The backdating scandals
Six years later, MIT Sloan Management Review and BCG asked 2,600 executives, “What are the greatest benefits to your organizations in addressing sustainability?
” The first reply on the list was none other than “improved brand reputation” (40 percent).
So it got me wondering if this is really true – are sustainability and CSR a path to brand reputation management?
While it does seem logical and there is no shortage of anecdotal evidence to support it, I decided it was worth checking if this hypothesis is also supported by academic research.
But these differences apart, there are a number of important lessons to be learned from some of the biggest bankruptcies in U. history that are applicable to our own personal finances.
Lesson 1 – Excessive leverage is usually a high-risk strategy.
Dylan Minor and John Morgan looked for evidence in S&P 500 companies following product recalls, and found that “firms with better CSR ratings fare better than those that do not.” John Peloza writes that firms viewed as having weak CSR suffered stock declines twice the size of firms viewed as having strong CSR after riots surrounding 1999 WTO meetings in Seattle. Bhattacharya and Sankar Sen, who described this phenomenon, write that “consumers’ motivations to downplay or minimize negative information about a company (e.g., in the event of a crises) that they perceive to be socially responsible is a key reason why investing in CSR is akin to “building a reservoir of goodwill.”And what about regular times, when companies don’t face one crisis on another? The fruits of this approach can be seen in the relationships between the corporation and consumers.
CSR, he adds, “can provide incremental gain during good times and subsequent mitigation of negative publicity.”In a way, CSR helps companies to become more resilient not just to climate change risks, but also to negative information about the company. Henri Servaes and Ane Tamayo wrote in a paper published last year that “customers take into consideration firms’ CSR activities when making purchase decisions.”While consumers might not be willing to pay higher prices for greener products, they will more likely purchase goods from firms that are more socially responsible.
(If you're unclear how this recession began, see ) There are obvious differences in size and complexity between corporate financial statements (such as the balance sheet, income statement and cash flow statement) and your own personal financial statements.Financial leverage refers to the practice of utilizing borrowed money to invest in an asset.Leverage is often referred to as a double-edged sword, since it can amplify gains when asset prices are rising, but can also magnify losses when asset prices are tumbling. The housing bubble was fueled by a huge increase in subprime lending, as borrowers with poor credit histories were lured into the housing market by low introductory interest rates and minimal down payments.Key drivers of a good reputation, explain Katinka Gyomlay and Stefan Moser include vision and leadership, products and services, financial performance, treatment of staﬀ, social and environmental responsibility and emotional appeal.These factors, they explain, change over time, reﬂecting changes in society in general and business in particular.