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Corporate Reputation: Image and Identity

Peter Pruzan

Department of Management, Politics and Philosophy, Copenhagen

Business School

ABSTRACT

It is fruitful to consider two complementary per-

spectives on the concept of corporate reputation

and its relationship to success and credibility.

The first of these can be said to be a managerial

or pragmatic perspective. Its basis is economicrationality and it focuses on traditional notions

of corporate success. It is primarily concerned

with the qualities imputed to the corporation by

its stakeholders and aims at protecting and

improving corporate image. This pragmatic

perspective on corporate reputation is having an

increased effect upon the behavior of business

leaders due to the growing expectations of

employees, customers, investors, and the media

and is promoted and marketed by eager

hordes of consultants and PR experts.

The second perspective can be said to be areflective perspective. It is existential or phi-

losophical in nature and, in comparison with

the pragmatic perspective, employs a broader

repertoire of measures of corporate success and

focuses on organizational identity rather than

image. It is reflective rather than communicative

in nature and is more concerned with the inher-

ent character of the organization rather than

its outward appearance. This perspective does

not receive nearly as much conscious leadership

attention as the pragmatic perspective. Never-

theless, its focus on what is and what shouldbe rather than on what appears to be

is rapidly becoming central to the theory and

practice of leadership. This is evident in the

increasing interest in such concepts as corporate

social responsibility, corporate citizenship, and

values-based leadership.1

This paper concludes that supplementing the

primarily external image orientation of the

pragmatic perspective with the internal iden-

tity perspective of the reflective perspective can

lead to increased corporate self-awareness, to an

improved capability for reflecting on corporateidentity, and to more realistic methods for mea-

suring, evaluating, and reporting on the organi-

zations impact on its stakeholders and society

as a whole in other words, to an improved

and more inclusive depiction of the enterprise

and its performance which will be necessary for

organizational viability and success.

CORPORATE REPUTATION: A

PRAGMATIC PERSPECTIVE

There is no doubt that corporate reputation

in the sense of corporate image isgiven more attention than ever before in

the history of organized business activity.2

Broad groups of constituencies including

customers, shareholders, employees, local

communities, financial institutions, compe-

titors, regulating bodies, and the media are

increasingly interested in the way corpora-

tions behave that is, appear to behave.

Their concern is with the images3 they

receive of corporate behavior and results.

Management is reacting to these increased

stakeholder demands and is developingattitudes and tools which support an

increased awareness of, and sensitivity to,

how vital reputation is for stakeholder trust

and competitive advantage. This has led it

to take a pragmatic stance on corporate

reputation; protecting and improving repu-

Corporate Reputation Review Volume 4 Number 1

Corporate Reputation Review,

Vol. 4, No. 1, 2001, pp. 5064

# Henry Stewart Publications,

13633589

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tation is perceived as a necessary condition

for maintaining the corporations license to

operate, for maintaining harmonious rela-

tionships with its many stakeholders and,

perhaps most importantly from this per-spective, for competitive economic perfor-

mance.

We will now briefly consider some of

the developments leading to this relatively

recent focus on reputation as a vital area of

managerial concern.

Enter the political/ethical consumer

Throughout the world the media keep a

wary eye on corporate behavior and zoom

in sharply on suspected corporate misdeeds;

the TV news guillotine and the Internetare ever ready to defame business leaders

that are accused of unethical behavior.

They provide consumers with information

which enables them to make purchasing

choices that are based not only on tradi-

tional parameters such as price and func-

tionality, but also on such matters as how

and where the product/service is produced

and what the reputation is of the firm pro-

ducing it. This is evident in the increased

pressure being exerted on companies to

adhere to international standards on issuessuch as fair wages and the use of child

labor in developing countries. And an

increasingly powerful and influential type

of organization has developed in recent

years to support these trends the non-

governmental organization (NGO), quite

often campaigning to promote specific

causes and to promote corporate transpar-

ency.

All of these developments have led to an

increased sensitivity of consumers to their

moral responsibilities and their power toinfluence corporate behavior. In the

authors own country, Denmark, the term

political consumer was created in 1994. It

is widely used here and is indicative of a

new and paradoxical situation where politi-

cal matters are dealt with in the market-

place. It focuses attention on a new form

of consumer activism in an epoch where

politics is being reduced to economics and

where the market is a dominating arena for

political decisions. In other countries, dif-ferent terms are used (eg, the conscious

consumer, the critical consumer, etc.), but

the trends are the same; there is a clear rise

in what might simply be called ethical

consumerism.

Time after time surveys indicate that

while shareholders are primarily concerned

with corporate profitability, consumers,

the primary source of corporate income,

are increasingly concerned with the envir-

onmental, social, and ethical responsibility

of business.4

Ethical consumerism can beinterpreted as an expression of the heigh-

tened awareness of the role played by the

individual consumer in his or her interplay

with the business community. Ethical con-

sumers react positively or negatively in

their purchasing behavior to what they

consider to be the ethical or unethical

behavior of business not in a nave

attempt to replace regulating bodies or

political institutions, but to satisfy their

conscience, to send a signal to both the cor-

porate world and the politicians, and,indirectly, to supplement the workings of

democracy.

However, the ethical consumer not only

makes his or her point via decisions as to

what not to purchase, but also, though less

provocatively, by making positive choices as

to which products, production forms, and

companies to support. This positive

group is less vociferous, more stable and

perhaps more influential. According to

recent analyses, more than half Danish con-

sumers belong to this category of ethicalconsumers. For the past several years,

investigations indicate that, in particular,

environmental and social/human rights

issues are of importance to them and that

such matters always or often influence

their purchasing behavior.5

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According to Danish evidence, both

those ethical consumers who make their

point by deciding not to purchase a pro-

duct and those who do so by making a

positive choice (and of course there is aconsiderable overlap between these two

groups) are characterized by being better

educated, wealthier and more critical than

the average Dane and are recognized as

trend-setters.

Perhaps the most publicized expression

of the political/ethical consumers power

in Denmark was the decision made by the

top management of the major Danish (and

international) brewery, Carlsberg, in 1996

not to carry out its investment plans in

Burma after considerable public criticism.It is interesting to note here a very similar

result in Holland, where the brewery Hei-

neken also made a decision to pull out of

Burma but not just due to pressure

from the outside. According to its former

CEO, a major factor was also the attitudes

and expectations of Heinekens own

employees, who put pressure on the com-

pany because they wanted to be proud of

their place of work.

Words can be important for the way

that we view the world, and there is littledoubt that the invention of the terms poli-

tical/critical/concerned/ethical consumer

has contributed to increased managerial

focus on corporate reputation.

The Ethical Investor

Similarly, there is abundant evidence that

influential groups of investors and finan-

ciers are tending to focus not just on cor-

porate track records as to productivity,

profitability, and share price, but also on

the corporate ethical profile and the riskswhich might arise should corporate reputa-

tion be sullied. This is particularly the case

in the United States, where there is the tra-

dition of placing savings in the stock

market via mutual funds and pension

funds, as well as for litigation in connection

with corporate misdeeds.6 Analyses indicate

that $2.16 trillion, corresponding to

roughly 13 per cent of the $16.3 trillion

currently under professional management

(pension funds, mutual funds, creditunions, venture capital funds, etc.), is

socially or ethically invested.7

This

represents a growth of 82 per cent from

1997 levels, a growth roughly twice the

rate of all assets under management in the

USA. The term social/ethical investment

covers screened portfolios, shareholder

advocacy, and community investing.8

The

large majority of the funds so invested are

screened.

Similar results apply to the UK where

the amount invested in socially/ethicallyresponsible funds has tripled to roughly

3bn in the five-year period 19951999.

Internationally a major development has

been the launch in September, 1999, of the

worlds first global indexes that track the

performance of leading sustainability-

driven companies, the Dow Jones Sustain-

ability Group Indexes (DJSGI). The DJSGI

consists of more than 200 securities selected

from nearly 3,000 stocks in the Dow Jones

Global Index. Included are corporations in

68 industries in 22 countries. The selectionof the companies included in the DJSGI is

based on the extent to which the compa-

nies are known for achieving their business

goals by integrating economic, environ-

mental, and social growth opportunities in

their business strategies. According to the

providers of the index, Sustainability com-

panies not only manage the standard eco-

nomic factors affecting their businesses but

the environmental and social factors as

well. There is mounting evidence that their

financial performance is superior to that ofcompanies that do not adequately, cor-

rectly and optimally manage these impor-

tant factors.9 The evidence referred to is in

the form of detailed backtracking analyses

of the economic performance of the com-

panies in the indexes. These analyses show


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that had investors invested in the indexes

one year ago, three years ago, or five years

ago, they would in all cases have earned

significantly higher returns than if they had

invested in the stocks of the Dow JonesGlobal Index.

In other words, there is strong evidence

that corporate reputation can play a signifi-

cant role in the investment decisions made

by large numbers of individuals and finan-

cial institutions. There are indications that

ethical investing will play an increasing

role in the future and that it will not only

be an Anglo-Saxon phenomenon but will

spread to other countries with major stock

markets.10

ATTRACTING AND HOLDING GOOD

EMPLOYEES

Having considered the relationship

between a pragmatic perspective on cor-

porate reputation and customers and

shareholders, we now turn to another key

stakeholder, the employee. There is

increasing evidence that the good employ-

ees demand more from their place of

employment than a competitive wage,

professional development, and a careerpath. Bright, dynamic, independent, and

creative employees want to feel that the

corporate values are in reasonable har-

mony with their personal values, that the

organization provides them with an arena

for meaningful work and personal devel-

opment and that they can be proud of

their place of work. These aspirations,

directly or indirectly, are related to the

corporate reputation. Although it is possi-

ble for an employee to be proud of the

corporation she or he works for even if itdoes not receive public recognition, it is

far easier to be proud of ones place of

work in a company that has a fine reputa-

tion.

Employee pride in the workplace is

becoming an increasingly important indi-

cator of effectiveness.11 The opposite is

even more true; in those companies

where the employees are not proud of

their employer, there is a lack of trust,

confidence, enthusiasm, and willingness tooffer ones best. According to an article in

the Financial Times, a study performed by

the Fuqua School of Business at Duke

University among graduating MBAs at

ten of the top US business schools

showed that 64 per cent of the respon-

dents would not work in certain indus-

tries because of ethical concerns and

that strong ethics at the workplace,

together with a successful marriage and

good physical health are the three goals

most highly rated by respondents; makinga lot of money is down in 12

thplace!

12

There is also evidence that not only

potential leaders emphasize pride in their

place of work, but that this also applies

to active leaders. According to a survey

in 2000 among several hundred top lea-

ders in Danish corporations, 82 per cent

look forward to increased focus on ethical

questions in the years to come and 88 per

cent reply that there are companies or

branches they would not work for due to

ethical concerns. This is particularly thecase as regards companies whose suppliers

suppress human rights (62 per cent) or

employ young children (81 per cent).13

It can be argued that pride in ones place

of work is particularly important in so-

called knowledge-based firms where

knowledge generation is highly important,

where production is highly automated, or

where the direct costs of production are,

relatively speaking, less important com-

pared to the total economic activities of the

firm. In such firms there is a movementtowards more decentralized and fluid

organizational structures and increased

autonomy for both organizational sub-

units and the individual employees. In such

environments it is vital for companies to be

able to attract and hold the good, creative,

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The pragmatic reaction to (potential)

challenges to corporate reputation is to

build up a good image, make certain that

the company cannot be accused of break-

ing the law or of behaving unethically, andto be sensitive to the demands of custo-

mers, shareholders, the local community,

the media, and so on in other words, to

avoid being attacked for misdeeds, develop

a protective capacity, and live up to the

expectations of others.

In contrast, the reflective perspective on

reputation primarily mirrors an organiza-

tional-existential concern. We are accus-

tomed to the notion that individuals can

ask existential questions such as: Who am

I? Why am I here? What are my obliga-tions as a human being? What is a good

life? We are not accustomed to such ques-

tions at an organizational level. Neverthe-

less, it is exactly these kinds of questions

that enlightened managers are beginning to

seek answers to when faced with challenges

to corporate reputation: Who are we? Why

are we here? What values do we support?

What are our obligations as an organiza-

tion? What is a good life for us? These are

questions dealing not with superficial

appearances but with identity, with integ-rity, with accountability, with fundamental

purpose.

The worlds religious traditions as well

as modern psychology provide arguments

that it is important for human beings to

pose existential questions and not just to

focus on exterior matters such as wealth,

position, and reputation. These arguments

can be extended from the individual

domain to collectivities. It is argued here

that it is also important for corporate lea-

ders to pose organizational-existential ques-tions. Unless such questions are faced up to

it will be difficult (in particular for

employees) to attach deeper meaning to

such everyday phrases from modern man-

agement jargon as the companys visions,

values, strategies, and goals. Moreover, it

will be difficult to harness the latent collec-

tive energies that can arise from an organi-

zation where there are shared values and

understandings as to what we value and

what we disvalue, energies that have astheir source an experience of identity, a

feeling of belonging, of being a part of, of

being responsible for in other words

of what will be referred to as corporate

we-ness.

But the authors experience clearly indi-

cates that the development of a shared per-

spective on values can not be achieved by

managerial decree. Therefore the question

naturally arises: Under which circum-

stances is it meaningful to ascribe to an

organization the competency and capacityfor developing visions, values, and so forth

for having a corporate consciousness?15

The reflective approach to corporate repu-

tation deals with such questions, questions

about corporate identity and integrity. It

regards the explicit attempt to formulate

and answer such questions as vital for both

commercial success and viability as well as

for the corporation being able to serve its

constituencies and society in a manner

which is in harmony with its basic reasons

for existing.It is seldom that such organizational-

existential questions are being posed expli-

citly by researchers on organizational

theory, by consultants, or by members of

the managerial profession. But the

increased emphasis on corporate visions,

shared-values, accountability, and ethics

provides an indication of their gradual

emergence into the managerial mind-set.

Before proceeding, it must be empha-

sized that the views to be expressed below

are of a most subjective nature and thattheir validity is not at present amenable to

more standard, quantitative, empirical

investigation. These arguments, which sup-

port the proposition that there is an

increasing focus on the deeper, reflective

perspective, can be challenged and fre-

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quently are. Many managers the author

speaks to about the themes presented here

argue that their interest in these themes has

little to do with an ethical, reflective,

deeper perspective on corporate reputation.They argue that their motivation is purely

pragmatic.

The authors experience indicates that it

is often extremely difficult for human

beings to know what their real, funda-

mental motivations are. We are in some

sense the captives of our cultural construc-

tions. A large minority of the managers

the author has discussed these matters with

in fact aspire to utilize a far broader reper-

toire of explanations to motivate their

decisions and actions than traditional eco-nomic rationality alone permits. These

include what modern leadership vocabu-

lary categorizes as a multi-stakeholder,

multi-value perspective on corporate iden-

tity and success. The problem is that they

have for so many years become accus-

tomed to the narrow language of money,

the short-term demands of shareholders,

and the arguments provided by their edu-

cation and by hard-nosed consultants that

they tend to suppress these aspirations as

well as consideration of the dilemmaswhich arise from pursuing ethical aims in

a competitive business environment. They

fear as well the potential taunts and criti-

cisms of their colleagues, their directors,

and the media should they deviate from a

narrow focus on profitability and share-

holder-value.

VALUES-BASED LEADERSHIP

The first theme which provides an indica-

tion of this shift in perspective from thepredominant pragmatic perspective to the

reflective perspective is that of values-based

leadership. Within a relatively short period

of time this concept has become widely

accepted in the language of management

and there are journals centered around this

theme, courses at business schools, and a

large number of consultants marketing

tools to enable management to implement

values-based leadership. Many arguments

can be developed to promote this perspec-tive on leadership (see, eg, Pruzan, 1998)

and both the champions of the pragmatic

and the reflective perspectives on corporate

reputation are able to provide rational jus-

tification for espousing values-based leader-

ship. Perhaps the two factors that most

clearly distinguish the former from the

latter are:

1) the extent to which the justification is

primarily based on the argument it

pays to do so rather than on argumentsbased on the values of all the stake-

holders

2) the extent to which the values to be

considered are generated in a top-down

fashion and implemented rather than

as a result of a dialogue process which

involves the various stakeholders, espe-

cially the employees.

In those companies where the introduction

of some sort of values-based management

is primarily predicated upon its instrumen-tal effectiveness in protecting corporate

image and short-term profitability, the

pragmatic perspective is elevated over the

reflective. Here the focus is on one stake-

holder the owners16

and one value

profits.17 This primacy of the pragmatic

over the reflective perspective is even more

the case when the values, which form the

basis of the values-based management, are

developed in the top management tower

and then sent down the hierarchical ladder

to the foot soldiers. In these cases there islittle interest in the values as such; they are

primarily labels which are employed to

promote shareholder value by creating

images, portrayed in attractive brochures,

to convey to the world all the good things

that the company stands for. A rapidly


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increasing number of major corporations

have developed or are in the process of

developing their ethical codes, value state-

ments and the like in this manner. There is

a big difference, however, between anexercise in public relations and values-

based leadership.

Fortunately, there are also an increasing

number of corporations that are focusing

on values not simply to protect the corpor-

ations image and its license to operate

should a scandal arise (the unfortunate

behavior was not in accord with our values

as can clearly be seen from our code of

ethics). Rather, there is a shift taking place

from a one-stakeholder (owners), one-

value (monetary wealth) approach to cor-porate purpose, to a more inclusive multi-

stakeholder, multi-value perspective. From

this expanded perspective stakeholders and

the values they espouse in their interplay

with the organization are important in

their own right. They are not just instru-

ments to produce increased profits and

stock prices. And the underlying rationales

which over time affect the corporations

culture and shared values are not exclu-

sively instrumental, but are the result of

what one might refer to as the organiza-tions ongoing dialogue with itself. It is

particularly in such a culture that it is

meaningful to refer to shared values and to

a feeling and awareness of corporate we-

ness. This shift in focus and perception,

even though it may be gradual, is an indi-

cation of the shift in perspective on corpo-

rate reputation from the pragmatic

towards the reflective.

THE NEW FORMS OF ACCOUNTING,

AUDITING, AND REPORTING

Closely related to the observations above

about values-based leadership is the rapid

evolution of new forms of corporate mea-

surement, evaluation, and reporting. The

first major shift occurred in the mid-1980s

when the first attempts were made to

develop environmental accounting. Look-

ing back over the past 15 years an amazing

development has taken place here. While

the first reports were scoffed at by cynics,most major corporations regularly produce

environmental reports today and in some

parts of the world (for example, in Den-

mark) there are legal demands as to the

publication of such reports.

What is interesting to note now is the

similar development taking place in what is

referred to as social and ethical accounting,

auditing, and reporting (SEAAR).18

Since

about 1990 this field has developed at an

explosive rate. An increasing number of

particularly northern European enterprisesare producing ethical accounting state-

ments, social reports, value reports, sta-

keholder reports, holistic reports,

sustainability reports, and so on.

Although, as could be expected, some of

those producing such reports are major

international firms, a rather large number

are small- to middle-sized organizations,

and among these are many public and not-

for-profit enterprises (including hospitals,

medical clinics, schools, railroads, commu-

nities, homes for the aged, and so on). Allof these reports seek to present an

expanded perspective as to corporate iden-

tity and success in comparison with the tra-

ditional financial accounts and they all

provide multi-stakeholder, multi-value

profiles of the corporations.

Perhaps the major single characteristic

that these reports share is that almost all are

either built around the concept of stake-

holder dialogue or profess that they will be

in the future. They are not just one-way

communications prepared by experts;almost all the reports invite the stake-

holders to participate in the development

of the reports, the methodology employed,

and the development of new actions to

improve corporate performance. In other

words, rather than being solely based on

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managements perceptions of what is

important to measure and on objective

measures of performance, the reports also

focus on the values and aspirations of the

various parties who affect and/or areaffected by the corporations decisions and

actions.

The greatly increasing interest in the

development and implementation of these

reports provides important evidence of the

shift from a pragmatic perspective to a

more reflective perspective. Further evi-

dence of this shift in perspectives can be

found in the ongoing work in developing

standards for such reports. At the confer-

ence Building Stakeholder Relations, held

in Copenhagen in November, 1999, by theLondon-based Institute of Social and Ethi-

cal AccountAbility (ISEA), the first

detailed standards for the development of

social and ethical accounting, auditing, and

reporting were presented. These standards,

AA1000, were developed by ISEA in close

cooperation with a group of international

corporations, all of whom are working to

develop meaningful portrayals of corporate

behavior and its effects on their various sta-

keholders.19 Central to these standards is,

once again, the notion of stakeholder dialo-gue. It is clear from this ongoing work

that although most certainly the corpora-

tions involved are concerned with their

reputations as seen from a pragmatic per-

spective, they are also concerned with

much broader issues of how to develop the

competency to be sensitive to and to sup-

port the values of their various stake-

holders, ie, a reflective perspective.

CORPORATE SOCIAL RESPONSIBILITY

The notion of corporate social responsibil-

ity is the final theme to be introduced in

support of the proposition that there is a

shift taking place away from a purely prag-

matic perspective on corporate reputation

and towards a reflective perspective, a shift

taking place not only in observable corpo-

rate practice but also in the mind-set of

corporate leaders. In particular, reference

will be made to one major component of

the rather nebulous concept social respon-sibility responsibility to marginalized

groups as regards the labor market. Such

marginalized groups could include older

employees who may have difficulty in

learning to use modern technology and

therefore risk being fired, the unemployed,

the handicapped, and political refugees and

immigrants who lack basic skills and have

social/cultural patterns of behavior different

from the local citizens. The arguments pre-

sented will primarily be based on experi-

ences in Denmark.Indicative of the present high level of

concern in Denmark for the concept of

corporate social responsibility are the many

active partnerships which have developed

in the last few years between the Danish

government, corporations, local govern-

ments, and unions. In early 1994, prior to

the UN Social Summit meeting in Copen-

hagen in 1995, the Minister of Social

Affairs, Ms Karen Jespersen, started the first

of a series of domestic initiatives on corpo-

rate social responsibility. The motive wasto contribute to the long term develop-

ment of the Danish social welfare society

and to create a more reflective atmosphere

for considering the responsibilities of both

government and business with regard to

marginalized groups in the labor market.

The underlying proposition was that cor-

porations have a large potential for contri-

buting to the prevention, dissolution, and

solution of social problems related to the

labor market without negatively affecting

their effectiveness and viability.A basic assumption underlying the initia-

tives was that it is no longer viable for

either the corporate world or government

to rely on the classical distinctions between

private and public domains. An under-

standing developed that, on the one hand,


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if corporations do not assume greater

responsibility for the needs of the margina-

lized groups, they will, in the long run,

undermine the healthy societal atmosphere

which is a precondition for a properlyfunctioning market and properly function-

ing companies; and on the other hand, that

it is unacceptable to continue with govern-

ment assuming the sole responsibility for

these groups with the resultant high levels

of taxation, insensitive bureaucracies, and

an increasingly marginalized and alienated

proportion of the population. The threat

which both sides recognized is one of

developing a more polarized society char-

acterized by the haves and the have-nots,

both with respect to work, wealth, andself-respect, and of the resultant tensions,

which could exert great influence on the

whole atmosphere and quality of life in

Denmark.

This is to be seen in light of the tempta-

tion, stimulated by competition and the

demands of shareholders, to continue con-

sidering employees as instruments or

resources to be used or discarded solely on

the basis of their cost-effectiveness, rather

than as most important stakeholders with

their own rights, values, and aspirations.20

With this background, the Ministry of

Social Affairs, in teamwork with a network

of leading Danish companies, initiated a

series of activities designed to develop tools

and processes for integrating such margina-

lized citizens into productive work in a

way that serves the interests of all parties

involved: the individual, the company, and

the society. This was to be achieved by

creating new forms of teamwork between

the public and private domains.21

It should be clear from this brief presen-tation of the evolving notion of corporate

social responsibility with respect to mar-

ginalized groups that the perspective is not

primarily a pragmatic one; the corpora-

tions involved are committing themselves

to developing a far deeper perspective on

responsibility than that promoted by tradi-

tional economic rationality. Certainly the

leadership of the companies involved have

considered the possible goodwill that can

be won, the support to be provided by thegovernment, and the potential benefits to

corporate image, all of which can influence

major stakeholders including regulators,

investors, customers, employees, and

others. But it is clear from the develop-

ments here that this pragmatic perspective

is strongly complemented by another

factor, the organizations existential dialo-

gue with itself, a self-referential dialogue

which emphasizes organizational-existential

questions dealing with the notions of cor-

porate identity, purpose, success, andresponsibility.

ARE THE TWO PERSPECTIVES ON

CORPORATE REPUTATION

ANTITHETICAL OR MUTUALLY

SUPPORTIVE?

It should be clear from what has been writ-

ten above that this is really a leading ques-

tion; the answer has more or less been

hinted at throughout the exposition.

Although die-hard pragmatists will arguethat any concern with the corporations

reputation has only one major purpose; to

protect the corporations license to operate

and to contribute to its income generating

potential, the author maintains that focus-

ing solely on this perspective will most

likely be counter-productive. Paradoxically

speaking, a management that only empha-

sizes the pragmatic perspective and ignores

the reflective perspective may find that its

focus on economic rationality alone is irra-

tional that it could have achieved betterfinancial results if its narrow focus on suc-

cess had been more inclusive and involved

a multi-stakeholder, multi-value perspec-

tive. In other words, rephrasing a well-

known one-liner, the business of business is

more than business.

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horizon: not to be confused with specific

goals or business strategies.

Clearly the conclusions here, which

characterize these most highly reputed cor-

porations by their fundamental reasons forexistence beyond just making money,

underline the significance of the reflective

perspective. The corporations in question

have all been highly successful according to

traditional economic measures of perfor-

mance and this appears to be positively

correlated with the deeper, values-based,

reflective perspective on reputation pre-

sented in this essay.23

What is equally

important for the theme of this essay is

that the companies they are compared to

are, for the most part, characterized by theabsence of such core/shared values and pur-

poses.

In conclusion, there appear to be both

strong logical arguments as well as empiri-

cal evidence that the two perspectives on

corporate reputation need not be in oppo-

sition to each other, and that the reflective

perspective can be supportive of the prag-

matic perspective with its focus on tradi-

tional notions of success. It has been

argued that a pure pragmatic perspective

on corporate image can lead to a lack ofcorporate sensitivity to the needs and

aspirations of many stakeholders and indi-

viduals whose support and trust is of vital

importance for corporate success and sur-

vival. It has also been argued that supple-

menting the primarily external image

orientation of the pragmatic perspective

with the internal identity perspective of

the reflective perspective can lead to

improved corporate self-awareness, to an

improved capability for reflecting on cor-

porate identity, and to more realisticmethods for measuring, evaluating, and

reporting on the corporations impact on

its stakeholders and society as a whole

in other words, to an improved and more

inclusive depiction of the corporation and

its performance.

ENDNOTES

1 The author will throughout use the concept of

leading when referring to activities dealing

with inspiring and nurturing employees and

other corporate stakeholders. When on

occasion the term managing is used, the refer-ence is to activities dealing with more tradi-

tional hierarchical functions such as steering,

controlling, and coordinating.

2 It should be interjected here, that the word

business will be used throughout not in a

strictly commercial sense; when we speak of

corporations we will refer to both private and

public enterprise, local governments, unions,

hospitals, associations, NGOs, etc.

3 It can appear as though we always deal with

images. The distinction, which will be more

clear in the sequel, is that the reflective perspec-

tive is less concerned with appearances andmore concerned with the reality underlying

these appearances; its focus is on existential

rather than pragmatic enquiry.

4 Top leaders boycott unethical companies.

article in Danish which shows that even some

of Denmarks most highly respected corpora-

tions are regarded by Danish business leaders as

ethically controversial; see Larsen (2001).

5 See, eg, K. Hjulmand (1997) Det umuliges

kunst: Politik og den politiske forbruger (The

art of the impossible: Politics and the political

consumer), Chapter 2 (Jyllands Postens Erh-

vervsbogklub, Copenhagen).

6 According to David C. Korten (1995) Tort

liability payments accounted for about 2.5 per

cent of American GNP in 1987 (When corpora-

tions rule the world, Berrett-Koehler, p. 119).

7 According to Social Investment Forum News,

November 4, 1999.

8 Screening filters out firms that produce particular

products or produce products in a particular

way, eg, firms that produce attack weapons,

landmines, cigarettes, dangerous pesticides, firm

that lack an effective environmental policy, use

animal testing, employ child labor, do not have

women or members of minority populations in

managerial positions, etc. Such screening canalso be employed positively to identify firms

that produce particular products and/or produce

their products in a particular way which the

investor wants to support through his or her

investment. Shareholder advocacy means that the

investors use the power of their ownership posi-

tions to sponsor proxy resolutions on social

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issues and to work with companies to encourage

more responsible levels of corporate citizenship.

Community investing means that capital invest-

ments are focused on local development initia-

tives. Community investing means that capital

investments are focused on local developmentinitiatives, affordable housing, and small

business lending in needy urban and rural areas.

9 See Guide to Dow Jones Sustainability Group

Indexes, Versin 1, September 1999. For further

information contact: Dow Jones Sustainability

Group Index, telephone: +41 1 395 28 28 fax:

+41 1 395 28 50 e-mail: info@sustainability-

index.com website: www.sustainability-index.com

10 Information on ethical investing in the United

States is collected and disseminated by, among

others, the Social Investment Forum (www.so-

cialinvest.org). A sister organization in the UK

is the United Kingdom Social InvestmentForum (www.uksif.org). In Europe there are a

number of ethical and environmental rating

groups which advise investors, eg, Caring-

Company in Sweden, Ethical Investment

Research and Information Service (EIRIS) in

the UK, IMUG in Germany, Eco-Rating

International in Switzerland, Ethibel in

Belgium, Avanzi in Italy and Arese in France.

In May, 2000, the European Commission spon-

sored a conference in Lisbon to promote the

development of socially responsible invest-

ment in Europe. In the USA the Council on

Economic Priorities and the Interfaith Center

on Corporate Responsibility research andadvocate the interests of investors and consu-

mers. As mentioned above, the new Dow

Jones Sustainability Group of Indexes is

intended to provide investors with information

on major international corporations that are

known for integrating economic, environmen-

tal and social perspectives into their business

strategies.

11 See Levering, Robert and Milton Moskowitz,

The 100 Best Companies to work for in

America, (Doubleday, 1994) for a large

empirical study of the relationship between

employee satisfaction, including pride, and cor-porate success. They provide empirical

evidence that American companies with the

best scores with respect to criteria such as job

security and job possibilities, openness and

fairness, the social environment, wages and

benefits and pride with respect to ones job

and the company were not only among the

most profitable companies, they tended to have

the lowest job turnover and the happiest

employees.

12 Family values replace the dash for cash, article

by Della Bradshaw in Financial Times, 25th

May, 1998.13 Reference is made here to Larsen (2001), an

article which was not published by the time

that the present essay was submitted in its final

version to Corporate Reputation Review in

December 2000.

14 See Peters (1999). Peters has developed the

concept of Reputation Assurance for Pricewa-

terhouseCoopers. The focus in his article is

mainly one of defending corporate reputation

(the title speaks of surviving the corporate

jungle) and the rationale is primarily one of

shareholder values rather than a more inclusive

stakeholder value perspective with its focus onthe values and needs of all those parties affected

by the corporation. He underlines that

. . .companies with good sustainable reputa-

tions are those which succeed in managing

their various stakeholders together.. .; stake-

holders are to be managed as resources to

generate shareholder value rather than to be

respected in their own right.

15 For a discussion of the notion of corporate con-

sciousness, see Pruzan (2001).

16 Traditionally, tensions have existed between

owners and managers, with the owners putting

pressure on the managers to act solely in their

interest. These tensions may be disappearing,not primarily due to more enlightened owners

but to the fact that more and more managers

are becoming owners. In major US corpora-

tions, the primary source of income for many

managers is not their salaries but the income

they receive via stock options and the like.

According to an analysis of the incomes of

managers of major American corporations per-

formed by Pearl Meyers & Partners, New

York and reported on in Why is Executive

Pay Going through the Roof? AFL-CIO

(1997), . . .stock options make up two-thirds of

a CEOs pay.17 In many cases the pragmatic perspective is

tightly tied to a shareholder perspective on cor-

porate success, where the primary value is stock

price rather than profit. These two measures of

performance are of course tightly correlated

via the price-earnings ratio.

18 See Zadek, Pruzan, & Evans (1997), Building


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corporate AccountABility: Emerging practices

in social and ethical accounting, auditing and

reporting. For information on the state of the

art, standards, and qualification training contact

the Institute of Social and Ethical AccountAbil-

ity (ISUEA), tel: +44 20 7407 7370, fax: +4420 7407 7388, e-mail: Secretariat@AccountAbil-

ity.org.uk, website: www.AccountAbility.org.uk

19 ISEA (1999) Accountability 1000 (AA1000):

Overview of standard and its applications, and

AccountAbility 1000 (AA1000) framework,

standard, guidelines and professional qualifica-

tion, exposure draft, London.

20 The concept of corporate social responsibility

employed here should be seen against the fol-

lowing concept which has dominated

economic/pragmatic thinking over the last 40

years: Few trends could so thoroughly under-

mine the foundations of our free society as theacceptance by corporate officials of a social

responsibility other than to make as much

money for their shareholders as possible

(Milton Friedman, Nobel Prize Laureate in

Capitalism and Freedom, University of

Chicago Press, 1962).

21 Such teamwork is not only informal, but may

also be formalized via so-called new social part-

nerships (NSPs). These are partnerships

between corporations, local governments,

NGOs and labor unions. Research is currently

being carried out on these, NSPs, not only in

Denmark via the Copenhagen Centre (www.co-

penhagencentre.org), but also via the EuropeanBusiness Networks for Social Cohesion based

in Brussels (www.ebnsc.org).

22 Note that this attention to visionary and per-

vasiveness is also closely related to such less

attractive concepts as indoctrination and cult-

like cultures. The authors argue that The

visionary companies more thoroughly indoctri-

nate employees into a core ideology than the

comparison companies, creating cultures so

strong that they are almost cult-like around the

ideology. The visionary companies more care-

fully nurture and select senior management

based on fit with a core ideology than thecomparison companies. The visionary compa-

nies attain more consistent alignment with a

core ideology in such aspects as goals,

strategy, tactics, and organization design

than the comparison companies (p. 71).

23 Yet another word of caution is called for here.

The book is very American and the concepts

of values employed are not always in line

with a more European approach to values-

based leadership. In particular, there appears to

be little consideration given to the notion of

stakeholder dialogue or to a more inclusive

perspective on whose values are in focus andhow these values have originated and been per-

petuated. It is also interesting to note in this

context that Phillip Morris, which is heavily

attacked for its production of cigarettes, is

included in the books list of visionary com-

panies.

REFERENCES

Bradshaw, D. (1998) Financial Times, May 25.

Brsen (1997) April 14. p. 8, Copenhagen.

Collins, J. C., and Porras, J. I. (1994) Built to last:

Successful habits of visionary companies, Har-perCollins Publishers, New York.

Dow Jones Sustainability Group Indexes GmbH.

(1999, September). Guide to Dow Jones Sustain-

ability Group Indexes, Version 1. Available:

www.sustainability-index.com

Friedman, M. (1962) Capitalism and Freedom,

University of Chicago Press, Chicago.

Hjulmand, K. (1997) Det umuliges kunst: Politik

og den politiske forbruger (The art of the

impossible: Politics and the political consumer),

Jyllands Postens Erhvervsbogklub, Copenhagen.

Institute of Social and Ethical AccountAbility

(1999) AccountAbility 1000 (AA1000): A foun-

dation standard in social and ethical accounting,

auditing, and reporting, overview of standard

and its applications, and AccountAbility 1000

(AA100): Framework, standard, guidelines, and

professional qualification, exposure draft,

London.

Korten, D. C. (1995) When corporations rule the

world, Berrett-Koehler, West Hartford, CT.

Larsen, T. and Srensen, M. (2001) Top leaders

boycott unethical companies, (in Danish)

Brsens Nyhedsmagasin, 1, 1418.

Levering, R., and Moskowitz, M. (1994) The 100

best companies to work for in America, Dou-

bleday, New York.Peters, G. (1999) Reputation assurance: Surviving

the corporate jungle, Earning your reputation:

What makes others respect your company, Pri-

cewaterhouseCoopers, London.

PricewaterhouseCoopers, Reputation Assurance,

RA5. [On-line]. Available Internet: http://

pwcglobal.com

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Pruzan, P. (1998) From control to values-based

management and accountability, Journal of

Business Ethics, 17, 13791394.

Pruzan, P. (2001) Can corporations have con-

sciousness? Can they have values, visions, and

virtues? Journal of Business Ethics, 29, 271284.

Social Investment Forum News (1999, November 4).

[On-line]. Available Internet: http://www.socia-

linvest.org

Zadek, S., Pruzan, P., and Evans, R. (1997)

Building corporate AccountAbility: Emerging

practices of social and ethical accounting,auditing, and reporting, Earthscan, London


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