Strategic Reputation Management

Towards A Company of Good

Pekka Aula,Saku Mantere

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781000155518
• Edition: 1
• Topic: Economics
• Subtopic: Economic Theory
• Index: Economics

Strategic Reputation Management examines the ways in which organizations achieve "goodness" through reputation, reputation management and reputation strategies. It presents a contemporary model of strategic reputation management, helping organizations and stakeholders to analyze the business environment as a communicative field of symbols and meanings in which the organization is built or destroyed. Authors Pekka Aula and Saku Mantere introduce the eight generic reputation strategies, through which organizations can organize their stakeholder relationships in various ways. They illustrate their arguments using real-world examples and studies, from the Finnish Ski Association to Philip Morris International.

This book serves as required reading in advanced courses covering public relations practice, advanced topics in PR, corporate communication, management, and marketing. Professionals working in PR, business, management and marketing will also find much of interest in this volume.

Part I

The company of good

A contradiction in terms?

Chapter 1

The question concerning the good company

A good question

This world is always chasing after clichés, always trying to function according to them regardless of what cliché it is that time—the information society, IT shares, the new economy … And these clichés de facto change the way we function.

(Business area director of a major international corporation)

Routine morning. I wake up and fry some bacon using Flora margarine in a new Teflon-coated frying pan. It’s a hot summer’s day, so instead of coffee I enjoy some refreshing Nestea iced tea. There has been talk of buying a new car, so on the spur of the moment I reserve a Kia Sportage for a test drive. To get to work I drive a small Hyundai Getz. I feel good; I’m wearing a pair of boxers washed in Omo Color detergent. I’m still a little groggy, so I sip some Powerade sports drink. I save the Bonaqua mineral water I’ve bought for the anticipated afternoon heat wave. While driving I remember the fun holiday recently spent in Copenhagen at the Marriott Hotel. Nice place, although the Renaissance in Amsterdam was more stylish. In Copenhagen I was able to tank the car using my Finnish Neste credit card at Texaco gas stations. It’s hard to focus on work. I’m looking forward to spending an evening watching movies. After careful consideration I’ve invested in a new Sanyo video projector. At the same time I exchanged my old Fisher receiver–amplifier for a new one. My day at work leaves me with a good feeling; the Wal-Mart example I use in my lecture on image-building was given a good reception. While watching the evening’s movie I enjoy a delicious Magnum ice cream.

It’s been a good day, yet all along I’ve been a co-conspirator in projects of varying degrees of malevolence—at least if one is to believe the findings of the Swedish national pension fund Sjunde AP concerning unethical business practices. According to the Sjunde AP’s report, every product that I used during the course of the day, from Omo to Fisher and Sanyo to Magnum, casts a shadow of evil. Yet still there is increasing talk about how important it is for companies to be good.

Table 1.1 Companies and crimes: examples of unethical investment targets according to the Swedish national pension fund Sjunde AP. Source: Helsingin Sanomat newspaper, May 15, 2005.

Company	Brand	Crimes
Chevron Texaco	Texaco	American oil and gas giant. Guilty of human rights violations in Nigeria and environmental crimes in the Amazon.
Coca-Cola	Nestea, Powerade, Bonaqua	American refreshment drinks giant. Infringed on workers’ rights and guilty of discrimination in the USA and Central and Latin America.
DuPont	Teflon	American chemical giant. The company’s product has caused injury to people and damage to nature.
Hyundai/Kia	Kia Sportage, Hyundai Getz	Korean car manufacturer. Has restricted unions from operating, maintains poor working conditions in South Korea.
Marriott	Marriott Hotel in Copenhagen, Renaissance Hotel in Amsterdam	American hotel chain. Sexual harassment of minors in company offices in Costa Rica.
Sanyo Electric	Sanyo, Fisher	Japanese electronics manufacturer. Discrimination against women at its production plant in Mexico.
Unilever	Omo, Flora, Magnum	Dutch foodstuffs company. Subsidiary guilty of environmental crimes in India.
Wal-Mart	Wal-Mart	American shop chain. Discrimination against women in Guatemala, restricted unions from operating, infringed on workers’ rights in USA.

An essential contradiction is inherent in all the good deeds performed by companies. Whenever a company does something good, its motives are questioned. A company can be up to no good while doing the right things. It is as if the “good side” of a company is always counterbalanced by an “evil side.” And performing good deeds is just a way of covering up the evil side, or making it look good. When a multinational hamburger chain collects funds and builds houses for families of sick children, the outcomes of the deed itself are good as they improve the lives of those we sympathize with. But since the organization in question is not UNICEF, for example, we assume that there must be some evil motive behind the gesture. Even if we are unable to demonstrate where or what that evil motive is, it has to be there somewhere. If concrete examples of the twisted motives of good deeds cannot be found in our immediate neighborhood, they can certainly be found elsewhere, probably in the third world.

Today’s business environment demands a lot of corporate responsibility and a robust ethical backbone. On the one hand, it is claimed that goodness improves the public perception of a company and builds a positive image. In this way good operations influence people’s decision-making, which naturally has enormous importance for the success of the company. Even the “faceless markets” of the global economic system are ultimately influenced by decisions made by someone somewhere.

Goodness also attracts investments, also in a concrete way. The so-called ethical investment funds have become popular, even if their market share is in a minority among all funds. An example of an ethical fund is the SEB Lux Fund—Ethical Global:

The fund invests globally in equities and equity-related securities. The ethical restrictions are based upon GES^®, Global Ethical Standard, which origins from international norms concerning human rights, labor, environment, bribes, corruption, and weapons. The fund also excludes companies for which more than 5 percent of the business is derived from weapons, alcohol, tobacco, gambling, and pornography. The ethical review is performed by GES Investment Services. SEB donates 13.5 percent of the fund’s management fee to the WWF every year.

(www.seb.se, read June 7, 2005)

If investors are becoming seekers of goodness, consumers also want to buy things from a company of good. Many studies indicate that “ethics” and “responsibility” are still in fashion. This should mean that we as consumers make direct daily decisions that benefit companies and products that we know, or think, suit our own personal values. But something still seems wrong. It seems that even if customers have values, this does not automatically lead to good operations. It has been estimated that the market share of ethical funds in Finland is between 0.5 and 1.0 percent. According to a publication released by the Finnish Foundation for Share Promotion, a total of around є170 million was invested in funds adhering to certain principles of social responsibility at the end of 2004. At the same time the total capital of all funds was over є31 billion. Investors in the USA are more ethical. There the share of socially responsible funds is over 10 percent of all funds. Matters are made even more interesting by information that suggests that it pays to invest in “badness” or “vices,” as reported by Finland’s leading daily newspaper Helsingin Sanomat (May 15, 2005). The Vice Fund in the USA invests successfully in companies that are active in gaming, tobacco, alcohol, and aerospace and defense. Since its inception in 2002, the fund has averaged an annual return of 18 percent. As the Vice Fund Prospectus states:

It is the Advisor’s philosophy that although often considered politically incorrect, these and similar industries and products … will continue to experience significant capital appreciation during good and bad markets. The Advisor considers these industries to be nearly “recession-proof.”

(Vice Fund Prospectus, July 31, 2006, p. 2)

Of course, investment decisions are made by very few consumers on a regular basis. Selecting the food we buy is much more common. But even here our daily bread is seldom produced naturally; just a couple of years ago the market share of organically produced bread was less than 2 percent (The Ministry of Trade and Industry, 2002). At least organic eggs are doing better. According to a 2004 ACNielsen study, their market share in terms of total sales in that year was 4.8 percent.

Despite the contradiction between words and deeds, responsible business operations are still considered to be extremely important for achieving success. Companies invest enormous sums of money in good deeds, as well as in good presentations to promote the public image of being a responsible company. And the bigger the company, the bigger the deeds.

Many pharmaceuticals companies have invested large sums in various kinds of virtuous projects. A well-known example is provided by Merck & Company, which has played a major role in treating so-called “river blindness” caused by parasites in sub-Saharan Africa. River blindness is a painful ailment that often leads to permanent loss of vision. Merck & Company has distributed free of charge over 250 million treatments, each of which costs more than є1 (BBC News article, “River blindness drug revives village life,” September 15, 2002, www.bbcworld.com).

The treatment was discovered by Dr William Campbell, a veterinary researcher at Merck & Company who was studying parasite-inflicted illnesses in animals. The company developed the treatment in cooperation with the World Health Organization. Sub-Saharan Africa was and still is a poor region. After failing to receive funding from the US government and several other bodies, Merck & Company decided to donate the treatment to everyone in need of it for as long as the disease prevailed. The company has maintained its commitment for over 20 years (www.merck.com).

...

Table 1.2 The “projects of good” of a pharmaceutical company in 2005. Source: Novartis Annual Report, Novartis Access to Medicine Projects 2005.

Project	Objective	Target region	Program value 2005 (US$ millions)	Patients reached 2005
Malaria/WHO	Provide Coartem at cost for public-sector use	Africa, Asia, Latin America	36^1	5,600,000
Leprosy	Eliminate leprosy by providing free medications to all patients worldwide with WHO through 2010	Global	3^2	407,000^3
Tuberculosis	Donation of fixed-dose combinations^4	Tanzania, Sri Lanka	3^5	20,000
Novartis Institute for Tropical Diseases (NITD)	Discover novel treatments and prevention methods for major tropical diseases; NITD discoveries to be available in poor endemic countries without profit	Developing countries	10
Novartis Foundation for Sustainable Development	Work at policy and field level to improve access to healthcare for the world’s poorest people	Developing countries	7	58,000

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Table of Contents
• List of figures and tables
• Preface
• Part I The company of good: a contradiction in terms?
• Part II Strategic reputation management
• Part III Managing the company of good
• Part IV Conclusion
• Notes
• References
• Index