It can't exactly be said that every generation in business has its major corporate debacle--because it happens more often than that. Companies and their leaders' reputations are compromised in every industry at every pass.
A ton of people lose money when scandals surface. Even more people lose face. Which is worse? Writer Leslie Gaines-Ross would say a blow to the wallet is less of a setback than one to corporate credibility, no matter how big the company.
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She is the author of CEO Capital: A Guide to Building CEO Reputation and Company Success, published in 2002.
In her latest book, Corporate Reputation: 12 Steps to Safeguarding and Recovering Reputation, Gaines-Ross lists clear guidelines to rebuilding a part of any business that is just as crucial as the bottom line.
"It's not enough anymore to just have a great reputation and to be able to protect that," Gaines-Ross said.
In the book, she discusses some of the world's largest companies and their best practices for preserving reputation. They span all sectors, including Goldman Sachs, Colgate-Palmolive, Boeing and McDonald's.
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Gaines-Ross spoke with Forbes.com and discussed corporate reputation, how there are always signs when a storm is about to strike and the importance of character in the C-suite.
Is the US any better or worse when it comes to corporate reputation compared with other countries?
Leslie Gaines-Ross: I think reputation recovery happens everywhere, and companies around the world are recovering--Societe Generale in Europe, it goes on and on, UBS--in the U.S., you have Dell, Oracle, what's happening at Yahoo!. It just goes on and on and on in terms of companies recovering their reputation.
Is reputation any more important or less important depending on the industry?
I don't think anyone is safe from losing their reputation.
In certain industries, it's 90 per cent trust and reputation, like in the financial services industry. These are peoples' livelihoods and they're investing it and I think they can really hurt your reputation to a greater extent.
It's like health care companies, or pharmaceutical companies, airlines. If you don't trust an airline, you're not going to fly it. That's a whole different level of risk. Some industries require more reputation-safeguarding than others.
It would seem that there are enough rules and regulations in place to avoid many of the problems related to corruption. Do you think we have enough watchdogs? Is this the kind of thing that'll ever disappear? Will we all be Boy Scouts one day?
It'll never go away because it's human nature. Greed and the ability to get away with something, that's never going to go away. Companies can do a better job of controlling just by asking questions.
One of the biggest issues at Societe Generale is that there were these warnings. They were getting these messages that there was something not right happening and really wrong with the business and the board didn't act quickly enough.
Is there always a sign that something is amiss before the problem is brought to light?
There's almost always something, a sign. Look at Enron when Sherron Watkins went in to see Ken Lay and said "What's going on here?" Things like that. There's always a sign.
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There's a great quote that an employee at BP said: "An employee shouting that something is wrong is a whisper by the time it gets to the CEO's office."
That happens all the time. By the time it gets to the CEO's office, it's practically inaudible. One of the things about safeguarding the reputation is that anything the CEO hears it could multiply times 10 just to get a sense of how big of a deal it is. They're not going to hear everything, but when they hear something, they better take note.
Then the 'buck stops here' rule applies to the CEO?
It's the way it is. Some people will say, "Well that's what they get paid for, they get paid the big bucks."
Well, they're not going to feel bad for them.
I do. I'm a big CEO supporter. There are many things hidden from the CEOs and they don't know really what happened. The board possibly could be doing a better job of oversight, but ultimately the CEO gets the blame, we found, about 60 per cent (of the time).
Are there any current business practices that could avoid scandal and corruption and poor risk management that could keep companies on the straight and narrow? Take the shared role of CEO-chairman for example. Does this help or hurt matters?
In Europe they're more likely to be two different people and in the US, they're more likely to be one person, although that's changing. But, again, the classic example, Enron, had a separate CEO and a chairman so it works and sometimes doesn't work. It probably is a better safeguard to have two different individuals.
Are you ever surprised when a new news story breaks about something else going wrong where millions or billions of dollars were lost?
I'm always surprised. I don't know why, but I'm always surprised. I always think that companies and leaders are minding the store in the best way possible by bad and overlooked behavior. One of the things you mentioned about the separation of the CEO and the chairman, I would say that's something that's really important to keep up on, all these early warning signs--sometimes they're called weak signals. I also think that companies are doing a better job of monitoring their reputations online. They really put their ears to the blogosphere.
Just to pick one of the 12 steps in the book, communication, how important is that today for a leader? Do they all have to be charismatic to get the job done, and who's a good example?
I think a good example of the importance of communication is an event like Sept. 11 and how important it was for US citizens and the world, probably, to hear George Bush come and say something. What he said and how he said it was really critical.
Despite whatever anyone thinks about George Bush, that's just an example of how important it is. Yes, it means you have to be a good communicator, but it doesn't mean you have to get on a podium and speak at a conference and talk about some lofty subject. Most of it is just really walking the hall, helping the people on their way into the office, going to these town hall meetings. The CEOs who stay in their ivory towers and never leave their offices are not communicating.
Jack Welch said that you have to communicate until you feel like you're going to gag. It's just over and over and over again, and he's right.
Is the boss' reputation the same as the company's reputation?
About half of the company's reputation is attributed to the CEO. He's the face of the company. He's the person who really sets the value. He's the voice of the company. The second you have a crisis, everyone is saying, "Where is the CEO? What is he or she saying about it?"
If he or she stumbles, it hurts the reputation of the company.
