ESOP Centre and STEP Jersey Conference

Friday, 11 July 2008

The Importance of Reputation for Trustees

Helen HattonDeputy Director GeneralJersey Financial Services

Commission

Reputation

• What is it?• How is “reputation” different from

“brand”?• What is your reputation worth?• How do you know what your reputation is,

anyway?• How do you build a good one?• How do you lose it?• Why is reputation important for Trustees?

Reputation - What is it?

Oxford English dictionary defines as:-Noun:

1 the beliefs or opinions that are generally held about

someone or something; 2 a widespread belief that

someone or something has a particular characteristic: his reputation as a brainless lad.

Reputation - What is it?

“O! I have lost my reputation. I have lost

the immortal part of myself, and whatremains is bestial.”

William Shakespeare 1564-1616: Othello (1602-4)

Reputation - What is it in today’s business world?FT article 30/9/05 stated:-

“Reputation is based on the sum of how allconstituencies view the organisation.

Constituents’assessments are based on the identity of theorganisation, including statements about visionand strategy as well as actions over time;perceptions of the organisation from others,including pollsters and credible third parties; andperformance, such as profitability and socialresponsibility.”

Reputation - What is it in today’s business world?FT article 30/9/05 continued:-

We are talking about the beliefs of others, outsidethe company.

Beliefs are not necessarily rational – think ofreligious beliefs – these are views often held in theface of so-called evidence to the contrary andcertainly held in the face of contrary beliefs beingvoiced.

Reputation - What is it in today’s business world?

Goldman Sachs states in its businessprinciples:-“Our assets are our people, capital andreputation. If any of these are everdiminished, the last is the most difficultto restore.”So – its important – that’s what!

How is “reputation” different from “brand”?

A brand is a collection of experiences andassociations attached to a company,organization, product or service; morespecifically, brand refers to the concretesymbols such as a name, logo, slogan, anddesign scheme. A brand is a symbolicembodiment of all the information connected

toa company, organization, product or service.

How is “reputation” different from “brand”?

Your brand, once established, will have areputation, a reputation doesn’t have a brand.You can protect your brand through copyright,trade mark registration, effective logos anddesign schemes and doing these tasks well willavoid problems that could damage yourreputation.

What is your reputation worth?

An Ernst & Young study on how value affectsinstitutional investors' decision-making,"Metrics that Matter“, indicated non-financialfactors account for 35% of a company'svaluation by institutional investors.See APCO worldwide website for excellentinformation on protecting and managingreputation.

What is your reputation worth?

Ernst & Young stated:

“There is no pre-defined recipe for measuring

corporate reputation and therefore noformulaic response. History, sector,

market,Product lines, visibility, management,competition, and third parties all play a

role inhow a corporation is valued.

What is your reputation worth?

Ernst & Young continued: “We discovered that understanding

reputation requires three key steps: • determining the unique elements for each

company regarding what influences its value (corporate DNA);

• assessing the relative importance of each factor for that company in its industry and with its most important stakeholders; and

• measuring performance against each factor to understand the company's strengths and weaknesses.

What is your reputation worth?

The quote continues: “A new valueparadigm has emerged. Corporate reputationwill play a central role in determining thatvalue. Understanding the new value driversand expectations for your company and yourindustry, and then communicating about

themin a direct fashion, will play a critical role indetermining that value.”

What is your reputation worth?

So, something like 35% of your company’s worth isdetermined by the beliefs and perceptions of otherpeople.

Jack Welch, former CEO of General Electric, saidearlier this year in a speech to students:

“Perceptionis reality” …… and went on to talk about the fundamental dutyof every employee to protect the reputation of thecompany.

How do you know what your reputation is, anyway?

This is about OTHER PEOPLE’S perceptions and beliefs -your role is to ask and listen.• Benchmarking: Surveys and questionnaires are very

valuable – of clients, suppliers, introducers, strategic partners. There are many PR companies that have low cost questionnaires, provide anonymity to respondents and give you excellent feedback.

• Key Influencers: Go ask people, whose opinion you care about, what they think of you, how you could interact with their agency better, what you do well. Parties might be regulatory agencies, the JFCU, your top five clients, your top five introducers, your accountant, your banker, your non-executive directors.

How do you know what your reputation is, anyway?

Look for the indicators of a bad reputation:-• Share price decline: Difficult in a private

company environment, but are people looking to ditch their holdings? How marketable would you be?

• Decline in market share: Again difficult in the private client world – Are you busy? How does your performance stack up against competitors? Read the Annual Reports of competitors and see what they are saying about their business, how does yours compare? Who is moving to new offices? Who is advertising for new staff? Are you lagging? How do you compare against surveys run by JATCO or JFL? Complaints. Cancelled orders. Enquiries that don’t convert.

How do you know what your reputation is, anyway?

• Difficulty in recruiting talent. Staff turnover and vacant posts are key indicators that people don’t want to work for you – what more damning to your reputation than the vote of people who understand from the inside how you operate.

• Discontent in communities.• More obvious in community pressure groups in

industries like chemical factories or nuclear power plants - too frequent visits from JFCU, FSC, etc are a sure sign something isn’t right. Ask them, work with them to address the issues.

How do you build a good one?

First establish your values – what are your organisational

values?

• Do your staff know them? • Do you “live” them in your business?• Do you air them when you have difficult decisions

to make?• When something goes wrong, do you review

lessons learned to assess deviation from them?• Do employees who live them do well in your

organisation or do you measure performance by a matrix OTHER than your corporate values?

How do you build a good one?

Consider the American Express model – thesewords have been used in what today we wouldcall a “mission statement” since 1850:

• customer commitment, quality, integrity; • teamwork, respect for people, good

citizenship; • a will to win and personal accountability.

How do you build a good one?

Second, identify and review six areas and test them against

your values – • Top six might be - corporate governance, money

laundering defences, quality client advice, quality client service, fair pricing, prompt fees collection.

• Probably not – swishest offices, sharpest advertising, biggest company cars, most aggressive litigators, flashiest sponsorship, best corporate hospitality.

• How much money and management focus is spent on the latter compared to developing and assessing the effectiveness of the former?

How do you build a good one?

Building a good one is also about avoiding a bad one:-• Prepare for potential problems – what are your

key risks?• Develop a crisis management process – Who is

the spokeman? How will you notify personnel? Which media do you need to contact? What notifications need to be made?

• Plan your responses – run simulations, get staff skilled and drilled.

• Analyse constituencies – regularly benchmark (previous slide) and educate your staff as to the findings, develop and action plan to address negatives and implement it.

• Provide certainty – see next slide.

How do you build a good one – avoiding a bad one!

Provide Certainty - continuedPeter Verrengia, President of US Eastern CommunicationsInc, a major PR company:“Follow the certainty principle. Recognise the paradox thata company wants to say as little as possible about anincident whilst the public want to know as much as possibleabout it. So, recognise that people want certainty aboutfuture outcomes. If they cannot have certainty

immediately,let them know when you will be able to provide it for them. If they can’t get that from you, arrange for them to get itfrom other authorities. If none exists, at least give themcertainty about the process that someone will use to

resolvethe problem and what milestones will indicate progress.”

How do you build a good one – avoiding a bad one!

Although Peter Verrengia wrote those words onthe certainty principle with an incident in mind –an explosion, a failed product, a major fraud, etc -actually the point applies to the small things, too:-• clients want to know how long something will

take to action;• clients want to know how a complaint will be

handled;• regulators want to know when/who/how a

problem is going to be fixed.

How do you lose it?

This is the one word slide:-

EASILY

Why is reputation important for Trustees?

Reputation is important for everyone atpersonal family level; as a friend; at employee,professional or corporate level; as a governmentDepartment; a political party; indeed a country orsupranational body.

Of all business relationships, the trustee combinesfriend, professional and corporate relationships – youhave a position of unique trust and power – yourreputation simply has to be immaculate if your

businessoffering is to sustain.

Why is reputation important for Trustees?

Everyone does due diligence these days:

• Why choose a trustee with a bad reputation when you can pick a good one?

Conclusion

Reputation - defined1 the beliefs or opinions that are generally held about someone or something; 2 a widespread belief that someone or something has a particular characteristic: their reputation as a third rate trust company.

Reputation - describedO! I have lost my reputation. I have lost the immortal part of myself, and what remains is bestial.

William Shakespeare 1564-1616: Othello (1602-4)

QUESTIONS?