On Corporate Reputation: Painstakingly Built, Easily Squandered

Reputations take years, even decades to build but can be destroyed in an instance. So goes the adage and as we’ve seen since the advent of the financial crisis, there is ample evidence all around us of how true this is.

Stellar institutions such as Lehman Brothers, the collapse of which marked the start of one of the worst financial crises the world has seen, fell from grace in just a few days – its reputation tarnished irreparably.

And it was not the only casualty: Goldman Sachs, The Royal Bank of Scotland, BP, Exxon-Mobil saw their reputations badly damaged. In the automotive industry, even Toyota’s legendary manufacturing model was called into question, albeit temporarily on account of product recalls. A reputation for top quality was put at risk in light of recalls and manufacturing problems.

Or take FIFA, football's international governing body, which had resisted calls for real change for decades and got away with it until corruption became so endemic that the whole house almost came crumbling down. An institution created to further the interests of the most popular sport in the world, gradually turned into something akin to Mafia. The allure of power and wealth seemed to be too much for voluntary, internally guided change.

Reputational damage is not just inflicted at company level: entire countries can suffer a loss of standing and credibiltity. Greece has been making negative headlines for some time now, almost non-stop, with Spain, Portugal and perhaps Italy susceptible to a similar fate….Argentina had suffered huge reputational damage more than a decade ago, and it took years to regain some of it back.

In the US, the acrimonious fight between Republicans (especially those who identify themselves with the Tea Party) and Democrats over the debt ceiling, put into question the country’s ability to repay its debts. Incredibly, the US’s creditworthiness, which was always taken for granted, was put in serious doubt by its elected officials. They did manage to reach ast minute deals on a number of occasions, but the prolonged acerbity and wrangling took its toll and led to the loss of the US’s triple A credit rating….David Sanger writing in the New York Times (In World’s Eyes, Much Damage Is Already Done) noted:

“….But the brush with default has added a new dimension. It has left America’s creditors and allies alike wondering what had changed in American politics that a significant part of the country’s political elite was suddenly willing to risk the nation’s reputation as the safest place for the rest of the world to invest.”

There are unfortunately self-destructive streaks within most institutions, be it in business or in politics, which may jeopardize the very asset everyone should be striving to maintain intact. Sometimes the fall-out comes from events which are hard to control or predict (accidents, natural calamities and the like) but sometimes they are very predictable…and preventable.