Corporate Reputation Can Impact Amount of Regulation

Research has shown how corporate reputation can enhance shareholder value, sales and customer loyalty. New research reveals that corporate reputation has a significant impact on government regulation. Simply put, the stronger the reputation a company and its industry, the less likely the government will seek to regulate it. Weaker reputations can prompt the public to call for increased regulation and government oversight, according to new research by the Pulse survey, conducted by polling firm Morning Consult.

 Who Do You Trust?

The poll shows that the public trusts technology companies more than other business sectors: 29 percent of survey participants say technology companies are more trustworthy than average and only 18 percent say they’re less trustworthy. Manufacturing companies followed by food and beverage firms ranked next.

Survey participants consider pharmaceutical firms the least trustworthy: 51 percent of respondents say they are less trustworthy than average. Health insurance and financial institutions also rated poorly on the trustworthy scale.

The poll also asked if corporate sectors are under-regulated, over-regulated or subject to the right amount of regulation. Many believe pharmaceuticals (44 percent), health insurance (44 percent) and financial institutions (35 percent) receive too little regulation. Only 20 percent say the technology sector has too little regulation.

“A remarkable correlation? Not really. When you think about it, government regulation is an act of distrust. If an industry is widely trusted, the public often assumes that further government scrutiny is unwarranted,” writes Doug Pinkham is president of the Public Affairs Council, for the Institute of Public Relations. Heightened regulation generally follows public sentiment or egregious acts by companies within an industry.

Dim Views of Politicians and Corporate Leaders

The poll also showed the public holds both elected officials in Washington, DC, and executives of major corporations in low esteem. Just 6 percent of Clinton voters and 7 percent of Trump supporters say national politicians are highly ethical.

Corporate CEOs scored only slightly better: 9 percent of Americans said major company CEOs were highly ethical and 43 percent said they had low honesty and ethical standards. Perceptions of CEOs of small businesses were reversed: 41 percent call them ethical and only 5 percent say they have low ethical standards.

Blame the executive compensation issue. Only 22 percent of Americans think major companies do a good job paying their top executives fairly, without overpaying them. And only 31 percent feel companies do a good job ensuring fair compensation of rank-and-file workers.

CEOs often serve on government advisory committees. The public views their motivations cynically. About a third believe they serve on committees to “get laws changed to increase profits.”

“If the public already questions the ethics of major company CEOs and our nation’s political leaders, then it stands to reason that a committee putting them together in the same room must be up to no good,” he says.

Monitor Your Industry

Because public sentiment toward a company’s industry influences sentiment toward individual companies, experts recommend that organizations monitor sentiment toward their industry in addition to assessing sentiment toward their brand names.

The US Reputation Dividend Report also recommends:

• Pay attention to how stakeholders view competitors and peers. Show exactly how they are perceived and point to your relative strengths, vulnerabilities and how they can be addressed through improved operational performance and messaging.
• Understand what matters most to your stakeholders. Identify what has the greatest impact on reputation value and how communications messages can move the needle.
• Focus on proactively managing corporate reputation. Spell out to executive leadership how much shareholder value depends on reputation and how much is at risk.

Being proactive entails regularly monitoring your public reputation — not just when a specific incident requires your attention. “How do you do this? The magic tools invented to solve this problem fall under the name of ‘social media monitoring,'” states the Kissmetrics Definitive Guide to Online Reputation Management.

Bottom Line: Poor corporate reputations can lead to increased legislation and government oversight. Conversely, strong reputations can help shield companies from government involvement in their industries, new research shows. The research highlights the importance of public relations and value of measurement of sentiment toward entire industries in addition to individual companies.