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Reputation, Stock Price, and You: Why the Market Rewards Some Companies and Punishes Others

Book Description

"All of our working lives we have heard the mantra, 'a reputation lost is never regained.' Still, the firms we work for, admire and invest in seem to take costly reputation hits all too often. Everyone interested in managing, regulating or investing in public firms will find Nir Kossovsky's book a wonderful read through reputations won, lost and regained over the last 20 years. This is the first book which goes beyond platitudes to explain how to spot value destroying reputation risk and how to manage it or live with its consequences. Couldn't be more timely."

—Tom Skwarek, Managing Director|Structuring and Solutions Group, Unicredit Bank AG; previously Managing Director|Corporate Strategic Solutions, Swiss Re.

"There are fiduciary reasons why corporate directors would benefit from reading this book. There is also a personal benefit. The collapse of a company's reputation can stain the personal reputation of its directors."

—George Miles, Member of the Board of Directors, AIG, EQT, Harley Davidson, HFF, and Wesco.

"Nir Kossovsky has written a gripping tale, first educating the reader, by distinguishing between corporate branding and reputation, then alarming us with case histories of mismanagement of corporate reputational crises, and finally reassuring all with a unique solution, i.e. insuring against the risk of reputational loss."

—John H. Bennett, Partner, Global Brand Positioning, previously Chief Marketing Officer, Visa, Inc.

"While directors know reputation is important, it often is treated as a vague 'good' until something bad happens. Nir Kossovsky does a great job, with many examples, of connecting reputation to stock price and to behaviors, before and after crises. If you are a director, a senior manager, or a regulator, you should read this book and remember the lessons it offers. There is no office which will restore reputation, but careful planning and quick response, as Nir points out, can make a big difference."

—Herbert S. Winokur, Jr., former chairman on Enron's Board Finance Committee and a director of many for-profits and non-profits

A company that takes a hit to its reputation—BP after the Gulf oil spill, Barclays after fiddling LIBOR, News Corp after the phone hacking scandal—enters a world of grief: market value falls along with employee morale, regulatory scrutiny increases, and customers defect and boycott. Reputation, Stock Price, and You: Why the Market Rewards Some Companies and Punishes Others shows how a company's reputation is created and how reputational value impacts corporate P&L and the personal finances of its many stakeholders. Better yet, it shows what you can do to profit from, increase, protect, monitor, evaluate, restore, and even insure reputational value.

If your job, bonus, options, salary, or investments depend on the stock price of a public company—or on the sales, profitability, or value of a private company—you need to read this book to understand the concrete steps you can take to improve your firm's reputation, reduce risks to its finances and industry standing, and reap the highest reputational dividends. Using dozens of case studies, Reputation, Stock Price, and You:

  • Explains how stakeholders, and their expectations, both shape and are shaped by a company's reputation

  • Describes how reputations for ethics, innovation, governance, quality, safety, sustainability, and security are created and lost

  • Shows how you can influence the expectations and behaviors of stakeholders, which in turn can improve corporate finances, reduce operational risk, and increase stock price or market value

  • Provides sensitive tools for tracking and predicting stock price as a function of reputational value metrics

The majority of directors at U.S. public companies now count reputation as their firm's #1 concern, and with good reason. A firm with a superior reputation gains many benefits: Customers are more willing to pay higher prices, vendors and employees offer better terms for their services, creditors and equity investors offer better terms for capital, and regulators tend to be more forgiving. This book shows how to achieve and sustain a stellar reputation and how to convert it into its tangible form: reputational value.

What you'll learn

  • How stakeholder expectations for a company help shape a company's reputation

  • How actions taken by a company in managing ethics, innovation, governance, quality, safety, sustainability, and security shape stakeholder expectations

  • How a company's reputation affects stakeholder behavior

  • How corporate executives and directors have the unique opportunity to frame the entire reputation-forming process and build it into governance policies

  • Why professional marketing, and communications efforts play a relatively minor role in reputation formation

  • How the behavior of stakeholders collectively determine a company's stock price or market value

  • How to measure and improve your company's reputation and thus improve results in all areas

Who this book is for

Reputation, Stock Price and You is for senior executives and mid-level managers, directors, and market analysts, fund managers, and sophisticated individual investors.

Table of Contents

  1. Titlepage
  2. Dedication
  3. Contents
  4. About the Author
  5. About the Contributors
  6. Acknowledgments
  7. Part I: Précis
    1. Chapter 1: Avoiding Hara-Kiri
      1. Anatomy of a Reputational Crisis
      2. Organization of the Book
    2. Chapter 2: A $54 Billion Reputation
      1. Headline Risk: Reputation vs. Reality
      2. Reputationally Linked Process Failure
      3. Reputational Value Lost: Summary
      4. Retrospective
      5. Consider This
      6. By the Numbers
  8. Part II: Profit and Loss
    1. Chapter 3: Customers
      1. Safety
      2. Quality: Zale Corporation
      3. Innovation
      4. Guidance
      5. By the Numbers
    2. Chapter 4: Employees
      1. Ethics
      2. Innovation
      3. Quality: Domino Pizza Redux
      4. Guidance
      5. By the Numbers
    3. Chapter 5: Suppliers
      1. Reputation Risks in the Supply Chain
      2. Quality: McDonald’s and YUM!
      3. Safety: Coke and Pepsi
      4. Consider This
      5. Sustainability: Peet’s Coffee & Tea Inc.
      6. By the Numbers
    4. Chapter 6: Creditors
      1. Volkswagen AG
      2. Reputation Matters
      3. Security: The Johnson & Johnson Case
      4. Guidance
      5. Consider This
      6. By the Numbers
  9. Part III: Controls
    1. Chapter 7: Equity Investors
      1. Facebook Inc.
      2. WPP plc
      3. Guidance
      4. Consider This
      5. By the Numbers
    2. Chapter 8: Boards of Directors
      1. Say-on-Pay: Compensation Committee
      2. Asset Protection
      3. Business Strategy
      4. Guidance
      5. By the Numbers
    3. Chapter 9: Analysts
      1. Reputation Value
      2. Other Reputation Metrics
      3. Consider This
      4. By the Numbers
    4. Chapter 10: Regulators
      1. Rewards and Enhanced Reputations
      2. Punishments and Diminished Reputations
      3. Guidance
      4. Consider This
      5. By the Numbers
  10. Part IV: Perspectives
    1. Chapter 11: Cultural Context
      1. Society, Expectations, and Reputation
      2. Guidance
      3. Consider This
    2. Chapter 12: Metrics
      1. Metrics: Qualitative Edition
      2. Metrics: Quantitative Edition
      3. Guidance
      4. Consider This
      5. By the Numbers
    3. Chapter 13: Consider These
      1. Watch What They Do
      2. Final Guidance
      3. By the Numbers—Highlights
  11. Index