important measure of success than stock market performance, profitability and return on investment. Three-fifths (59 percent) of respondents estimated that corporate brand or reputation represents more than 40 percent of a company’s market capitalization. And more than 77 percent believe that reputation has become increasingly important the last two years. Only quality of products and services was ranked as a more important measure of success, and that by only three percentage points.

“The reputation of a company and its products used to be regarded as an intangible asset that was very hard to quantify,” said John Graham, chairman and CEO of Fleishman-Hillard International Communications, a communications consultancy that assisted with the survey. “Clearly the recent wave of corporate scandals has made CEOs reappraise the importance they attach to their corporate brand.”

Yet it can be argued that stock performance and investment activity—traditional signals of corporate success—do, in fact, confirm that a company’s name and its reputation as a good corporate citizen is critical.

What’s at stake? Consider the recent actions of the California State Treasurer, Phil Angelides, who has launched an initiative to use California pension funds’ clout and assets—$250 billion in total—to demand more disclosure of climate change and other environmental risks from portfolio companies. Similar actions are being considered or have been undertaken by other large fund managers. My guess is that more than a few CEOs and Wall Street analysts are losing sleep over this kind of news.

In a time when information is transmitted virtually instantaneously, all it takes is a single incident where a company has not acted as a good corporate citizen to undo years of unblemished behavior—a fall from grace that the media will most likely ensure occurs in a very public manner. And make no mistake: shareholders large and small will take note and take action. They will insist that their voices be heard and the companies they invest in be held accountable. The Social Investment Forum reports that shareholder advocacy activity has increased by 15 percent between 2001 and 2003, a trend that is expected to build momentum in coming years.

“It takes 20 years to build a reputation,” says Warren Buffett, “and five minutes to ruin it. If you think about that, you’ll do things differently.”

Sage advice from a veteran who has staked his own reputation on knowing how the game is played.

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