boardroom

Reputation increasingly difficult to protect

New Zealand and Australian senior executives are increasingly focusing on whether they are behaving with integrity and have good products and services. This contrasts with previously nominated priorities including authenticity and competence, according to a survey of 254 firms by Australasian public affairs firm, Senate SHJ.

The sixth survey undertaken by the firm since 2006 finds that while a strong reputation is almost universally regarded as a primary corporate asset, executives in both countries say it is increasingly difficult to protect and that they are becoming less confident about their ability to do so.

"An increasing number of respondents told us that corporate reputation is harder to manage than other forms of risk," said SenateSHJ chief executive Neil Green in a statement.

"We believe this is a result of a number of factors, including the rapid pace of change, increased regulatory scrutiny, consumer activism, the sophistication of how consumers use social media to raise complaints, pressure on organisations to focus on purpose and profits not merely returns for shareholders, and the demands on listed companies by institutional investors relating to environmental, social and governance issues eg gender equity, pay parity, climate change."

Some 63 percent of Australian respondents said corporate reputation was more difficult to manage than other forms of risk, up nine percentage points from the last survey, taken in 2017, while 67 percent New Zealand executives said the same, a rise of 12 points since 2017.

When it came to monitoring reputational risk, 76 percent of firms monitored social media versus 70 percent also monitoring traditional news media, while in New Zealand, 70 percent monitored traditional media and 68 percent kept an eye on social media.

Social media focus was highest in the retail and wholesale sector, with 100 percent of respondents monitoring social platforrms, followed by banking and finance at 86 percent, and government at 84 percent.

New Zealand executives unanimously nominated as the three biggest reputation-damaging stories of 2018: Fletcher Building's financial difficulties, the law firm Russell McVeagh's intern sex scandal, and Jami-Lee Ross's incandescent departure from the National Party caucus.

Respondents said of the Russell McVeagh story that the firm had been "very 'old-school' in its response" and failed to realise how serious the situation was.

In Australia, the royal commission into the behaviour of the banking sector was the biggest reputational issue last year, along with political party leadership battles and the Australian cricket team's ball-tampering scandal.

The report suggests that, despite the downgrading in importance of authenticity versus integrity, "inauthentic demeanour of executives" was one of three killer problems for any organisation dealing with a reputational crisis, along with "unstructured and poor communications" and "lack of ownership of issues".

These "were all pinpointed by respondents as exacerbating a crisis and wreaking untold damage on organisational and personal reputations".

In New Zealand, the survey found crisis communication plans are most prevalent in the agricultural/forestry/fishing sector (100 percent), the healthcare/pharmaceutical sector (91 percent) and the manufacturing and transport/postage/ warehousing sector (88 percent).

Professional services firms and IT/technology/communications firms were least likely to have a crisis communication plan, at 50 percent and 40 percent respectively. About half of firms with a crisis plan tested their readiness at least once a year.

The survey found that only one-third of executives felt confident in their ability to manage a reputational crisis.

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