From Travis Kalanick’s enforced departure from Uber to the allegation of sexual abuse and intimidation by Miramax’s Harvey Weinstein, 2017 has been the year of the bad boss. But what real impact does the profile of the chief executive officer have on the wider corporate reputation, and how best to align the two? Research from earlier this year offers several insightful answers.
It has been claimed that the apparent success of a company is strongly intertwined with the profile of its leader; the higher the CEO’s profile, the better the perceptions of company performance.
If high-profile CEOs are a benefit to a company, what relationship should their own reputation have with their company’s?
Reputation intelligence analysts at alva have examined the reputation of Apple and Amazon (Figures i-ii), we find consistently high ratings for both firms, while their CEOs also show steadily positive scores, though to a lesser degree.
Figure i: 60-Day rolling average sentiment for Amazon and Jeff Bezos (UK & US)
Source: alva Insights, www.alva-group.com
Figure ii: 60-Day rolling average sentiment for Apple and Tim Cook (UK & US)
Source: alva Insights, www.alva-group.com
This implies that a healthy relationship between the corporate reputation and CEO reputation of an established corporation is one in which the company has the most prominent positive profile.
When the company generates the bulk of stakeholder goodwill it creates a reputation buffer against negative issues concerning the CEO. It also protects the company against boardroom changes, either voluntary or enforced, and ensures success is not reliant on one personality.
As the CEO is responsible for setting the strategy and vision of the company, ideally they should also maintain a good reputation, reassuring stakeholders the business is in good hands.
But what is the dynamic when a major global brand persists with a high-profile leader? An obvious example of a celebrity figure head is Virgin Group founder Sir Richard Branson.
Figure iii: 60-Day rolling average sentiment for Virgin Group and Richard Branson (UK & US)
Source: alva Insights, www.alva-group.com
Figure iii shows that despite Branson’s visible media-profile, his relationship with Virgin is similar to the pattern established with Apple and Amazon.
The strong reputation level of the main company takes prominence over its most high-profile executive, though the relationship fluctuates in terms of which party is driving reputation.
While Virgin’s founder can affect the reputation of the brand, the brand isn’t reliant on the founder. The CEO can add value in good times and have confidence in the brand to take the lead if they encounter difficulties.
However, in recent years we have seen a number of highly-successful start-ups, primarily driven by “celebrity CEOs”. If the growth of these firms is largely attributed to the strong reputation of their leaders, is the model the same for these companies?
Uber case study: the risks of a CEO’s reputation outweighing the company’s
Since Uber launched in summer 2010, it has established itself as one of the most successful start-up companies ever. Much of Uber’s success has been attributed to the driven but abrasive personality of its CEO, Travis Kalanick.
Uber’s growth has been built on disrupting an established industry through lowering prices and improving convenience. The benefits of competitive pricing and convenience outweighing any negativity around employee pay and conditions.
However, 2017 has been very challenging for Uber, with a string of controversies, including multiple lawsuits, driver-less car crashes and Kalanick’s connections with President Trump during the controversial travel ban. Claims of a rampant and unchecked culture of sexism resulted in the resignation of Kalanick as chief executive officer in June this year.
Figure iv: 60-Day rolling average sentiment for Uber and Travis Kalanick (UK & US)
Source: alva Insights, www.alva-group.com
Throughout 2016 Kalanick was a positive asset, while the Uber brand had a slightly negative perception. Uber’s issues really started in late January with the executive order restricting immigration from a number of countries.
Kalanick had joined Trump’s economic advisory board and the travel ban was of particular concern among employees in Uber’s sector, many of whom are immigrants themselves.
When Uber was accused of profiteering from a subsequent strike, an estimated 200,000 people deleted their Uber account.
Despite being quick to issue a strong response to the travel ban, and resigning from the advisory board, Kalanick was now the focal point for criticism around a string of subsequent incidents.
By bending the rules and offering a disruptive service, Kalanick was helping drive Uber’s rapid growth. However, these values were simultaneously permeating into the public’s perceptions of the Uber brand.
As the company had consistently scored negatively, there were warning signs that, should a reputational issue arise, the Uber brand did not have a goodwill safety net to fall back on.
This demonstrates the reputational risks of a strong CEO out-weighing the reputation of the company. If the company has not established and effectively communicated its own culture and values, it has no independent identity and negative perceptions of the individual are quick to transfer across to the company.
Elon Musk and Tesla: enhancing corporate reputation through aligned values
Elon Musk and Tesla make for an interesting comparison with Uber – another disruptive start-up which experienced rapid expansion under a prominent CEO.
Throughout Tesla’s rise, Musk has pushed brand identity but also prominently promoted his wider goal of sustainable energy.
Figure v: 60-Day rolling average sentiment for Tesla and Elon Musk (UK & US)
Source: alva Insights, www.alva-group.com
When Tesla’s corporate reputation plummeted due to autopilot crashes in the summer of 2016, Musk’s own reputation only saw a marginal delayed hit. His prominent positioning around socially conscious issues seemed to successfully insulate himself from the difficulties the company was experiencing.
In another parallel with Kalanick, Musk also joined the economic advisory council. However, his personal reputation was largely unaffected due to a number of factors, including pre-election and post-travel ban criticisms and the Tesla work-force not being as affected by this policy.
Tesla’s reputation is enhanced by its values and goals being aligned with, but not solely defined by, its CEO’s. This means that, similar to Virgin, the company can benefit from its association with a leading personality pushing the agenda at the core of its business.
With clear reputational benefits from a strategic alignment between CEO and company, it is important for those responsible for communicating these values to be able to identify, measure and track how effectively these messages are permeating with their key stakeholders.
Conclusions
- Companies that have a weaker reputation than their CEO face increased reputational risks and volatility
- Strong CEOs whose reputation and vision are aligned with that of their company can enhance reputation
- CEO reputation will often lag two-three months behind their company, giving time to mitigate negative issues faced by the business
- Communications teams need to strategically plan which subjects their CEOs lead on and how prominent they are compared to the company
Read the full CEO Reputation vs. Corporate Reputation white paper on the alva website.
