The role of leadership in reputation
The standing of the CEO has long been a driving force in shaping corporate reputation. In the wake of the Covid crisis, the rise of ESG concerns, and a wave of popular activism, the actions of business leaders are now under greater scrutiny, and their impact on stakeholder perceptions is more pronounced than ever before
A history of leadership and reputation
In the corporate world, CEOs are the hinges on which good reputations hang. The external perception of the business is indelibly linked to the image of its leader. They embody and promote the company’s purpose, drive its culture, and espouse its values. Strong leadership will see a business weather crises, reputation intact. While a leader who courts controversy will find a corporate reputation, once damaged, is hard to rebuild.
Throughout the history of private business, different styles of leadership have arisen in response to the prevailing corporate model of the time, but each has had an impact on corporate reputation.
- Heroic leaders: The image of the ‘great man’, embodying a unique set of characteristics allowing them to rise to the challenges of the time, is an enduring one. The 20th century lauded heroic senior executives from industrial barons John D Rockerfeller and Henry Ford to cosmetics magnates Estée Lauder and Anita Roddick, and tech titans Steve Jobs and Bill Gates. Company reputations were founded on ground-breaking individuals’ talent.
- Relationship builders: In the 1950s and 60s, the emphasis became less on inherent traits, and more on those instilled by the business environment. Leadership became more collaborative, and less task-oriented. Reputations were built by earning a place at the top – and staying there. Solid CEOs heading stable household names.
- Supporters: Between the 1970s and 1990s, the antithesis of the hero at the vanguard emerged. The ‘servant leader’ modelled CEOs who empowered their employees to reach their potential. Reputations reflected employee satisfaction and collaborative end of year results.
- Cult of personality: The interconnected digital world has seen a shift from the iconic to the self-promoting leader. Hyper-visible, vocal CEOs, not shy of tweeting a strong opinion, such as former Uber boss Travis Kalanick and Tesla’s Elon Musk. The reputation of a relatively young company is at risk from leadership actions because the two are indistinguishable.
- Transformational leaders: The start of the 21st century saw the rise of the transformers, CEOs who created change by ‘walking the walk’, providing inspiration to others, and taking multi-angled approaches to challenges. Reputations were made by working for the good of the whole, rather than the benefit of the individual.
A new style of leadership
The last decade has seen a further evolutionary step in leadership behaviour, emphasising authenticity, agility, collaboration, and distributed power. The rise of stakeholder capitalism, which recognises the input and interest of all stakeholder groups in an organisation’s success, has shifted leaders’ focus. Accelerated by the pandemic, popular movements for equality, and the rise of the ESG (environmental, social and governance) agenda, the days of shareholder-centric models are waning, and with them the star of CEOs who fail to take a multilateral approach.
In order to be effective in the stakeholder era, a CEO needs to stand for something, to have a clearly stated platform on which to plant their flag.
That platform will be the foundation of the leader’s reputation, reflecting their leadership style, and the direction in which they will steer the company. It will be the basis of stakeholder understanding of the identity and purpose of the CEO.
The phenomenon of activist CEOs has seen some leaders using their platforms to push radical changes in their corporate cultures, and the impact their organisations have on the outside world. The politicising of the population is putting a growing expectation on CEOs to take a stand beyond the bounds of their own business, and align themselves with the extrinsic priorities of their stakeholders.
But while CEOs may choose to co-opt elements of the ESG agenda, for example, to appease wider stakeholder groups, they should be wary of doing so at the cost of authenticity, which remains a key driver in managing reputation.
The CEO and corporate reputation
A catalysing factor in the spread of stakeholder-driven leadership is the recognition that one of the greatest contributors to a company’s reputation is the profile of its CEO.
The interconnectedness of the digital world, the 24/7 news cycle, the hypertransparency that brings boardroom discussions into the public domain, have all made the visibility of CEOs greater and more significant than in any previous era.
Pressure from climate change campaigns, Black Lives Matter protests, and the expectation for businesses to support wider society during Covid has sparked demand by stakeholders for greater accountability, more involvement in corporate policy, and greater transparency in business decisions. In the eyes of the stakeholder, the CEO is the manifestation of the organisation. Their actions, what they say, and what they might fail to achieve will be scrutinised, shared and amplified in ways that weren’t possible before the advent of social media and digital news.
The onus on the CEO to embody the company can endow their position with a degree of fragility. If a CEO’s actions pose a risk to a company’s reputation, then they will be replaced, often swiftly and unceremoniously.
Failing to counteract issues likely to damage corporate reputation presents such a risk. After a single term at the top, McKinsey’s global managing partner Kevin Sneader is to be replaced. The move is arguably an attempt by the business to distance itself from a string of controversies during Sneader’s tenure. These include a £600m lawsuit settlement over its role in fuelling the US opioid crisis; contracts with companies embroiled in corruption scandals in South Africa and Angola; and consulting work with US Citizenship and Immigration Services during the Trump regime’s much-criticised separation of migrant children from their parents.
The future of leadership and reputation
The CEO’s reputation is now more closely entwined with that of the corporation they lead than ever before. While shifting trends in leadership styles will continue to emerge in response to changing economic and social conditions, the new era of stakeholder capitalism heralds a unifying theme that is unlikely to recede.
Whatever their management model, the CEO will be required to employ a stakeholder engagement strategy in order to connect with their company’s most influential stakeholder groups and understand their priorities.
This does not translate into a one-size-fits-all approach. The primary stakeholders of one organisation will be different from those in another sector, and its leadership will need to factor in different priorities. Stakeholder analysis can identify exactly whose interests need to be engaged. But the principle remains the same. CEOs need to be aware of the trends in sentiment among their particular stakeholders, and their leadership style must reflect that.
While CEOs should anticipate shifts in the predominance of individual stakeholder groups over time, reflecting shifting societal and business priorities, they should not expect a return to the mono-stakeholder, shareholder-centric way of operating. The framework has been permanently redesigned, and leadership styles will simply take on different configurations within that new model – all of them impacting corporate reputation.
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