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Tuesday
Apr162013

When Share Price Puts a Value on Brand Reputation

Share price might not be everything – but for many organizations, it's far ahead of whatever is coming in second. Yet research across American companies shows many decision-makers don't seem to be focused on branding issues and threats and the impact those threats can have on reputation and share value.

Polling conducted with more than 1,100 executives around the USA by Deloitte revealed that a bare 24% of the companies formally measure and report on brand value. Moreover, fewer than 22% thought it was likely that negative information about their brand would show up on social media such as Twitter, Facebook or YouTube in the coming year. (Some hope! Just ask the nice folks at Domino’s Pizza, or FedEx or Lotus or Comcast or any of the others who feature on the list of social media brand disasters)

A study of corporate crises in South Africa* reinforced the impact of a crisis on share price and reputation. It found that the greater the speed and number of positive steps taken in the two weeks after a crisis, the less the company share price fell. It also found that the more the company share price increased six months after the crisis, the greater the perception of its corporate reputation and brand strength.

Cause and effect is sometimes hard to assess when it comes to the share market, but the cost of mismanagement can be brutal. For example, in 2011 Google CEO Larry Page was expected to explain to an analyst's conference why quarterly revenue was well under forecast. Instead he spoke less than 400 words of general optimism, and then signed off.  Wall Street hammered the stock, wiping $15 billion USD off the value of Google in a single day. 

Plenty of other high profile company brands have also suffered the awful impact of real world events on the slightly unreal world of stock market value.

  • After an adverse review of the iPhone 4,  Apple shares lost $5.08 billion USD in one day
  • When Goldman Sachs was accused of fraud, its shares lost $12.4 billion USD in just one afternoon and $20 billion USD in a week
  • After Toyota announced a major vehicle recall, the carmaker's shares on Tokyo Exchange fell $30 billion USD over four weeks
  • UBS disclosed a $2.3 billion USD rogue trading scandal and their shares fell about $4 billion USD in one day and the Chairman resigned a week later.

As the Deloitte report concluded, very few companies proactively manage the link between reputation risk and company strategy. Yet share price alone shows that proactive risk management for crisis prevention and reputation protection isn’t a cost – it’s an investment in the future.

*Source: Coldwell and Joosub, African Journal of Business Management. 5(24), 14 October, 2011

Tony Jaques is an internationally recognised expert on issue and crisis management and author of the online newsletter Managing Outcomes (www.issueoutcomes.com.au). Contact him at tjaques@issueoutcomes.com.au.

MissionMode's simple-to-use crisis management, emergency notification and mobile communication software enables organizations to take control of crises and reduce the time and cost of the response.

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