CEOs Receive Nearly 60 Percent of the Blame When Company Reputation Is Damaged

CEO RESPONSIBILITY FOR REPUTATION LOSS

	Total  Global	North  America	Europe	Asia
Average percent of blame attributed to CEO after crisis  strikes	58%	60%	57%	57%

Source: Weber Shandwick Safeguarding Reputation™ survey conducted with KRC Research.
Note: Results for Brazilian executives are included in the total.

Weber Shandwick’s survey also identified the key triggers of reputation failure that if caught early could reduce the chances and extent of CEO blame.  A majority of executives surveyed cite major triggers of reputation failure as financial irregularity (72 percent), unethical behavior (68 percent) and executive misconduct (64 percent).  Other frequently mentioned strikes against reputation revealed by the survey are security breaches (62 percent), environmental violations (60 percent), and health and safety product recalls (60 percent).  Despite widespread media coverage, and in some cases severe consequences for any wrongdoing, key triggers continue unabated – alleged stock-option backdating, corrupt governance, consumer information security, pipeline leaks and salmonella or e-coli scares, among others.

“Interestingly, many of the reasons causing companies to suffer reputation loss are self-inflicted.  Financial irregularities, unethical behavior and executive misconduct are all issues that could be prevented if companies had better controls in place,” said Weber Shandwick’s Chief Reputation Strategist Dr. Leslie Gaines-Ross.  “As more reputations deteriorate worldwide, companies need better reputation radar systems to identify and track approaching reputation threats – 33 percent of the Global Fortune 500 experienced reputation deterioration in their ‘most admired’ status in 2005.”
Also noteworthy is that today, global business executives underestimate the severity of a number of significant reputation threats.  Approximately one-third of survey respondents place CEO compensation, online attacks or rumors and top executive departures low on the list of triggers that tarnish reputations.  Companies continue to overlook how damaging threats from online activists and pressure groups can be if they are not prepared to respond quickly and decisively.  The survey also underscores how executives around the world might be underestimating the negative impact of executive turnover.

Factors That Can Significantly Damage Reputation
% Always/Usually

	Total  Global	North  America	Europe	Asia
Financial irregularities	72%	74%	70%	71%
Unethical behavior	68	66	69	61
Executive misconduct	64	59	65	56
Security breaches such as loss of confidential information	62	60	60	60
Environmental violations	60	60	59	55
Product recall based on health and safety issues	60	47	64	58
Regulatory non-compliance	59	49	62	53
Factory breakdowns or explosions resulting in injuries	59	56	57	61
Labor strikes or unrest	40	31	42	39
Ongoing protests by special interest groups or NGOs*	38	29	41	34
Risky supply chain partners	38	30	40	33
Support of unpopular public policy position	38	31	39	34
Public controversies over high CEO compensation	36	29	36	40
Online attacks or rumors	25	16	28	27
Top executive departures	17	9	19	12

Source: Weber Shandwick Safeguarding Reputation™ survey conducted with KRC Research.
Note: Results for Brazilian executives are included in the total.
* Non-governmental organizations

Regional Differences
Overall, European executives appear more sensitive to reputation threats than their North American and Asian executive peers (most frequently respond “always or usually” to factors that can significantly damage corporate reputation).  Regardless of region, executives consider financial wrongdoing and unethical behavior the most significant threats to reputation.  Compared to their counterparts in other regions, however, North American executives are more sensitive to environmental issues, Europeans to health and safety product recalls and regulatory non-compliance, and Asians to factory breakdowns or explosions.

Regional Top Five Factors That Can Significantly Damage Reputation
% Always/Usually

North America	Europe	Asia
Financial irregularities	Financial irregularities	Financial irregularities
Unethical behavior	Unethical behavior	Unethical behavior
Security breaches	Executive misconduct	Factory breakdowns or explosions  resulting in injuries
Environmental violations	Health and safety issue product  recalls	Security breaches
Executive misconduct	Regulatory non-compliance	Health and safety issue product  recalls

Source: Weber Shandwick Safeguarding Reputation™ survey conducted with KRC Research.

“Companies need to put safeguards in place to protect their reputations,” added Weber Shandwick President Andy Polansky.  “Our groundbreaking research on how companies can safeguard and repair their reputation is the foundation for Weber Shandwick’s ongoing reputation management services for clients around the world.  We can help guide companies looking to identify the early warning signs of reputation failure and take the right steps to reputation recovery.”

Safeguarding Reputation™
Safeguarding Reputation was conducted by Weber Shandwick in partnership with KRC Research among 950 global business executives in 11 countries spanning North America, Europe and Asia. Brazil was the only Latin American country participating in the survey.  All interviews were conducted by telephone between July 20 and August 8, 2006.  The sampling error for the total sample is +/- 3.2 percentage points.