We have seen that in recent time the spotlight has been put on Corporate America in a way that has not been seen since the Great Depression. Newspaper polls suggest that many investors and members of the general public no longer trust Wall Street and corporate boards for obvious reasons. In order to try to restore the reputation of Corporate America, politicians and law makers are suggesting more stringent reporting and controls. Does it make sense for a company to try to form its reputation in such a way that it helps to gain a competitive advantage relative to its industry rivals?

Richard Branson, the founder of the Virgin group of companies in the UK had advised senior managers to build their corporate brands not around products and services, but around their company’s reputation. In order to consider whether to compete on one’s corporate reputation is a sensible strategy, managers need answers to the following questions:

- What are corporate reputations and can they be crafted to provide an advantage over those of other industry rivals?

- How are corporate reputations validated?
- What type of reputation should be fostered?

Let us explore what is corporate reputation and how is it formed? A dictionary defines a reputation as the estimation in which a person or thing is held by other people. A corporate reputation is an overall evaluation that reflects the extent to which people see the firm as substantially “good” or “bad.” Good reputations foster trust and confidence, bad ones do not. Corporate image is a person’s beliefs about an organization, and corporate identity is the attributes used to describe an organization. Thus, corporate image means that we are talking about people’s perceptions of the organization and answers the question “What do people think about you?” Corporate identity refers to the way that the organization presents itself to its stakeholders and answers the question “Who are you?” An organization develops and highlights the parts of its identity that it hopes will foster a better image than its rivals in the minds of key stakeholders. If this occurs, the organization is said to have a good reputation.

For an organization to use its corporate reputation as a competitive weapon it must initiate a set of programmes to shape its identity, namely, its character, ability, products and services, and its behavior so that these will be evaluated favorably by its key stakeholders—relative to that of its industry rivals. Two basic options are either to foster a broad-based “good” reputation that will resonate with all stakeholders or one that is anchored to a specific identity attribute that is highly valued by one or more key stakeholder groups.

In some industries, it is important for competitors to have a broad-based good reputation. Trust and confidence in the organization is a strategic factor in its success. Those organizations that lead their rivals in this endeavor can gain a competitive advantage. In other industries, the establishment of a good corporate reputation is anchored to an attribute of the organization that is of particular importance to target customers and/or a key stakeholder groups. In both cases, corporate reputation can be a strategic asset that provides a source of potential competitive advantage. An organization that seeks to compete on its corporate reputation does so by choosing to promote some of its identity attributes or to publicly trade on its good name. In both cases, the corporate brand name is used to direct attention to the organization as the source of some type of communication, such as advertising, press releases, sponsorships, community activities, and investor relations.

For an organization to be a persuasive source of communication, it must be perceived as either:

- Credible, e.g., expert, objective,
- Attractive, e.g., likable, similar to the stakeholder, or
- Powerful, e.g., authoritative, influential.

The question then arises as to how can an organization present itself as credible and/or attractive and/or powerful? John Rossiter and Larry Percy suggest that because claims made by the organization will be carefully considered, they should be:

- Emotionally authentic (and this needs to be checked as it will vary across stakeholder groups)

- Convincing, that is, pitched to build on, or gently refute, the target stakeholder’s current beliefs.

Maintaining a good reputation requires constant vigilance. The actions of a rogue employee can quickly damage such a reputation. Also, it is easy for a company to pronounce its good intentions but fail to put in place formal procedures to ensure and measure compliance. To make a reasoned judgment, managers need to understand how good reputations are formed and maintained. This understanding suggests that the organization’s behavior is the prime determinant of its reputation. This will be driven by its overall system—such things as its strategy, business process, culture, controls, employees, and governance. Another crucial reputation driver is the value proposition offered to customers Also, the integrity of the top team —the Board, CEO, and executive managers—play a crucial role in personifying and creating trust and confidence in the company. Because different stakeholder groups often hold different reputations of an organization, managers need to address the problem of achieving a balance among the competing interests of their stakeholders.

To sum it up, a corporate reputation reflects the organization’s strategy, culture, and values. A good corporate reputation signifies trust in the company; creates an emotional and intellectual bond with employees, target customers, and other important stakeholders; and acts as the source of authority and credibility for all the organization’s dealings.