Zimpapers Logo

ZimCode
One of the main drivers of success for a company is corporate reputation and this is the overall estimation in which an organisation is held by its internal and external stakeholders based on its past actions and probability of its future behaviour.

Corporate reputation basically involves predictable behaviours, relationships and two-way communication undertaken by an organisation, as judged by its stakeholders over time and it is heavily dependent on the way the organisation builds and manages relationships with its key stakeholders.

Chapter 2 of the National Code on Corporate Governance (“ZimCode principle”), clause 23 notes that a company must conduct its business in a manner that best serves the interests of the shareholders, including minority shareholders and other stakeholders of the company.

Principle 260 further recommends boards to encourage the formation of appropriate stakeholder associations to facilitate structured and constructive stakeholder engagement and that they should delegate to management the task of pro-actively dealing with stakeholder relationships.

Clause 21 of the Public Sector Corporate Governance Bill (“the Bill”) clearly states that boards of public entities should develop, implement and communicate programmes for dealing with stakeholders, in accordance with internationally recognised norms.

Furthermore, clause 20 states that the Government and its public entities should recognise and respect stakeholders’ rights, whether established by statute or through mutual agreements.

Although reputation is an intangible concept it increases corporate worth and provides sustainable competitive advantage. A business can achieve its objectives more easily if it has a good reputation among its stakeholders, especially key stakeholders.

The value of corporate reputation can be measured or realised when a good reputation turns bad for a public company as the impact can be seen in the plunge in share price and its market value.

Organisations consider their greatest asset to be their good name or reputation. This is especially true in knowledge-based organisations such as professional services firms in the consulting, legal, medical, and financial sectors and in universities.

They work actively to build their own bank of goodwill. The two main sources of a corporate reputation are experience and information, based on a person’s past dealings with the organisation.

A favourable reputation requires more than just an effective communication effort; it requires an admirable identity that can be moulded through excellent and consistent performance over many years.

If an organisation is well regarded by its main customers, they will prefer to deal with that particular company ahead of its competitors. And this very market share will influence other potential customers by word of mouth.

Also Suppliers will be more inclined to trust in that organisation’s ability to pay and to provide fair trading terms. Likewise, government regulators will trust a company with good reputation, and they will be less inclined to punish that organisation if it trips up along the way. In the long run such an organisation will automatically retain good talent and skilled employees.

Today’s globalised world is characterised by increasing interconnectedness, social networking, and fast-paced technologies, information spreads like veld fires reaching even the shareholders that are  geographically dispersed in no time.

Considering that bad news travels fast, a company is at risk of losing its market share once stakeholders express discontent over the way the company conducts its business. Of late the news has been dominated by indigenous communities in the Amazon fighting the encroachment of mining companies who are destroying their environment. These companies might have considered these indigenous communities as minor stakeholders but they learnt the hard way.

Corporate governance essentially involves knowing the stakeholder expectations as precisely as possible and meeting them, “custom fit”, therefore achieving a fair balance between the interests of these various stakeholders in an organisation.

It is important for senior management to note that a good reputation towards a company is not only a vain end in itself but it contributes to business performance, hence the future slogan “The stakeholder is king” from the former “The customer is king”.

• For more information on the ZimCode contact: [email protected]