Politics aside, President-Elect Trump’s choices for various Cabinet positions suggest an abrupt about face on regulatory policies championed by the Obama administration (think fair wages or the environment). While nothing is official, Trump and his team of advisors talk as if we are about to enter a new “Wild West” of de-regulation in an effort to promote business and spur the economy.
In 2017, I predict that many large corporations will face a delicate balancing act. Deregulation in certain areas may be in stark contrast to the opinions of a company’s key stakeholders. I foresee that companies which fall out-of-step with these expectations may experience an erosion in their reputation.
But, you may ask, why does a company’s reputation matter? Reputation is not about winning a beauty contest, it’s about ensuring your company’s ability to operate and succeed. Many industry experts extol the virtues of a strong reputation and assert that companies with a solid reputation tend to have a higher market value, are better able to sustain profits over time and often outperform the S&P.[i] In other words, reputation matters.
Based upon APCO Insight’s vault of reputation research, here are my predictions on what we may see in the coming months.
Environmental citizenship will continue to matter for a company’s reputation
Looking at the past decade of our reputation research findings, we’ve witnessed a heightening of environmental expectations for companies across industries. Our research has found that environmental stewardship is often a highly influential issue on opinions of major corporations. Moreover, taking the lead in one’s industry in addressing environmental issues is often cited as an expectation for the largest of companies.
Corroborating our findings, a recent survey by the Pew Research Center found that more Americans believe that stricter environmental laws and regulations are worth the cost than say these types of regulations cost too many jobs and hurt the economy (59% vs. 34%).[ii]
If reputation is about meeting the expectations of your stakeholders, our research tells us that sliding back too much on your company’s environmental promises can have a potentially detrimental impact on reputation.
Expectations for being a “good employer” will continue to heighten
I log many hours each year in focus group facilities around the world talking to different groups of people about what it means to be a respected and responsible company. More often than not, paying fair wages and providing good benefits tend to be a threshold expectation of any reputable company. Beyond just wages and benefits, the best companies take care of the whole employee – providing education and career development opportunities, family-friendly benefits and even re-training opportunities when lay-offs occur.
Looking ahead, falling down on paying a fair wage to employees will only be part of the losing battle of being a “good employer.” Companies with the strongest reputations are better positioned to recruit and retain the best talent.
Become an advocate for society to “win” on reputation
Our research indicates that the best brands become champions for the interests of their stakeholders and society. Those companies that use their business (not just their corporate social responsibility programs) to add value to society will win over their stakeholders and succeed in building a strong brand.
The next four years may provide a further opportunity for U.S. corporations to take the lead over the government on addressing society’s biggest problems. To paraphrase my colleague Bill Dalbec, the new business environment represents an opportunity for corporations to take the lead on social change. Companies that push for transformative social change that impacts our daily lives will become reputation brand champions.
[i] Enterprises, W.K. & M. Smith M. (2008). Does Corporate Reputation Translate into Higher Market Value? Jesse H. Jones School of Business, Texas Southern University & Mays Business School, Texas A&M University, Social Science Research Network
Anderson, J. & G. Smith. (2006). A Great Company Can Be a Great Investment. Financial Analysts Journal, Vol. 62, No. 4; 86-93.
Vergin R & M.W. Qoronfleh. 1998. Corporate Reputation and the Stock Market. Business Horizons (Jan.-Feb. 1998): 19-26
Roberts P, & G. Dowling. 2002. Corporate Reputation and Sustained Superior Profit Performance. Strategic Management Journal 23: 1077-1093
[ii] Bialik, Kristen. “Most Americans favor stricter environmental laws and regulations.” Pew Research Center, survey November 30 – December 5, 2016.