The Reputation Dividend: What Would Gandalf Say?

As a contemporary anthropologist of sorts working as a CCO in technology-based companies, I often felt like a Muggle – a person without magical abilities – among the Wizards.

Once in Shell, I was talking with a team of senior executives about stakeholder concerns and how we could shape our narrative to connect better. I said that we had no choice. Even Shell had to play by Muggles’ rules. Because the Muggles actually rule the world. Not the Wizards.

And, sadly, there was no Platform 9 ¾ (where Harry Potter took the train to Hogwarts) where we could transit from our own energy wizardry to the Muggledom around us.

That episode came back to me recently at an event in London. It was hosted by Echo Research, Arthur W. Page Society trustee Sandra Macleod’s company, to launch a new way to calculate the contribution of reputation to a company’s market capitalization, called the Reputation Dividend.

Bottom line: The good news is that a value on reputation and its share in the value of a company can now be calculated! CCOs can now put a valuation on the intangible asset they help manage in discussions about resources with the C Suite, including the numbers wizards.

As the press release said, few CEOs would deny that corporate reputation is a key asset, but there has been little appreciation of its true value.

Echo Research, where I‘m proud to hold an advisory role, worked with Bestra Brand Consultants for five years to create the underlying diagnostic tool “Reputation Dividend” – an objective way to monitor corporate reputation based on four factors:

• Reputation Contribution – the financial value and proportion of market cap attributable to corporate reputation.
• The comparison of the relative value of a company’s corporate reputation to that of its peers and competitors.
• Isolation of nine principal components of reputation value – the individual levers of a company’s reputation that do and/or could contribute most.
• Reputation Leverage – a measurement of the return on investment in corporate brand communication. The study measures the growth in market cap due to past investment or what can reasonably be expected from any future investment in corporate reputation.

So what was the worry that buzzed through my mind? And what’s with the magical connection?

The worry is simple. The reputation dividend calculates the value that the corporation reputation contributes to a company’s market capitalization.

And since the reputation dividend is such a neat calculation, in a CCO’s discussion with the C-suite colleagues this could lead to a narrowing of the field of vision. Whereas, if used well, it will provide more breadth, depth and clarity of vision on an important component of reputation

So, it will be critical that CCOs continue using other reputation metrics in order to get to a rounded reflection of how all stakeholders see the firm and its economic, social and environmental performance.

Otherwise, a line from Gandalf, the wizard and sage in The Lord of The Rings, could be applicable, and that would be a pity: “And he who breaks a thing to find out what it is has left the path of wisdom.”

Or am I the only one who prefers to see reputation as the sum of what ALL stakeholders think of a company, as an unbreakable construct whose total sum is greater than the sum of its parts?

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By Bjorn Edlund
Retd EVP Communications, Royal Dutch Shell plc
Principal, Edlund Consulting Ltd.