Brand Reputation Outranks Financial Performance as Measure of Success | AccountingWEB

Brand Reputation Outranks Financial Performance as Measure of Success

Corporate reputation is a more important measure of success than stock market performance, profitability, and return on investment, according to a survey of some of the world's leading CEOs and organization leaders. Only the quality of products and services edged out reputation as the leading measure of corporate success.

The World Economic Forum sent a written survey in December to all 1,500 delegates to the 34th Forum currently underway in Davos, Switzerland. About 10 percent of the delegates (132 respondents), whose membership is primarily drawn from the world's 1,000 leading global companies, responded. This "Voice of the Leaders Survey" was released today by the WEF and Fleishman-Hillard International Communications. It reveals fresh insights into the issues that
concern top business leaders.

"The reputation of a company and its products used to be regarded as an intangible asset that was very hard to quantify," said John Graham, Fleishman-Hillard's chairman and chief executive officer. "Now it is clear that reputation is a vital component of a company's value and it is becoming a key measure of a company's performance." Three-fifths (59 percent) of the survey respondents estimated that corporate brand or reputation represents more than 40 percent of a company's market capitalization. And more than 77 percent believe that reputation has become more important over the last two years.

"Clearly, the recent wave of corporate scandals has made CEOs reappraise the importance they attach to their corporate brand," added Graham. "One of the results of this reappraisal is that business leaders no longer regard traditional financial measures as the ultimate indicator of a company's success."

Ninety-two percent of corporate survey respondents (103 leaders) perceive reputation as important to their corporate strategy and 24 percent rated corporate reputation as the most important measure of success. That answer was followed by profitability (17 percent), return on investment (13 percent), sustainability (6 percent), and stock market performance (5 percent). Only quality of products or services (27 percent) was named by survey respondents more often than corporate reputation as the leading success measure.

Among the survey's other findings:

  • By a ratio of more than two-to-one, members believe the next generation is more likely to live in a prosperous (59 percent) rather than safe (27 percent) world. World leaders appear to be somewhat more pessimistic toward world safety (61 percent think the world will be less safe for the next generation) than citizens at large (only 48 percent feel the same).

  • While most members (90 percent) associate either high or moderate risk with the current geopolitical situation, most (82 percent) are more optimistic now than they were a year ago regarding the global economy.

  • Members tend to believe the outlook for their personal security looks better now (65 percent assign positive ratings) than in 10 years' time(only 41 percent assign positive ratings).

  • Among corporate members, almost two-fifths (38 percent) rated
    economics/markets as the leading threat to security and integrity
    of the corporate brand, suggesting that short-term views may be
    distorting accurate and efficient valuation of companies.

The sampling error in the survey is plus or minus five to nine percentage points at the 95 percent confidence level.

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