“Chairman contagion”—the process of trouble afflicting a shared chair spreading from one portfolio company to another—is among the key reputational risks identified by chief executives and communications specialists in a new report.
In research that ranges across a host of reputational issues faced by companies and their public relations experts, headhunting firm Cayhill Partners also suggests that the Covid-19 pandemic has created its own reputational risk and highlighted the necessity of good communications.
Based on the assumption that reputation is a significant corporate asset—even though it doesn’t appear on balance sheets—the research examines the way corporate reputation is managed among FTSE 250 firms.
Among the other results was that almost three-quarters (73%) of communications leaders believe their chief executive fails to “appreciate” what corporate reputation management is and the role it plays. That will probably come as no surprise to many in PR still contending with executives using “old media” command-and-control thinking in a social media age.
But the report’s listing of “chairman contagion” as a key risk adds a new spin on the problems face by reputation managers. “The likelihood of reputation damage from chairmen, CEOs and their leadership teams has increased significantly,” the report said.
“Their personal standing is now inextricably linked with that of their organisations. ‘Chairman contamination contagion’ is also on the increase amongst companies that share a chair with another organisations, as negative fallout from one firm can seep into the other company via association.”
One FTSE 250 chief executive executive told researchers: “The reputation of the chair, independent directors and the board in general tends to send strong signals about a reputation.”
These days communications professionals are on alert for the unintended consequences of a shared leadership figures findings themselves in hot water.
According to Neil Boom, managing director at Gresham PR, a specialist in financial communications, the old City adage about being “careful with the company you keep” is more pertinent in an age when bad news can move instantly through the internet.
And it isn’t just the journalists companies have to worry about. Scrutiny in the social media age comes from customers, suppliers, staff as well as investors.
“A careless comment by a non-executive chair who sits on more than one board can inadvertently import trouble to an entirely innocent company who suffers guilt by association,” said Boom.
“These days customers can start a boycott and demand a head at the drop of a hat. It may be grossly unfair to the innocent company, but the risks are nonetheless real.”
Among the other reputational risks found to be of concern by Cayhill researchers are geopolitical issues, among them human rights. One chief executive told researchers that a potentially lucrative line of business in an emerging market was abandoned because of the country’s stance on human rights.
“Our guiding compass has to be moral not just financial,” the chief executive said.
Regulation was also identified as a key reputational risk, in particular environmental, social and governance (ESG) topics. Cayhill noted that investment funds increasingly look for ESG credentials, as do ratings agencies.
Covid-19: a reputational risk?
While Cayhill’s research took place before the pandemic, they believe Covid-19 is having an impact on reputation, especially in the way companies manage the welfare of their staff. Communications staff can play in role in helping chief executives understand expectations outside their organisations.
“The reputational pivot of ‘people, purpose and values’ has been thrust into the spotlight by Covid-19.
While some commentators see this signalling the coming of age of the Human Resources director, it could equally point to enhanced recognition for the communications leaders,” the report said.
There is broad agreement that Covid-19 may be a game changer in the way many companies are viewed publicly. In the early stages of the crisis some companies took a reputational battering as a result of the way they treated employees. Others benefited after switching their resources to not only supporting staff, but providing services that contributed to efforts against the virus.
Prof Colin Mayer, a corporate governance expert at Oxford University, recently told Board Agenda that the pandemic would “fundamentally change” business.