Reputation and integrity are the only real assets owned by companies; when one is lost, everything else follows, as discovered with the public relations disaster that emerged from the manner in which communicators handled the former President, Nelson Mandela’s illness… It is for this reason that every organisation must develop a plan to prepare for the day its corporate integrity or that of its stakeholders – is threatened.
Market value is heavily determined by corporate reputation. According to Robert Eccles, a US-based reputation management expert, 70 – 80% of a company’s assets are not on the balance sheet – intangibles are increasingly important.
A good company reputation affects current performance:
More loyal customers
Better terms and service by vendors
Higher-margin products and services
Reputation affects expected future performance. It encourages clients to believe that the current performance will continue to improve – a good reputation leads to lower perceived risk (lower cost of capital and higher stock price).