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The Elusive Figure

Some commentators claim that the sharp drop in Goldman Sachs’ market capitalisation following Greg Smith’s damning resignation letter in the New York Times shows the importance of reputation.

However, the lost share value was almost all recovered within 24 hours, and it remained unclear what impact the outburst would have on the bank’s future profits and relationships with stakeholders, or indeed what value reputation has in financial terms. Measuring corporate reputation effectively is a holy grail for corporate communications as corporate affairs teams find themselves under increasing expectation to demonstrate the value of reputation to their boards. Accountants and marketers place financial values on goodwill (in balance sheets) and brand value respectively, but putting a number to reputation has proven more difficult.

Richard Fleming, chief technology officer at reputation analysts Alva, believes that the difficulty partly arises because goodwill, while intangible, is valued at a point in time. He explains: “It is like the difference between a balance sheet and a profit and loss statement. A balance sheet is valued at a point in time whereas a profit and loss statement is measured over a defined period of time.” As reputation affects business performance, it has a bearing on goodwill.

Rupert Younger, founder of the Institute of Reputation Management at Oxford University’s Saïd Business School, believes reputation can be given a figure but not one overall. By breaking down reputations among different stakeholder audiences, Mr Younger believes they can be measured in economic terms. Mr Fleming points out however that there will be other considerations even within stakeholder groups, such as the environment that the organisation is operating in at the time, the perception gap between stakeholder groups, and the scale of issue impact over time. There are also significant differences between sectors.

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