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Boards Look to Directors With Reputational Risk Experience

 


Agenda | November 13, 2020




The Agenda article, "Boards Look to Directors With Reputational Risk Experience," quoted Russell Reynolds Associates Consultant Seema Kathuria and cited our paper, "Reputation in a Crisis: Footsteps and Horses' Hooves." The article is excerpted below.

As companies seek to gird their reputations, boards are looking for new directors with deep corporate affairs backgrounds to help them oversee and safeguard an intangible asset that can swiftly erode.
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Corporate reputation comprises $16.7 trillion in shareholder value — or more than one third of total capitalization — on the world’s top 15 stock market indexes, according to a recent Russell Reynolds Associates (RRA) report. Yet reputation doesn’t rate as a regular agenda item at most boards and few boards assign a board member to oversee it.

Since reputation represents such a huge asset, boards ought to schedule the topic as a discussion priority at least once a year, says Seema Threja Kathuria, a consultant at RRA. She also suggests that directors monitor reputation regularly through update reports. The best management person to shepherd a company’s standing with stakeholders is likely to be the company’s corporate affairs leader, she says.
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“Corporate reputation is a major contributor to shareholder value. If you have a negative reputation, you can have a similar trajectory to the shareholder price,” says Kathuria, who is co-leader of RRA’s corporate affairs officer practice and a member of its CEO and board advisory practice.

She explains that, as the focus on stakeholders has increased, the “S” in ESG has grown increasingly more important. Corporate affairs pros shepherd a flock of internal and external social and human concerns, such as risk and strategy, sustainability, customers’ perception of products, and investors’ and business partners’ perception about the company. The compilation of those issues is known as corporate reputation.​
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For Kathuria, the world has changed from the time when boards drew mostly from the P&L side (CEOs, presidents and general managers) or from financial leaders who have fiduciary responsibility as qualified financial experts. Given that corporate reputation is essentially a license to operate, overseeing it requires professionals who can manage reputation and a board that regularly reviews it.

Considering that reputation accounts for $16 trillion in value across a smattering of world stock exchanges, she asks, “How does the board not have that as a priority agenda item in the boardroom?”

To read the full article, click here.


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Boards Look to Directors With Reputational Risk Experience