A bottom line can always recover from a negative hit, but regaining a tarnished reputation isn't so easy, a consultant told dealers attending Bridgestone/Firestone's Bizcon 9 commercial dealer meeting in New Orleans.
In his April 28 seminar presentation on ``How to get your people to do the right thing-legally and ethically,'' Peter Dignan of LRN explained to dealership executives that corporate reputation is not something that's managed but rather performed on a daily basis.
``You folks are the Homeland Security for your organizations,'' Mr. Dignan said. ``CEOs must look out for ethical conduct and compliance or else your people won't take it seriously.''
Mr. Dignan is global account manager for LRN, a Los Angeles-based firm that provides corporations with legal, ethical, compliance and governance advice and solutions. BFS has contracted with the company since 2003.
Reflecting on the past three years, Mr. Dignan pointed out that the public generally has lost trust in individuals and institutions due to war, scandals at corporations, media outlets and even religious organizations.
``There's a difference between what we have the right to do and what is right to do,'' Mr. Dignan said, pointing out that when companies fail to police themselves, government will step in. The Sarbanes-Oxley (SOX) Act of 2002, which rewrote the rules on corporate governance, financial disclosure and corporate accounting, was passed in response to the Enron and WorldCom scandals, but it is causing headaches for CEOs now, he said.
In an interview with Tire Business following his presentation, Mr. Dignan, citing a PriceWaterhouseCoopers survey of 180 companies, said SOX has forced publicly owned enterprises to spend millions on retooling and rebuilding their accounting software to comply with the new reporting regulations. He said 56 percent of all information technology (IT) resources in 2004 were dedicated to implementing the SOX-compliant accounting systems.
``SOX does apply to publicly held companies. But it's just a matter of time until that whole framework is going to cascade down to the small business person,'' Mr. Dignan told Tire Business.
Bizcon attendees also were advised that protecting corporate reputation isn't free of cost. Mr. Dignan cited lawsuits as an example of a problem a CEO cannot manage or prevent from getting out to the media and the rest of the world. The way to keep integrity within an organization and change behavior is for the CEO to shape the culture of the enterprise, he noted.
``It all relates back to reputation and do I want to do business with that particular company,'' Mr. Dignan said. ``Reputation is the hardest thing to get back.... Leaders have to be concerned about corporate reputation.''
A common type of lawsuit is one charging an employee with sexual harassment, he said. Courts will take into consideration a company's efforts at formulating a harassment policy, educating workers on that policy and attempts to discipline the offender. Those type of actions clearly shape a culture of encouraging and rewarding ethical behavior and punishing lapses, Mr. Dignan said.
He added that top executives and managers under them should not tolerate harassment and must be vigilant on health, safety and educational issues and know what not to ask during an interview of a potential hiree. ``You want to try to get to a culture where people will take the initiative in what they do because it's a worthy objective,'' he pointed out.
If a CEO is not fulfilling a commitment to ethical leadership, Mr. Dignan said the risks in legal, regulatory, governance and reputation costs are enormous. He advised that management should hold meetings with employees to inform everyone of how the business ought to be run and to discuss the company's code of business conduct. He said employees should sign the code in acknowledgement of having read it and understood its ramifications.