Of Reputations, Roller Coasters, and Wild Rides on Wall St.

Dr. Charles FombrunChairman, Reputation Institute

Madrid, Spain7 May 20107 May 2010

Huge Centripetal Economic Forces are Pulling Us Apart

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While Geological Forces are Taking their Toll

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Contributing to a Wild Ride in the Financial Markets

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And Putting “Reputation” On Everyone’s Mind

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Toyota is Reeling from Unintended Effects of Cost-Cutting

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BP is Reeling from a Huge Oil Spill in the Gulf of Mexico

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Clearly Reputations are Always at Risk

"It takes 20 years to build a reputation and five minutes to ruin it.

If you think about that, 'll d thi diff tl ”you'll do things differently.”

Warren BuffettWarren Buffett

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RI has conducted Global Reputation Studies since 2000

34 Countries & 24 Industries –65,000 ConsumersAirlines & Aerospace • Automotive • Beverage • Chemicals • Computer • Conglomerate • Construction & Engineering • Consumer

Products • Electrical & Electronics • Energy • Financial – Bank • Financial – Diversified Services • Financial – Insurance • Food Manufacturing • Industrial Products • Information & Media • Pharmaceuticals • Raw Materials • Retail – Food • Retail – General •

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Manufacturing Industrial Products Information & Media Pharmaceuticals Raw Materials Retail Food Retail General Services • Telecommunications • Transport & Logistics • Utilities

Lesson #1: A Corporate Reputation is an Emotional Bond

…and built on 7 Pillars

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Lesson #2: Reputation Operates “Below the Line”

Strategic Goals

Business Results

CorporateInitiatives

Perceptions of Company

Supportive Behaviors

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Lesson # 3: Improving Alignment Increases Reputation

What Companies

SayInconsistency

Say

How Companies are Perceived

Inconsistency

What C i

InconsistencyCompanies

Do

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Lesson #4: Improving Reputation Increases Support

Improve Reputation by 10% – Increase Support by 10%

80

72

80

56

64

Rec

omm

end

40

48

nden

ts w

ho W

ould

R

24

32

% R

espo

n

8

16

26 36 46 56 66 76 86

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Adj-R2 = 0.889

26 36 46 56 66 76 86

U.S. Pulse Score

Source: 2010 Global Reputation Pulse (U.S. Results)

Lesson #5: …and creates Financial Value

Top 30 in Reputation

Bottom 30 in Reputation

Ratio of Market ValueMarket Valueto Book Value

3.79 1.42

% Change in Market Value = 1.3 * % Change in Reputation

So, on average:

13%10% Improvement in Reputation

13% Improvement

in Market Value

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Value

Lesson #6: So that Investing in Higher Reputation Firms Can Pay Off

40 .00%

HIGH REPUTATIONPORTFOLIO

CumulativeReturns

20 .00%S&P 500

0 .00%

S&P 500

-20 .00 %

-40 .00 %

-60 .00 %

Jan-00Apr-0

0Jul-0

0Oct-0

0Jan-01Apr-0

1Jul-0

1Oct-0

1Jan-02Apr-0

2Jul-0

2Oct-0

2Jan-03Apr-0

3Jul-0

3Oct-0

3Jan-04Apr-0

4Jul-0

4Oct-0

4Jan-05Apr-0

5Jul-0

5Oct-0

5Jan-06Apr-0

6Jul-0

6Oct-0

6

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Ja Ap J O Ja Ap J O Ja Ap J O Ja Ap J O Ja Ap J O Ja Ap J O Ja Ap J O

Lesson # 7: But Reputation Requires Vision & Governance

Energy Autogy

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Tobacco Banking

Lesson #8: And a Focus on Products & Innovation

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Lesson #9: Companies have to Do the Right Thing

“You can make money without doing evil”You can make money without doing evil

Is Google a great Is Google a great place to work because place to work because its stock is at $483, or its stock is at $483, or is its stock at $483 is its stock at $483 is its stock at $483 is its stock at $483 because it's a great because it's a great place to work? place to work?

----Business Week, January Business Week, January 22, 200722, 2007

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Lesson #10: As Well as Do Things Right

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So a Mind-Shift is Taking Place From Brand to Reputation

Brand ReputationBrand

The promise a company makes

Reputation

The degree to which the companyThe promise a company makes to its stakeholders

“Owned” by the company

The degree to which the company fulfills its promises

“Owned” by stakeholdersOwned by the company Owned by stakeholders

A brand is a promise…h li t th t i b ild R t tiwhen you live up to that promise you build Reputation

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Reputation Pulse 2010

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The World’s Best Corporate Reputations (2010)

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Corporate Reputations in Spain?

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