The perp walks of the likes of Martha Stewart, the indictment of Dennis Koslowski, the Dick Grasso affair at the NYSE--all have had a major impact on our collective psyche, says Christopher Foss, associate director of the Reputation Institute, a private research organization that investigates how to manage and measure corporate reputations.

According to the Institute's latest Reputation Quotient survey--a study developed with Harris Interactive that measures public perceptions of the country's most "visible" companies—cynicism about big business has grown for the third straight year (In 2001, 29% of the general public said they would “definitely” trust companies to do the right thing in the event of a product or service problem. In 2002 that number dropped to 23%, and by 2003 only 21% had that emphatic level of trust). Mr. Foss speaks with Crainsny.com about Martha Stewart Living Omnimedia’s future, Altria’s name change, the crisis facing drug companies, and more.

Crainsny.com: What is reputation management?
Christopher Foss: People think of reputation management--if they think about it at all-as being about image. That's partly true. But actually, the discipline is far more involved; it focuses on perceptions of a broad array of stakeholders--not just consumers and investors--which can impact company performance. It's about parsing out variables such as trust, admiration--as well as specific, emotionally charged issues that can affect public perception of a company or industry.

One of the worst mistakes a company can make is to focus on spin or brand advertising while ignoring internal cultural factors or external, contextual issues that may at first blush seem peripheral.

These days, there's a lot of information that's readily available about companies--everything from financial performance and CEO leadership to employee disaffection and environmental impact. Flash-point issues like racial discrimination, outsized stock option grants, layoffs, pension plan rollbacks, sexual harassment, environmental degradation, worker health and safety, outsourcing, etc., are all examples of contextual information that can damage corporate reputation--through word-of-mouth or the media--and overwhelm a company's intended messages.

We maintain that if companies measure and track the various components of their reputation, they'll be in a much better position to avoid potentially serious missteps vis a vis stakeholders and ultimately manage their reputation for competitive advantage.

Crainsny.com: Johnson & Johnson [based in New Brunswick, N.J.] consistently comes up as No. 1 on your survey. Why?
Christopher Foss: First of all, they're good corporate brand stewards. They have the baby-products "halo," and they lend their corporate name only to certain products.

There's also a strong "heritage" component that they leverage. They publish their long-held "credo" on their Web site, and employees have a strong sense of corporate values.

One of the elements of corporate reputation that is often overlooked is the firm's reputation at home. We've found that the strength of the internal culture--that is, the degree to which employees identify with corporate values--is a major factor in strong reputational performance.

Crainsny.com: You've worked in some quintessentially New York industries. Could you tell me about your career path?
Christopher Foss: Both my parents are artists-my father is composer/conductor/pianist and my mother is a painter. I consider myself first and foremost a writer, but one who--surprise!—has had to find a way to make money.

I studied literature and writing at Columbia College as well as Columbia’s Graduate School, and at first planned to pursue a career in academia. But I found that world (at the graduate level, at least) too focused on dry scholarship. I then did a three-year stint at Sotheby's, working in the Medieval and Renaissance art department, doing appraisals and a lot of cataloguing. It was a good first exposure to business--a very rarefied area of business--and after three years, I found myself wanting to find more expression for my analytical and writing skills.

In the way many things happen in New York, serendipity played a role in my finding my next job. My sister, who was starting out as an actress, had temped at Bozell Worldwide, the advertising agency. She said it was a fun place to work, so I gave it a shot. Before I knew it, I was offered a job as a research manager/strategic planner. And after I wrote a memo outlining what a big client needed to do to restore its reputation-a car company had a van whose rear door kept opening while the vehicle was in motion--the CEO, David Bell, who is now running Interpublic Group, hired me as his speechwriter and communications strategist.

When the dot-com boom hit, I ran marketing communications for a company called Swan Systems, which was developing a tool for managing advertising functions online. Nowadays, this type of thing is not so new, but back then it was positively avant-garde! Then came the dot-com bust, and again, serendipitously, I ended up getting a job at the Reputation Institute. One of my colleagues at Swan just happened to know the executive director at the RI.

Crainsny.com: Do you ever draw on your academic background?
Christopher Foss: Yes. There's a real depth to the issues we explore at the RI, a sense that narratives of corporate behavior follow a kind of logic. What's often required of companies when they begin to think about the environmental and social impacts of their business is real transformation, serious change management--both in terms of values and accountability. Overstepping the line in one gray area can have catastrophic results down the line.

There's something like a "morality play" to all of this--and it's completely compelling to a guy who in college was interested in literature--or more precisely in narrative structure and the decoding of texts.

One thing that the Institute’s recent study has shown is that name changes aren't a panacea to problems. People aren't fooled by superficial change. Witness Altria, which ranked No. 54 in our recent study. I don't want to second-guess why Altria [the former Philip Morris] chose a new name for itself, but the move was certainly greeted with skepticism by the public. Now if a change like that is matched by a discernible shift in a company's values and behavior, then that could have a major impact, of course.

Crainsny.com: What's the next big crisis area in terms of reputation?
Christopher Foss: One industry I think is in some trouble now is pharmaceuticals. I asked someone at a major pharmaceutical firm recently if he wasn't worried about the industry becoming like Big Tobacco. I think I caught him by surprise--he was aware of the issues facing his industry, but I don't think he had taken the full measure of the perceptions and pitched emotionalism out there. I'm convinced that the "morality play" in which Big Pharma finds itself is both its great vulnerability and its great strength. What a potential the drug companies have to be a force for good! However if this potential is squandered, look out! You'll see increased regulation, even possibly the demise of some big-name firms.

In our 2003 annual RQ ranking, the drug companies are precariously ranked in the middle--Pfizer is at 28, Merck at 32. Johnson & Johnson, of course, continues as the reputational leader--but this is a special case, as I've mentioned. Even they are not above controversy, though, and, when it has occurred, it's hurt them a bit. This is the first year that J&J's overall score has dipped below 80. .

Crainsny.com: Will Martha Stewart's company be able to salvage its reputation?
Christopher Foss: Martha Stewart Living Omnimedia has quite an uphill climb in the wake of the recent jury verdict. The criminal charge of "obstruction of justice" is obviously antithetical to Martha's "domestic diva" image. So many of her properties and subbrands are tied up with that "touch of class" that Martha Stewart projected, cultivated and which so many (women, especially) aspired to bring into their homes and lives.

If this had happened to Donna Karan in the heyday of her business, the verdict would not have had the same effect at all. Martha's reputation is qualitatively different. It's linked to this idea of perfection to a fault, which, annoying as it was to some, drove this eponymous business phenomenon. The Martha Stewart name has suffered as a result of her indictment and conviction--and will almost certainly continue to suffer.

Back in November 2003, when the Reputation Institute's RQ survey data was gathered, Martha Stewart Living Omnimedia was ranked at 55, near the bottom for "overall reputation" of our 60-company list. Going forward, the company will be focused on a major rebranding effort in order to keep its assets viable.

Crainsny.com: What do you do on a day to day basis?
Christopher Foss: As associate director of the institute, I work in various areas—on consulting projects, the Institute’s conferences, etc.

One of our upcoming conferences, sponsored by IBM and Factiva, will focus on my particular area of interest-corporate social responsibility. I'm very interested in exploring how companies can become a force for good in society and simultaneously help their bottom line. This is commonly referred to as "enlightened self-interest," but that phrase gives short shrift to the major strategic component that is really involved in aligning corporate social responsibility with business goals.

Lately, I’ve been making a concerted effort to build the Institute’s network of corporate members. If an issue arises that’s having a negative impact on reputation, I would hope to convince the affected company to join our global network of firms interested in improving their understanding and practice of reputation management. After that, the goal is guiding the company to address its issues with some sophistication and sensitivity to stakeholder concerns--beyond mere spin, that is.

Published the week of April 12, 2004.

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