Charles Fombrun Reputation Journey #UP

THE REPUTATION JOURNEY: Pratfalls and Pitfalls, Sights & Sounds Dr. Charles J. Fombrun Chairman Reputation Forum Lima, Peru 8 May 2014 Š 2014 Reputation Institute, all rights reserved.

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Š 2013 Reputation Institute, all rights reserved.

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Adam Smith (1723-1790)

MARKET The Invisible Hand

Frederick Taylor(1856-1915)

SPECIALIZATION The Division of Labor

Max Weber (18641920)

ORGANIZATION The Visible Hand 8

Š 2013 Reputation Institute, all rights reserved.

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Self Regulation

Externalities & Market Failures

Institutional Control

Reputation Markets

Government Regulation 11

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Adam Smith’s Economics

The New Economics

• Small powerless buyers/sellers

• Big powerful actors

• Perfect Information

• Asymmetric Information

• Moral Behavior

• Opportunistic Behavior

• Investment Capital

• Social Capital

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Connective Technologies

Powerful Companies

Powerful Stakeholders

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In this brave new world, what you say doesn’t matter as much…

It’s whether you are trusted & believed!

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Shifting Composition of S&P 500 Market Value 100%

83%

68%

32%

20%

19%

80%

81%

2005

2009

80%

68%

60%

40%

32% 20%

17% 0% 1975

1985

1995

Intangible Assets

Tangible Assets

Source: Ocean Tomo

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Value of Intangibles (Billions of $US) USA Switzerland Australia United Kingdom France Canada Germany Netherlands India Brazil Hong Kong China Italy South Korea Japan Total Global

$11,916 $978 $875 $2,050 $1,273 $1,012 $1,032 $466 $626 $648 $520 $1,169 $280 $221 $266 $28,305

% of Enterprise Value 68% 61% 58% 58% 54% 53% 52% 49% 48% 44% 42% 35% 28% 16% 6% 50% Source: Brand Finance GIFT 2013

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…a new world in which people buy products, take jobs, and make investments based primarily on their trust, admiration and appreciation for the companies and institutions that stand behind them.

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Market Push

Products

Expressive Pull

Monologue

Authority Messages Clarity

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Winning Companies build strong emotional bonds with their stakeholders by engaging with them‌

Do Right

Do Good

Do Well

…and help to solve social problems 22

80.0%

% Respondents w ho Would Recommend

70.0%

60.0%

50.0%

40.0%

30.0%

20.0%

10.0% 30.00

40.00

50.00

60.00 RepTrak™ Pulse Score

70.00

80.00 Adj-R2 = 0.827

Industries

Countries United Kingdom USA Germany Italy Australia France Norway Mexico Brazil Sweden South Africa Switzerland Ireland Denmark Canada Portugal Spain Total

379 261 52 69 58 36 41 36 118 33 19 37 50 36 53 32 52 1362

228.3 151.3 84.1 74.9 60.7 59.4 43.6 39.9 12.7 -5.1 -15.8 -45.6 -46.3 -53.4 -105.9 -144.4 -225.9 112.6

Transport & Logistics Financial - Insurance Airlines & Aerospace Services Financial - Diversified Energy Consumer Products Telecommunications Chemicals Tobacco Automotive Food - Manufacturing Construction & Engineering Computer Utilities Raw Materials Industrial Products Electrical & Electronics Information & Media Conglomerate Pharmaceuticals Retail - Food Beverage Retail - General Financial - Bank Total

58 105 50 112 45 73 39 68 17 4 25 63 56 19 63 52 42 15 56 19 33 56 26 148 118 1362

62.9 51.0 47.7 47.4 41.3 37.5 26.6 26.1 22.8 18.5 17.0 15.4 13.1 10.6 10.0 8.8 6.6 3.5 2.4 -15.1 -15.9 -17.7 -18.4 -46.1 -243.3 112.6 24

Company Cobham Deutsche Post Indesit Volkswagen Siemens Unilever Virgin Group Illy Cafe FedEx Boeing Berkshire Hathaway Mayo Clinic Lloyd's of London Statoil Ryanair BP Vestas HMV H&M La Caixa Danske Bank

Country

RepTrak速 Pulse 2013

Change in RepTrak速 Pulse (2007-2013)

United Kingdom Germany Italy Germany Germany United Kingdom United Kingdom Italy USA USA USA USA United Kingdom Norway Ireland United Kingdom Denmark United Kingdom Sweden Spain Denmark

80.6 71.7 78.5 83.9 79.1 71.2 74.7 79.4 76.4 69.9 70.1 80.8 66.2 73.5 39.0 52.4 65.0 56.2 56.4 42.4 35.8

12.3 9.2 8.3 7.5 7.5 0.7 1.0 0.3 0.2 0.1 0.0 0.0 0.1 -0.6 -4.1 -4.1 -10.8 -10.9 -11.8 -15.8 -17.8 25

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“Stakeholder interests, risks, and opportunities are deeply integrated in every business decision that we take.

Helge Lund, CEO

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“We missed the issue of obesity and the value of healthy and nutritional food. We were behind, while Nestlé was riding that wave. Not being in tune with society, with the benefit of hindsight, can cost you dearly.”

- Paul Polman, CEO

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Increase tourism

Attract Investment

Increase exports

Attract talent

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1%

FULL INTEGRATION INTO LONG-TERM STRATEGY & INVESTMENTS

13% 33% 15%

38%

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Gracias!

Argentina-Australia-Belgium-Brazil-Canada-Chile-China-Colombia-Denmark-Finland-France-Germany-Greece-India Ireland-Italy-Japan-Mexico-Netherlands-Norway-Panama-Peru-Portugal-Puerto Rico-Russia-South Africa-Spain-Sweden Switzerland-Turkey-Ukraine-United Arab Emirates-United Kingdom-United Š 2013States Reputation Institute, all rights reserved.

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18th Annual International Conference on Corporate Reputation, Brand, Identity and Competitveness     

Oportunities to network with cross-functional practitioners across a diverse range of industries Knowledge sharing on reputation-based best practices CEO speakers and CMO, CCO cohorts Academic Scholars & Reputation Experts Executive Only Member Summit Sessions 34