MISSION INTANGIBLE

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MISSION:INTANGIBLE, the blog of the Intangible Asset Finance Society, offers critical comments on intangible asset, corporate reputation, and finance; supplemented by quantitative reputation metrics. Intangible assets include business processes, patents, trademarks; reputations for ethics and integrity; quality, safety, sustainability, security, and resilience; and comprise 70% of the average company's value. MISSION:INTANGIBLE is a registered trademark of the Intangible Asset Finance Society.

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Big Oil's Lessons for Big Banks

C. HUYGENS - Monday, August 04, 2014
The Financial Times reported July 27 that Fed officials have asked banks to see what they might learn from other sectors “that have gone through crises or reputational 
issues”…wait for it…”such as the oil industry.” The ExxonMobil reputation value and risk charts below show why it is sound advice. Read more here.

ExxonMobil: Much better than Paula Deen

C. HUYGENS - Tuesday, March 11, 2014
"Reputations are created and sustained by ongoing activities," explained Jonathan Salem Baskin, managing director of the reputation controls firm, Consensiv, in Forbes.com this past weekend. "Crises are simply the exposure of those behaviors." To illustrate the point, on parade were Paula Deen and ExxonMobil (XOM).

Deen took it in the chin for revelations of social improprieties, and according to Baskin, was sunk by her own PR-driven crisis communications efforts. "The premise that PR can “manage” those revelations is evidence of a misunderstanding and governing weakness [of PR]. Corporate reputation doesn’t belong to PR any more than the pixels on my computer screen belong to electricity."

ExxonMobil coated a good part of Arkansas in ooze last spring. The company managed the potential reputational impact through ongoing communications before the event -- the communications being largely an explanation of what they were actually doing operationally to minimize the risk of coating Arkansas and many other dry and wet places with black slime. "Successful reputation management requires ongoing communications, not a plan to “manage” crises."

Manage expectations, perform to those expectations, and reputation will be affirmed. So goes the theory. What do the reputational value metrics show emprically?

The reputational value profile of ExxonMobil, according to Consensiv and based on Steel City Re's reputational value metrics, is shown below. The Reputation Premium is near the top of the heap at the 94th percentile currently among 50 companies in the peer group. That's down a bit from the 100th percentile last spring, but from the chart it appears that the #1 slot changes hands regularly. The Consensus Trend, CT, is at a respectable level of below 3% and compared to peers, is about average. Its reputational health is strongly independent of the overall equities market and, while there is room for improvement, it's looking much better than Deen.



For more background on the Consensiv reputation controls, click here. To view the December 2013 reputational value league table, based on Consensiv's metrics, and available exclusively at CFO.com, click here. Last, to read more about how reputational value is linked to stakeholder expectations and enterprise value, read, Reputation Stock Price and You: Why the market rewards some companies and punishes others (Apress, 2012) (click here).

ExxonMobil and BP: Promises, promises

C. HUYGENS - Thursday, June 13, 2013
Nearly three years ago, BP suffered a near fatal reputational disaster precipitated by a series of technical failures leading to a massive oil spill in the Gulf of Mexico. There are many reasons why the technical failures led to the spill. More important, the accident was a reputational disaster because every stakeholder group held BP culpable of willfully breaching its commitment of responsible, sustainable drilling.

Yes, BP's 'Beyond Petroleum' campaign was wickedly effective. It established an implicit social contract, and stakeholder reasonably expected conformance. A key going forward lesson should have been, 'manage expectations.' ExxonMobil learned it after the Valdez disaster in Prince William Sound. Since then, they have strategically managed expectations, and their reputational value has benefited.

BP, on the other hand, appears to be making promises again. Its campaigns all but declare, "The environment has been restored, tourism is back, the company has made its operations safer and, perhaps most importantly, it spends more money in the U.S. than any of its competitors. It’s time to forgive and forget." Writes Jonathan Salem Baskin in Forbes, "Perhaps its reputation would have been far better served if it had used the Gulf spill as a chance to strengthen and reaffirm its stakeholder understanding of its business. It could enable them to make more informed decisions about energy, while laying the groundwork for more understanding and even forgiveness when the next crisis occurs. It might even enhance the tangible worth of its reputation."

Objectively, the metrics back Baskin's suggestion. The Steel City Re reputational value metrics show that XOM has a significant Reputation Premium, as termed by Consensiv, relative to BP.  In a peer group of 52 integrated oil companies, Exxon's reputation ranking is at the 100th percentile; BP's is the in 4rth quartile at 84%. In addition, BP's current RVM volatility, a measure of stakeholder consensus (Consensus Trend) is rising. Its not at a material, or "feverish" level by any means, but the movement of the metric concurrent with the communications campaign suggests not everyone is buying the story.


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