Corp. Reputation Key To Shareholder Value, Report Finds

Corporate reputation is increasingly able to enhance or rapidly destroy shareholder value, a not-for-profit business research group concludes in a report.

The report by The Conference Board in New York, "Reputation Risk: A Corporate Governance Perspective," provides recommendations on how corporate boards can manage risk to reputation as part of their enterprisewide risk management (ERM) program.

"Despite a recent surge in research on the topic, corporate reputation remains a highly disjointed field of study," said Matteo Tonello, senior research associate at The Conference Board Governance Center and author of the report. "There is still very little guidance on the oversight function of the board in protecting and enhancing this corporate asset."

To help fill the gap, The Conference Board held a Corporate/Investor Summit on reputation risk governance early this year, in Washington, D.C.

Moderated by Carolyn Brancato, director of The Conference Board Governance Center, the gathering was held in conjunction with the Council of Institutional Investors' annual spring meeting.

Delegates included representatives from corporations, investors and professional institutions. The group reached consensus on a set of principles and guidelines for reputation risk governance.

"This is an important study that thoughtfully explores an increasingly fragile ingredient of success, i.e., reputation, and how it can shape a company's risk content and processes," said John Farrell, National Lead Partner, Enterprise Risk Management, at KPMG LLP.

Mr. Tonello said since corporate reputation is the perception of the firm by many stakeholders, board members should consider having an organizational program in place to oversee any material event that may affect stakeholder relations.

The report includes a variety of recommendations for corporate boards including the advice they should reach a common understanding of the concept of corporate reputation and tie its discussion to a comprehensive analysis of the firm's stakeholder base.

The Conference Board said the recommendations are supplemented by references to a number of practical cases of corporate reputation failures and reputation risk management, including cases drawn from public source documents involving: Johnson & Johnson; Nike Inc.; Sony Corp.; Mattel Inc.; BP plc; and Martha Stewart Living Omnimedia Inc.

More information on the issue is online at www.conference-board.org.