The importance of reputation in business
This year brought a raft of crises that destroyed personal and corporate reputations. These crises and shattered reputations had a direct and negative impact on share prices, company profitability and business operations.
The personal reputations of senior leadership teams within those companies - and sometimes the health of those individuals - also suffered. Because increasingly, when a crisis emerges, senior leadership figures are facing blame, which may explain the rapid rise in the number of risk executives on company pay-rolls.
We no longer do business in an environment where brands bear the brunt of reputational fall-out. This was dramatically illustrated recently when Oliver Schmidt, a US-based Volkswagen executive, was sentenced to seven years in prison and fined $400,000 for his role in a diesel emissions crisis that is estimated to have cost the German car manufacturer around $30bn.
Volkswagen had already pleaded guilty to charges that it installed secret software in its cars to elude emissions tests, to mislead US regulators and to violate clean-air laws. But US District Judge Sean Cox, who sentenced and fined Schmidt, turned a blow torch on the corporate culture that allowed Schmidt and his colleagues to flourish. He described Schmidt as a ‘key conspirator’ in a scheme to defraud the United States and someone who saw this cover-up as an ‘opportunity to shine…and climb the corporate ladder at VW’.
Schmidt apologised for making ‘bad decisions’ and will be deported after his stint in jail. And there will be more cases to come as a series of current and former VW executives face similar offences.
The Schmidt case clearly links brand reputation with personal reputation in a crisis.
But recent research papers show an alarming disparity in what boards and executives say, and what they do, when it comes to preparing for a crisis.
SenateSHJ’s report - Reputation Reality: Trans-Tasman Perspectives on Reputation and Crisis, surveyed 150 business and corporate communication executives across Australia and New Zealand. It found that while 98% of executives said corporate reputation was a primary asset, only half had a budget line item for reputation management, and only half were planning to invest in crisis simulation training.
This echoes the findings of the Deloitte Crisis of Confidence report that surveyed 300 board directors across the globe and found only 49% of companies have playbooks for likely crisis scenarios and only 32 per cent engage in crisis simulations or training. Only half of those surveyed said board members and management have specific discussions about crisis prevention.
My experience of dealing with corporate crises clearly illustrates that leadership in a crisis comes from senior management and, in some instances, the board. Good crisis management requires at least one or two executives and board members with crisis experience who can soundly navigate the storm - and emerge with the brand reputation, and their personal reputation, intact.
In the 21st century corporate world, these elements are unavoidably intertwined.
As Oliver Schmidt would attest, no longer can executives hide behind the brand during a crisis. It’s time to clean up those smouldering issues...before they turn into a crisis on a Volkswagen-scale.
Craig Badings, Partner, SenateSHJ
G7 Summit guide: What it is and what leaders hope to achieve
Unless you’ve had your head buried in the sand, you’ll have seen the term ‘G7’ plastered all over the Internet this week. We’re going to give you the skinny on exactly what the G7 is and what its purpose on this planet is ─ and whether it’s a good or a bad collaboration.
Who are the G7?
The Group of Seven, or ‘G7’, may sound like a collective of pirate lords from a certain Disney smash-hit, but in reality, it’s a group of the world’s seven largest “advanced” economies ─ the powerhouses of the world, if you like.
The merry band comprises:
- The United Kingdom
- The United States
Historically, Russia was a member of the then-called ‘G8’ but found itself excluded after their ever-so-slightly illegal takeover of Crimea back in 2014.
Since 1977, the European Union has also been involved in some capacity with the G7 Summit. The Union is not recognised as an official member, but gradually, as with all Europe-linked affairs, the Union has integrated itself into the conversation and is now included in all political discussions on the annual summit agenda.
When was the ‘G’ formed?
Back in 1975, when the world was reeling from its very first oil shock and the subsequent financial fallout that came with it, the heads of state and government from six of the leading industrial countries had a face-to-face meeting at the Chateau de Rambouillet to discuss the global economy, its trajectory, and what they could do to address the economic turmoil that reared its ugly head throughout the 70s.
Why does the G7 exist?
At this very first summit ─ the ‘G6’ summit ─, the leaders adopted a 15-point communiqué, the Declaration of Rambouillet, and agreed to continuously meet once a year moving forward to address the problems of the day, with a rotating Presidency. One year later, Canada was welcomed into the fold, and the ‘G6’ became seven and has remained so ever since ─ Russia’s inclusion and exclusion not counted.
The group, as previously mentioned, was born in the looming shadow of a financial crisis, but its purpose is more significant than just economics. When leaders from the group meet, they discuss and exchange ideas on a broad range of issues, including injustice around the world, geopolitical matters, security, and sustainability.
It’s worth noting that, while the G7 may be made up of mighty nations, the bloc is an informal one. So, although it is considered an important annual event, declarations made during the summit are not legally binding. That said, they are still very influential and worth taking note of because it indicates the ambitions and outlines the initiatives of these particularly prominent leading nations.
Where is the 2021 G7 summit?
This year, the summit will be held in the United Kingdom deep in the southwest of England, with Prime Minister Boris Johnson hosting his contemporaries in the quaint Cornish resort of Carbis Bay near St Ives in Cornwall.
What will be discussed this year?
After almost two years of remote communication, this will be the first in-person G7 summit since the novel Coronavirus first took hold of the globe, and Britain wants “leaders to seize the opportunity to build back better from coronavirus, uniting to make the future fairer, greener, and more prosperous.”
The three-day summit, running from Friday to Sunday, will see the seven leaders discussing a whole host of shared challenges, ranging from the pandemic and vaccine development and distribution to the ongoing global fight against climate change through the implementation of sustainable norms and values.
According to the UK government, the attendees will also be taking a look at “ensuring that people everywhere can benefit from open trade, technological change, and scientific discovery.”