Reputation Risk: A Corporate Governance Perspective

Even though corporate reputation is increasingly able to either generate or rapidly destroy shareholder value there is still very little guidance on the oversight function of the board in protecting and enhancing this corporate asset.

Reputation Risk: A Corporate Governance Perspective provides recommendations on how corporate boards can ensure companies develop a robust reputational risk management process integrated within their enterprise-wide risk management (ERM) program. Also a number of practical cases of corporate reputation failures and reputation risk management, including cases drawn from public source documents involving: Johnson & Johnson; Nike Inc.; Sony Corp.; Mattel Inc.; BP plc; Martha Stewart Living Omnimedia Inc., are presented.

Among the key recommendations contained in this report: Boards of Directors should:

• Reach a common understanding of the concept of corporate reputation and tie its discussion to a comprehensive analysis of the firm’s stakeholder base.
• Become familiar with management’s rationale for prioritizing stakeholder relations and be persuaded that the selected relations are instrumental to achieving the firm’s long-term objectives.
• Discuss and understand the nature of reputation risk as an effect of certain business operational incidents, not a separate and distinct category of uncertainties.
• Oversee the design and implementation of a strategic, top-down, and holistic risk management program where all business events with potential consequences on the firm’s reputation capital are identified and measured.
• Consider adhering to The Conference Board Road Map to Risk Governance to embed reputation risk oversight into a comprehensive risk management program.