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Trishlee
04-07-2007 |
Many savvy companies are starting to realize that a good name can be their most important asset—and actually boost their stock price.
Call it the new science of reputation management. Corporations have long used sophisticated statistical models to predict everything from how much a new production process would hike efficiency to how much more soap can be sold with an additional $100 million in advertising. But a company's reputation among investors, customers, and the general public traditionally has been regarded as too squishy to measure with hard numbers or manage with any precision, let alone to prove cause and effect.
Many investment pros scoff at suggestions they can be influenced by image manipulation. And to most CEOs, corporate image is not something to fret about—at least, not until a crisis erupts, like an options scandal, employee class action, or ecological disaster. Even when execs try to be proactive, it's often by gut.
Want to be viewed as a good corporate citizen? Order up a PR blitz on your charity work or efforts to go green. Eager to land on a magazine's most-admired list? Gin up a strategy to game the selection process.
But a more sophisticated understanding of the power of perception is starting to take hold among savvy corporations. More and more are finding that the way in which the outside world expects a company to behave and perform can be its most important asset.
Indeed, a company's reputation for being able to deliver growth, attract top talent, and avoid ethical mishaps can account for much of the 30%-to-70% gap between the book value of most companies and their market capitalizations. Reputation is a big reason Johnson & Johnson trades at a much higher price-earnings ratio than Pfizer, Procter & Gamble than Unilever, and Exxon Mobil than Royal Dutch Shell. And while the value of a reputation is vastly less tangible than property, revenue, or cash, more experts are arguing it is possible not only to quantify it but even to predict how image changes in specific areas will harm or hurt the share price.
Complete article can be found on BusinessWeek at: http://www.businessweek.com/magazine/content/07_28/b4042050.htm?campaign_id=widget_topStories
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