CEOs say reputation ranks over stock price

By T.K.MALOY, UPI Deputy Business Editor   |   Jan. 22, 2004 at 5:31 PM
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WASHINGTON, Jan. 22 (UPI) -- In a possible sea-change of corporate culture after the go-go 1990s and more recent string of company scandals ranging from Enron to WorldCom, a poll of top CEOs gathering this week at the famous World Economic Forum said that corporate reputation is a more important measure of success than stock market performance, profitability and return on investment.

Most important of all, CEOs said, was the quality of their products and services.

The 34th annual meeting of the World Economic Forum being held in Davos, Switzerland this week includes among its 1,500 participants around 1,000 chief exective officers who hail from leading global companies. In a "Voice of the Leaders Survey" released Thursday at Davos over 100 of these participating CEOs commented on barometers of business success.

"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 of the survey respondents estimated that corporate brand or reputation represents more than 40 percent of a company's market capitalization. And 77 percent of those polled said they 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 out of the 132 responding) perceive reputation as an important part of 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).

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 versus a safe world. World leaders appear to be somewhat more pessimistic toward world safety, with 61 percent saying the world will be less safe for the next generation.

While 90 percent of those polled 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. Also, those polled tend to believe the outlook for their personal security looks better now -- with 65 percent assigning positive ratings -- than in 10 years' time (41 percent.)

Thursday's release of CEO opinions follows a separate survey released last week carried out for the World Economic Forum by Gallup International in advance of the Forum's Davos meeting. The results of the "Voice of the People" survey were based on almost 43,000 interviews from 51 countries. The questions concerned different aspects of prosperity and security.

Among the findings: half of those interviewed (48 percent) think the next generation will live in a less safe world. In Western Europe this figure rises to almost two-thirds (64 percent). But in West Asia (Afghanistan, India and Pakistan) -- three countries that Davos official noted have turbulent backgrounds -- people are more optimistic about the next generation and half those questioned feel the world will be a safer place for them.

The survey also found that people feel their country's economic position is worse now than it was 10 years ago.

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