Wednesday, May 15, 2013

Is Reputation the responsibility of the Board

BoD takes significant responsibilities to protect and nurture the reputation of a company.

The organizations across the globe face more pressure and ambiguity these days, as media continue to report " reputational ‘surprises’from some prestigious companies, and more organizations work hard to sustain their brand, but how to manage organizational reputation, and is reputation the responsibility of Board?

1. Reputation is Business Brand

Reputation management can be at least classified into Culture/Brand Management, Knowledge Management, Crisis and Risk Management

  • Brand Management: A typical brand value-chain includes such activities as Identifying what the brand stands for, how the company wants its stakeholders to see and perceive the brand name/the connotation it wants its stakeholders to associate to, and the primary activities through which the brand name gets communicated. A company's brand is one of its most valuable assets, and like any asset, it is the responsibility of the board to protect and nurture it. "reputation" is as the same as "brand" in this context --what's your brand reflecting to, the value, business purpose. The organization's Brand Equity is the key asset of concern when it comes to the question of reputational risk 
  • Culture Management: Reputation is part of the business brand, and the business brand usually also reflects the enterprise culture --How the group of people thinks and does things, the collective behavior, and the spirit of the organization comes from the top, hence, the board should be accountable to set a good tone on business reputation.      
  • Knowledge Management, It’s extremely important in digital era, as well-educated customers & consumers need to learn more about your organization before purchasing your products, but unlike your product & service, knowledge is more intangible, it's accumulated with time & growth, what can others learn from your business, your expertise, your collective wisdom. KM becomes the pillar in building up strong brand and reputation. 
  • Risk/Crisis Management: Some say, reputational risk is not a risk but a consequence of the public and media reacting to all the other risks. When someone talks about managing reputational risk, they are most likely talking about the post-risk processes of damage control and remedial steps involving corporate communication and public relations programs. And generic risk management includes how organizations manage economic, legal, political, social and human risks, how to build up its resilience muscle.   

2. Board Governance

As a corporate brand, culture, knowledge, and risk management are all boardroom concerns, and it is "the responsibility of the board to protect and nurture reputation." But how can you hit a target you can't see!! Such intangible assets as business culture, time resources, and knowledge capital don't appear on the radar screen of most BoDs and if they did they are kind of elusive targets. So, in order to identify the sources of reputational risk and address them, the BoD must institutionalize a robust governance model, to guide and govern management's decisions and behaviors along the brand's value chain and throughout its entire life-cycle.

1) The first step is to carefully select the BoD to comprise of experienced, knowledgeable/insightful, cognizant, independent, and reputable experts.

2) The following step is building a governance model. Building models is crucial for setting forth governance procedures and processes for the BoD.

3) The implementation of the governance process should be a "lead from behind" one,: Whereby the BoD assumes the dual role of guidance and governance, whilst leaving the day-to-day steering process in the hands of the C-level executives

4) "Trust but monitor": ACTIVELY monitoring of management for transparency and analysis of potential long-term consequences must become the agenda of this internet soon whistleblower era.

5) Equipped with Effective Tools: In all fairness, even with all the awareness, motivation and volition in the world, directors lack the mechanisms/tools to fully exercise their duty of care when it comes to many off-the-balance-sheet assets. Thus, effective tools will enable BoD guide and govern better. 

6) Once those activities are identified, the BoD needs to ensure that management has put in place adequate measures to perform them. To give just one example, the integrity of the company's financial statements is key to maintain a reputation for integrity and credibility with the investor's community. Accordingly, The BoD must see, through the governance system, that anything and everything that has to do with the preparation and communication of the financial statements will preserve the company's reputation and further nurture it... 

3.  The BoD Selection

In the end, it's not about models and theories. It's about people being willing to be held accountable, who have the gift of self-reflection, common decency, and common sense. However, many BoDs are undereducated about their role and responsibility while the business change is accelerated across global scope and knowledge life cycle is shortened.

It is time to revisit the importance of active questioning, and monitoring members of the BoD. If the composition of a Board must change, so be it, but the agenda is the long-term stewardship of reputation. The criteria to select BoD may include experience in the industrial ecosystem, high ethical standards, independent thinking capability, communication objectivity and the ability to analyze data and come to a well-reasoned decision. 

  • Better Raw Material for Board: Some argue, what businesses need are not models or forms to guide better Board governance, what is needed is better raw material. Organizations need to hunt for qualified, independent Board members who are aware of their responsibilities and duty to the shareholders, all the forms and legislation in the world will not lead to better decision making.  
  • “Hybrid’ Board: Yes, the selection/deselection of board members is crucial.  What the board truly care about is business growth & reputation, process/cost structure optimization, talent management and GRC discipline, the effective board needs to well blend heterogeneous leadership talents compliment character, skills, cognitive intelligence and diversified background, in order to bring up innovative thinking, wisdom, global mindset and constructive criticism to avoid blind spot in practicing governance with transparency and effectiveness. 
  • New Blood than Old Circle: The BoD agenda should be good for management as well as reputation. Getting some new blood into the C-Suite who are actually interested in active participation can only help. Either BoD, senior leadership team or all level of management agree that the standards companies use to choose Board members should be revisited in the environment in which we live - away from cronyism to objective criteria which might lead to choosing someone other than the old circle.     
Every staff has responsibility for corporate reputation; as we should realize that reputation risk starts with the do's and don'ts of a single person in a certain context and in a certain situation. BoD takes significant responsibilities to protect and nurture the reputation of a company, continue to reform governance practice and continue to raise the accountability of board toward business reputation.


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