Corporate with Reliable Information

The globalization concept has reawakened public awareness of a corporation’s purpose. These events have revealed strong differences and opinion about the role of business in society and how it links to the stated purpose of corporations. The current societal need of information is also leading corporate decision makers to be of digital consideration.

Companies articulate and communicate on corporate purpose with the ultimate aim of building and sustaining reputation and trust. Managers have good reason to view this proposition as a double-edged sword. On the one hand, more thoughtful and careful communication of corporate purpose gives the opportunity to build, sustain and increase trust. On the other hand, some managers feel it can open the door to still more stakeholder mistrust and skepticism. Clearly the idea of not only walking the talk, but talking the walk consistently and coherently is the only way around this conundrum. This is no easy proposition, but the rewards, in terms of reputation and brand benefits, are potentially rich.

In interviews, leading companies stated that they are not positioning financial performance in their communications as an end in itself, but as a means to an end. Interestingly, they also claim that the of leading companies efforts in communicating corporate purpose is dedicated to communicating on issues that help companies to align their corporate interests with those of key internal and external constituencies. Customer-focused messages also take up a good share of efforts. But viewing the literature and discourse around this subject, companies still have to be careful that “talk” matches “walk”. Otherwise, a substantial reputational risk factor enters the equation.

Overall, we found a positive correlation between effective communication of corporate purpose and financial performance. The effect of corporate purpose on financial performance of many companies was statistically tested through regression analysis and the results show that communicating purpose in a way that is consistent with corporate action can boost differentiation, strengthen reputation risk management and build additional competitive advantage.

Whilst one can be cynical about this, pointing to the “chicken and egg” conundrum (the view that financially successful companies do most things better anyway), we tried to counter this view by taking time effects into consideration to build a regression model that only measures the effect of purpose on financial performance.

Companies in the banking, insurance, logistics and automotive sectors have been struggling to communicate purpose in an effective way, with the exception of financial issues.

The food and beverage sector have the most uneven playfield in purpose communication, followed very closely by group companies, its competitors are having a very hard time in building and sustaining reputation and trust. Interestingly, food and beverage is the sector in which purpose have the strongest influence on financial performance from which all other communication’s trust is built. The corporate information system should be people's oriented and the center of reliable and trustworthy information.

By Mwasandube Aden A                  

BAPRM III    42638