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Stakeholders, Identity and Reputation 79

3.4 Understanding reputation and
corporate communications

As we have seen, the purpose of corporate identity is to project a consistent and
distinctive image of the organization, which, it is hoped, leads to favourable images
and reputations with stakeholders. Having a reputation as a financially healthy
organization with quality products and a solid social and ecological track record is
essential in order to be found legitimate by important stakeholder groups and to
ensure that sufficient financial transactions are generated. Stronger bottom-line per-
formance in fact comes about because better-regarded companies achieve ‘first-
choice’ status with investors, customers, employees and other stakeholder groups. For
customers, for instance, a reputation serves as a signal of the underlying quality of an
organization’s products and services, and they therefore value associations and trans-
actions with high reputation firms. Equally, employees prefer to work for high
reputation organizations, and will therefore work harder, or for lower remuneration.
In other words, a good corporate reputation has a strategic value for the organi-
zation that possesses it.It ensures acceptance and legitimacy from stakeholder groups,
generates returns and may offer a competitive advantage as it forms an asset that is
also difficult to imitate. A good corporate reputation, or rather the corporate iden-
tity upon which it is based, is exactly an intangible asset of the organization because
of its potential for value creation, but also because its intangible character makes
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replication by competing firms more difficult. Not surprisingly therefore, managers
continue to rate reputation as the most important intangible resource of a firm, and
a survey of Fortune 500 companies in 2001 found that managing reputation was
considered the lead philosophy among communications departments. 40

Identity and reputation

Recent research firmly suggests that organizations with stronger identities have more
positive reputations.That is, a strong identity is more visible to stakeholders outside
the organization and serves as a differentiation signal.When a reputation is indeed
broadly consistent with that organization’s corporate identity, it also ensures that the
organization is respected and understood in the way in which it wants and aims to
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be understood. Alternatively, when there is a discrepancy between the identity of
an organization and the way in which it is regarded, an organization is not standing
out on its own turf and may not have a strong enough reputation as a result. Its repu-
tation is then based, rather, upon more general associations with the industry in
which the organization is based or is informed by reports from the media. Shell, for
instance, in the wake of the Brent Spar crisis, realized that its lousy reputation in the
1990s had more often than not been based upon media reports and the tainted image
of the oil industry than its own identity and the values that are at the heart of its
business and operations. Shell has since put considerable effort into a rethinking of
its identity and values, redesigning systems for stakeholder management, and running
a global identity campaign to close the gap between its identity and reputation.
Fombrun and Rindova refer to this alignment of identity and reputation as trans-
parency, which they consider as an ideal situation (in comparison with a discrepancy