Leadership reaps rewards
A look into this year’s TCRI results
In this, the sixth year of the annual Top Companies Reputations Index (TCRI), compiled by Plus 94 Research and partly funded by the Mail & Guardian, the downward trend in the reputation scores of the top South African companies observed from 2013 to 2015 has been arrested. The trends for the top 10 companies in this year’s results show a strong improvement in the last year.
The prevailing mood in the private sector is one of cautious optimism after many years of economic hardship. It seems that in spite of the rocky road that the country has walked of late, people think that things are looking up. Consumer confidence and business confidence indexes show a big improvement, compared to last year. According to Sifiso Falala, the chief executive of Plus 94 Research, this buoyed optimism is partly due to the perception that business leadership has led the country through a particularly harsh time.
“Business as a collective demonstrated leadership when the country was facing a sovereign ratings downgrade, which would have seen us achieving junk status. This happened against a backdrop of questions being raised about the credibility of government leadership,” he said.
Corporate social responsibility outreach efforts such as the CEO Sleepout had a positive impact too, he believes.
The TCRI is powerful proof that companies that maintain a good broad-based black economic empowerment ranking have comparatively high reputation rankings too. In fact, it is an anomaly for a highly reputable company to have a poor BEE score. Falala believes that this means that South Africans see BBBEE/BEE as an important social contribution for a company to make.
“South African consumers want active corporate citizenry that goes beyond the feelgood charitable goodwill of corporate social responsibility. Reputable companies do not only concentrate on making a profit, but they also think about the impact their actions have on all the people involved with them and the planet in a concept called the triple bottom line — planet, people, profit,” Falala says.
The impact of a good corporate reputation extends beyond a good TCRI ranking. Guarding and maintaining an excellent reputation makes good business sense. Falala says that reputable companies are less susceptible to staff turnover, and recover a lot faster after economic disaster strikes.
A good reputation serves as insurance for when a crisis does hit. The case of MTN shows this. After the scandals that beset its Nigeria division, and the $1.67-billion fine it was ordered to pay for unregistered subscribers, the company understandably suffered a blow to its reputation. However, it has since recovered strongly, and rejoined the Top 10 in this year’s index. Falala believes that had the company had a poor reputation to begin with, the crisis would have sunk it. Local consumers are also aware of the fact that the problems were limited to the Nigeria business, and the faith in the South African business wasn’t as badly affected as it could have been in the final analysis.
In a 2007 issue of the Harvard Business Review, Harvard Business School professor Robert G Eccles wrote, “Firms with strong positive reputations attract better people. They are perceived as providing more value, which often allows them to charge a premium. Their customers are more loyal and buy broader ranges of products and services. Because the market believes that such companies will deliver sustained earnings and future growth, they have higher price-earnings multiples and market values and lower costs of capital.”
Conversely, consumers are more likely to turn on companies of illrepute by boycotting their products or services. Local companies should take heed. The TCRI results since 2011 show an increasing trend towards a boycott culture. In 2011, 44% of respondents said that they stopped buying goods or services from a company because they were viewed in a poor light. In 2016, that figure stands at just under half of the sample. The trend holds for good reputation too — more South Africans are deliberately seeking out the goods and services of reputable companies.