'Who steals my purse steals trash… but he that filches from me my good name robs me of that which not enriches him, and makes me poor indeed."
This quotation from Othello doesn't fully capture reality. Surprisingly, reputations are not filched, except maybe if you are an election rival in Willie O'Dea's constituency. Reputations are more often thrown away. It never ceases to amaze me how casually individuals and organisations throw away their reputations and self-destruct in return for so little. Recent events at Toyota bring this to mind again.
Some organisations have so completely lost their reputations that they have contributed new words to the English language. For example, 'enronitis' was derived from Enron, the seventh-largest US corporation, which went bankrupt in 2001 amid allegations of market manipulation, fraudulent accounting, theft by senior executives, and corporate governance failures, and that brought down its external auditors, Arthur Andersen. Surely that was sufficient warning to other organisations to play it straight. So, why didn't the executives at Anglo Irish Bank, Irish Life and Permanent, Irish Nationwide (I could go on) learn from this?
Arrogance and hubris at the top of organisations can explain this behaviour – an unwillingness to admit errors or to report a fall in profits, coupled with the conviction that one has the Midas touch. It is amazing that senior executives think they can never be found out for wrong-doing.
Can we ever think of Tiger Woods in the same way since discovering his philandering? How could he have thought he could keep his activities a secret? He has hurt a small (but important) group of people – his family. But where this arrogance and hubris operates at a corporate level, the opportunity to cause damage to a very large group of people is immense. It is ordinary decent folk who bear the brunt of the wrongdoing of a small rich few – those who can sneak away to their opulent hideaways in Marbella or the Algarve, leaving the wreckage for others to clean up and the human suffering for lesser mortals.
In researching this piece, I was amused to come across a speech by Lochlann Quinn, then chairman of AIB, in the wake of the John Rusnak fraud in 2002, when he told shareholders at the AGM that it was time to rebuild the bank's reputation. Plus ça change, plus c'est la même chose.
There are service providers that rate companies on their reputation, that measure and rank reputation and that assist companies in reputation risk-management. But no such exercise can really address the fundamental human behavioural requirement to "do the right thing, do the thing right". Unless organisations are led from the top by people who are driven by something more than making money, who are willing to admit mistakes, who put the interests of the organisation ahead of their own interests, then we can expect further incidences of reputation squandering.
Executive compensation, especially stock options, have been described as the most common form of legal corruption undermining large corporations and causing global economic destruction. I admire US president Barack Obama for his strong challenge of the executive bonus culture on Wall Street. If executives are incentivised in such a unidimensional manner, then don't be surprised to find incidents of corporate misdemeanour. Such systems attract greedy people – people who work for their own selfish needs without concern for the good of the organisation, its staff, its customers, and society generally.
Many companies that have been found wanting in their corporate practices claimed excellent governance standards. Beware of this empty rhetoric. If you don't always believe what you read in newspapers, then don't expect a higher standard of honesty in annual reports, even if they are subject to external audit. Here are some examples from Anglo Irish Bank's 2007 chairman's statement signed by Seán FitzPatrick: "We constantly pursue the highest standards of conduct in managing the business in the interests of all stakeholders"; "We are confident that our stringent risk management standards will maintain the high quality of our asset base". Yeah right! Compare this rhetoric with FitzPatrick's infamous RTE interview in which he criticised the corporate "McCarthyites" charged with overseeing proper standards in Irish business. We now know these comments better reflect FitzPatrick's true attitudes than his empty words in Anglo's annual report.
Corporate activities are highly regulated. But if you are not trying to break the rules or bend the rules, then a detailed knowledge of the regulations is not required. A high standard of corporate behaviour can be based on an easier rule: Don't do anything that cannot be discussed on the front pages of the national newspapers.
One's reputation cannot be valued – it is invaluable. A good name is still all.
Niamh Brennan is Michael MacCormac Professor of Management at University College Dublin, and is academic director of the Centre for Corporate Governance at UCD