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CEO REPUTATION STUDY
BELGIUM 2003
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CEO REPUTATION STUDY - BELGIUM 2003
Introduction Introduction
It has long been understood that the market value of a Company is not simply a result of it’s current financial performance but extends to include many intangibles which indicate the current and future ‘health’ of the organisation. These go to make up the reputation of the Company, and it is these together with current financial performance which drive stock values. It has long been contended by the Public Relations and Communications counselling firm Burson-Marsteller that one of the most important of these factors is the reputation of the CEO him or herself. CEO reputation, it is contended, has a major influence on the overall reputation of the Company and this in turn drives its standing in the market. This theory has been tested many times in markets across the world including USA, Australia, Denmark, Germany, UK, Norway, Mexico, Sweden, Switzerland, and more recently Netherlands and Belgium. In every case research has shown that CEO reputation is a major factor in determining Company reputation. What then is the situation in Belgium? Burson-Marsteller decided to find out and asked their WPP sister company Research International to conduct the research. Though this survey has been carried out in many different countries each was adapted to local market conditions so that, though themes are common allowing ready comparison, the survey methodology was designed to cover local issues. In Belgium, for instance, we firstly interviewed CEOs from the companies listed in the BEL20. We then analysed their views and constructed a questionnaire which was completed by two distinct interest groups. These we defined as Current Stakeholders ie. those who have a direct influence on the market standing of a company including Financial Analysts, Journalists, MPs, Government Employees, Politicians, and Professors/University lecturers, and Future Stakeholders ie. students of business and economics in their last year at University. These two groups form the basis of the survey.
Brussels, 20 November 2003 Burson-Marsteller/Research International
Contact persons: Aafke Huininga, Burson-Marsteller Tel: +32 2 743 66 11 Maureen van Wijk, Research International Tel: +32 2 663 18 11
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Sample Description Sample Description
In September 2003, Burson-Marsteller realised 5 face-to-face individual interviews with CEO’s of the group of BEL20 companies. All of them represented international operating companies, realising a substantial part of their turnover in foreign markets. End of October/first half of November 2003, Research International interviewed Current and Future Stakeholders. The interviews were done via the telephone (computer aided telephonic interviewing) for the Current Stakeholders and face to face for the Future Stakeholders.
CURRENT STAKEHOLDERS The sample for the Current Stakeholders is based on listings supplied by BursonMarsteller of all major Stakeholders in Belgium (Business Journalists, Analysts, Government employees and University teachers). The listings included N=152 contacts. All contacts received a warm up letter explaining the purpose of the study. They received a phone call a few days later. The questionnaire was approximately 20 minutes long. The achieved sample size for the Current Stakeholders is N=53 (among which 23 Journalists, 21 Financial Analysts). Belgium being a small country, the total number of Stakeholders is of course relatively limited. The achieved sample size, as a consequence, is small, meaning significant differences can not be indicated. However, a significant proportion of all Stakeholders in Belgium are interviewed (1/3 of the total database).
FUTURE STAKEHOLDERS As for the Future Stakeholders, we opted for face-to-face interviews among last year’s business students (23 Business, 13 Economy, 13 Marketing from universities in Antwerp, Brussels and Liège). The questionnaire used was identical. Overall, we have 44% French speaking respondents and 56% Dutch speaking respondents in our total sample of N=99 interviews.
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CEO REPUTATION STUDY - BELGIUM 2003
Does CEO Reputation Matter? Does CEO Reputation Matter?
Our survey suggests that it does. For instance 58% of our sample said that the CEO’s reputation would to a very great, or great extent influence their decision to buy the Company’s stock, and 62% of Analysts said that it would cause them to recommend stock. Also 70% of Journalists said that it would help to maintain confidence in the Company when the share price is lagging. On the other hand the CEO is not seen to be a great salesman for the Company’s brands since very few of our sample would change their attitude towards them as a result of his or her reputation. Furthermore when asked what % of the Company’s reputation was accounted for by that of the CEO, the sample as a whole said 48%. This % is comparable to the UK (49%), the US (48%), Australia (52%) and Netherlands (42%) but lower than Germany (64%). 48% of the overall reputation of a company is attributable to the reputation of its CEO
37% think that the percentage of the overall reputation of a company to its CEO has grown
In your opinion, about what percentage of a company’s overall reputation is attributable to the reputation of its CEO?
In your opinion, during the last 6 months, the percentage of a company’s overall reputation attributable to the reputation of its CEO?
Interestingly, Journalists claimed 57%, and Analysts, who take a more pragmatic view claimed 40% . Also, this is a matter of growing interest since over half of the Journalists and 37% of the sample as a whole thought that this percentage has risen in the past six months. This view is shared by the Future Stakeholders; nearly three times as many of whom (30% compared to 11%) thought CEO reputation had grown as a percentage of Company reputation in the past six months. Overall therefore we think it is reasonable to conclude that CEO reputation does matter in Belgium and is an important factor in determining the overall reputation that a company enjoys.
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What Do the CEOs Think? What Do the CEOs Think?
The CEO's believe that their reputation as a good business leader is mostly relevant within their own companies and in the home market. It is remarkably important for the Belgian CEO to have a reputation as a strong leader internally. Furthermore, they consider it a fact of life to be much more known here in Belgium and not nearly enough in foreign markets where they also operate and sometimes realise most of the company or group turn-over. Also, they are of the opinion that mostly the investors are interested in a strong reputation of the CEO. Even when foreign investment has increased over the years, for BEL20 companies the Belgian investor community is still seen as the group of key stakeholders. CEO’s acknowledge the need to establish a stronger presence in the foreign markets they operate in. According to the CEO’s, there are 4 main business issues and critical success factors in the context of the reputation of the CEO: Realise growth in a difficult economic environment Manage Reputation risks Be an Ambassador of the company Managing typical Belgian issues in the context of doing business internationally and maintaining visibility of foreign market More specifically, in order to be able to realise growth in a difficult economic environment, reputation was considered a very important element of the value of the company – more so after scandals that have also affected Belgian companies! Other elements mentioned in this context were: Increase the visibility of the company, mostly in foreign markets Maintain the values of the company and the ethical standards Have strategic vision and the ability to communicate this The need to take care of our human capital, our people (attract and grow talent) The need to safeguard the margins in order to be able to invest in know how and innovation
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In order to manage reputation risks, the CEO mentioned issues like: Business deals that may bring along reputation risks – evaluation is needed and some deals should not be made if risk is considered to be high Industry Codes of Conduct which are seen as very important to manage risk factors Further improving Corporate Governance Failing to deliver on promise The fact having ‘No Reputation’ is not good either – lack of visibility or presence in the market place when you want to achieve business deals or attract capital Being an Ambassador of the company (“Some may not like it, but it is probably the main role”) is important for the reputation. For business reasons the CEO must focus on visibility, talking to media, investors and authorities. This allows the possibility to identify the company with a face and is important for the reputation of the company. Fourthly managing typical Belgian issues in the context of doing business internationally and maintaining visibility on foreign markets is seen as crucial and for different reasons: Belgium is a small player in global marketplace and therefore often under valuated The political environment is at times difficult (Belgian foreign policy) The economic situation in Belgium is not good and labour is expensive here In terms of personal reputation, the CEO’s indicated the following important characteristics (not rating in importance): Be trustworthy Ethical behaviour (stick to the company values and demonstrate integrity) Demonstrate where you believe in Create an atmosphere of stability in the company Be a role model Be a good communicator Be a good crisis manager
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What Drives Corporate Reputation? What Drives Corporate Reputation?
In order to determine the main elements of a Company’s reputation we asked our sample to rate the characteristics which had been previously been identified by the CEOs we interviewed. We found the following to be the main drivers: High quality Goods and Services Credibility/honesty with stakeholders The ability to innovate and adapt to new circumstances Community awareness Financial performance Ability to attract/retain talented people Importance of characteristics on a company’s reputation - TOTAL How important are each of the folloxing characteristics to a company’s overall reputation today?
Less important was the Company’s international dimension, and being an industry leader. It seems to be the internally focussed elements which are important, i.e. those which a Chief Executive can exert direct influence over in day to day management. These results are very consistent with these seen in other countries suggesting that these are universal factors which as a group form important hygiene factors that determine Company reputation. Interestingly in Belgium the ability to innovate and deal with change was rated higher than in the USA reflecting the dynamic conditions of the local market.
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What Drives CEO Reputation? What Drives CEO Reputation?
There were three main elements which were thought to drive CEO reputation, the single most important of which amongst Current Stakeholders was Credibility. This was followed by communication of a clear vision of company direction and the ability to attract and retain high quality people. Future Stakeholders agreed that Credibility was the most important element but attached more importance to managing a crisis effectively, and caring about customers. These results line up closely with what was found in the USA suggesting that Belgian corporate culture is closely aligned to that of the US. We notice that in the Netherlands credibility was also the number one driver, and the second factor was good crisis management. Importance of characteristics on a CEO’s reputation (1) How important are each of the folloxing characteristics to a CEO’s overall reputation today?
The important drivers for each group were as follows: Current Stakeholders
Future Stakeholders
Is believable Communicates clear vision Attracts/Keeps quality people Executes well strategic vision
Is believable Manages well in a downturn Understands global markets Cares about Customers
Interestingly neither group thought that being seen as an ‘authority’ in the company or showing personal emotions were of relative importance.
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How Long Does a CEO Have? How Long Does a CEO Have?
We asked how long would be regarded as a reasonable time for the CEO to accomplish various goals. 80% believed that the most important year one goal would be to win the support of the employees, closely followed by the need to develop a strategic vision. On the other hand it was not considered reasonable to expect the CEO to be able to turn around an ailing Company in the first year. The emphasis is clearly on dealing with internal issues first so as to put the Company into a position of being able to compete more effectively. This is the case for both Current and Future Stakeholders and is also consistent with the findings from the CEO-interviews. 80% believe that CEO should win the support of his employees within less than one year For each of the following, please indicate what you believe is a reasonable amount of time for a nec CEO to accomplish these goals.
However, though stakeholders are prepared to be tolerant in the early stages of a CEO’s new assignment they do not want to wait too long for financial improvement to follow. When asked how many consecutive quarters of poor earnings a CEO could weather the average was just over 5. Interestingly Existing Stakeholders were prepared to be more tolerant, and perhaps more realistic than Future Shareholders allowing just over 6 quarters to 4.5 for Future Stakeholders. In either event the message is clear. A new CEO has about 18 months to show tangible results from his/her efforts before stakeholders become restless. An international comparison of these results suggests that this time span varies little from country to country.
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Failure factors Failure factors
We asked which factors were thought to contribute most to lack of success amongst CEOs. The biggest single factor, particularly amongst existing Stakeholders, was thought to be loss of credibility. This was followed by lack of strategic vision, and only then by poor results/earnings. So the seeds of failure could have already set in before being apparent through the financial performance. Clearly this is a factor watched carefully by existing Stakeholders. In contrast less importance is given to factors such as the inability to form alliances/partnerships, or the difficulties of following an outstanding CEO. This is very much in line with other countries.
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CEO REPUTATION STUDY - BELGIUM 2003 10
People People
We also asked our sample to comment on the overall reputation of the BEL20 companies, other important domestic companies, and a few International Companies on the Belgian market without a BEL listing. In addition we asked them to rate the reputation of the CEOs of these companies, and the data for that is shown below: Comparison company vs. CEO - Bel 20 - Mean TOTAL
Al m an ij Co nf ini m m o
UC B
Di Te et sse er en nd er lo Ch em Om ie eg aP ha rm a
Ba Br rco ux ell es La mb ert
M ob ist ar
Gr ou pe
KB C
Fo rti s
Um ico re Ag fa -G ev ae rt
So lva y Be ka er tN V Ele ctr ab el De xia Be lgi um
De lha ize
Using a scale from 1 to 10, please circle the number that best indicates your overall impression of each company/CEO listed below.
Co lru yt Int er br ew
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This comparison is interesting in that it shows that the broad trend of individual CEO reputation roughly tracks that of the Companies themselves, ie the lower the CEO ranking the lower the Company reputation. There are a number of interesting exceptions to this, for instance Interbrew, Electrabel, and Fortis amongst the BEL20 companies, and most notably SNCB/NMBS amongst the Other Companies. All of these differences can be explained by particular circumstances – in Interbrew’s case the arrival of a new CEO, and SNCB/NMBS a high profile appointment to a long standing public utility. It further suggests that these findings, though applicable in general sense, should be applied carefully in individual instances. The market is dynamic and personnel changes are common. Two further observations. The first is the relatively high level of Don’t Knows recorded when asked to rate individuals. Although this is less surprising amongst Future Stakeholders it was also notable amongst Analysts and Journalists, who, it is assumed, declined to give a view in certain cases. The second is the fact that despite negative publicity for recent announcements suffered by the Ford Corporation which clearly affected its corporate reputation, the reputation of the CEO, particularly amongst Analysts, held up rather well. It suggests that whilst Corporate and CEO reputations are closely linked, they are not always closely aligned.
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