By Dominic Cockram
What is it that companies fear most when a crisis hits? Or to put it another way, what do companies value most as a core asset?
Crises present a unique opportunity for corporate reputations to be bolstered or battered, and with the vox populi stronger than ever, protecting reputation rightly finds itself among the top priorities of any corporate crisis response team.
It is estimated that reputation makes up 26% of most companies’ market cap, while it is claimed that Apple’s corporate reputation is worth a staggering 58% of its shareholder value. In some cases, reputation is a company’s single most valuable asset, and is often the most vulnerable one in times of crisis, with the most long-lasting effects.
Take the example of Barclays’ recent crisis brought on by revelations of rate-rigging of LIBOR. Many industry insiders, and indeed the board at Barclays itself, saw CEO Bob Diamond as an experienced leader, capable of steering Barclay’s through its latest crisis and we were assured by all at Barclays that he had no plans to resign. However, the baying for blood by international media and influential political figures, and the growing tide of public animosity meant that “the best way” (Diamond’s own words) to protect the investment bank’s reputation was for the vilified CEO to finally stand down. Less than 24 hours before, chairman Marcus Agius had announced his resignation for the same reasons:
Barclays prioritised reputation over continuity, and concluded that it will be their reputation will be the single biggest determinant of the bank’s long-term prospects. The time taken to act on this means that they have been forced to play a defensive, reactionary game to protect their brand against the media antagonism and public anger. Barclays have finally accepted the potential of the court of popular opinion to swing the fortunes of big business. While much of the talk about switching bank accounts may prove to be empty threats (a Guardian poll found 72% of readers had been persuaded to change banks due to recent events – 30th June), there has been a significant increase in current accounts at rival ‘ethical’ banks since the crisis hit.
With more foresight (this had been a smouldering crisis since 2008!) and crisis planning, Barclays may have been better able to safeguard their reputation from the worst of the storm.