The role of the board in managing reputation

The number of corporate crises which we have seen in recent times, reiterate the importance of managing corporate reputation and its central role within the governance framework of an organisation.

A corporate crisis can have both short and long-term implications for an organisation. Shareholder value can fall rapidly but will usually recover over time, if the crisis is appropriately managed and resolved. An ill-managed crisis can not only impact on financial performance and customer confidence, but may also cause significant damage to a company's reputation from which, in some instances, it may never recover.

The board has a key role to play in ensuring that appropriate structures are put in place to manage corporate reputation on an ongoing basis and should not be addressing the issue solely in times of crisis.

In order to effectively manage reputation, it is important for the board to consider and to understand the impact of its strategic decisions, positive and negative, on its stakeholders and the wider community. The strategy that an organisation pursues will have an influence on its corporate reputation. Any risks to that reputation should be clearly identified within an appropriate reputation risk management structure as part of the organisation's corporate governance frameworks.

The board, in conjunction with the Chief Executive or Managing Director, is also responsible for setting the culture of the organisation and the ethical framework within which that culture exists. Every organisation should have a set of core values under which it operates and these values should be lived by everyone within the organisation, from the top down.

Behaviour that is at odds with an organisation's culture, values and ethical framework, will often have a negative impact on its reputation. If such behaviour is evident at board level, then the consequences can be extremely serious and as we have seen in recent years, can erode trust in and good will for an organisation, which can be difficult to rebuild.

Thus, an awareness and understanding by the board of the importance of managing the reputation of an organisation is key. Every board should have a mix of skills around the boardroom table, with expertise in communications and reputation management, a vital component.

In times of crisis, the board must be kept fully up-to-date. Through the Chief Executive or Managing Director, the board should be provided with structured, relevant information as a basis for critical, strategic decision-making. It is as important that the board shows leadership, is seen to be responsive, in control and honest.

The board must, at all times, act with integrity and act responsibly in the best interests of the organisation's shareholders and its various stakeholders.

Ultimately, managing corporate reputation at board level is about understanding the impact of strategic decisions, anticipating the risks and having a framework in place deal with the outcomes. The board must be seen as a safe pair of hands at the helm of an organisation and must be trusted to act with integrity and to act ethically. These standards should apply in times of crisis but most importantly, at all times.

Maura Quinn, Chief Executive, Institute of Directors in Ireland.