Corporate Reputation On The Agenda

June 16 2004

Corporate Reputation Clearly On The Agenda For CEO'S In China

Survey shows eighty-nine percent believe that corporate reputation is very important for the development of Chinese corporations

BEIJING, June 16, 2004 ¨C Brand-building is the number one business objective that corporate reputation and corporate social responsibility fulfill for companies in China, according to a survey of 122 Chinese business leaders carried out in May 2004. 75% of the corporate executives polled said that brand-building was the most important business outcome from their company's corporate reputation. 84% thought that brand-building was the most important achievement for corporate social responsibility.

The Corporate Reputation Watch (China) survey, targeting Chinese business executives and sponsored by global communications consultancy Hill & Knowlton and leading Chinese business publication The Economic Observer examines corporate executive level (C-Suite) perspectives on issues in China such as the importance of corporate reputation, the role of corporate social responsibility in Chinese companies, and corporate governance issues in China.

This is the first time that the Corporate Reputation Watch survey has been carried out solely in China, although Hill & Knowlton has sponsored five global surveys previously. Responses to the last global survey carried out in August 2003 provide comparative global reference data to the latest survey of Chinese business leaders.

The Chinese survey clearly shows that CEOs not only recognize the importance of their corporate brand, but also the importance of meeting the demands of their customers. Customers are ranked the most critical external force on a company's reputation. And product/service problems and customer criticism together rank high in the list of threats to reputation, other than financial performance, that Chinese CEOs worry most about.

Speaking in Beijing at the launch of the survey results, Paul Taaffe, chairman and chief executive of Hill & Knowlton Inc. said: These findings reveal that Chinese CEO's really understand the link between company reputation and corporate sales. They are savvy marketers of their companies and of their products, and recognize that the customer is king. This will make them very strong competitors as more and more Chinese companies globalize.

The results also show that Chinese CEOs, like many CEOs around the world, take very seriously their responsibility to manage reputation and that both reputation management and corporate social responsibility activities need to be senior management concerns, added Harlan R. Teller, president of Hill & Knowlton¡¯s worldwide corporate practice. The premise that reputation has tangible business value and must be managed like other disciplines is embraced in China as it is elsewhere, he said.

Other key findings from the survey include: CSR initiatives are important ¨ 87% of the CEOs surveyed agree that CSR initiatives contribute a lot to a company's corporate reputation. However, Chinese CEOs understand CSR essentially to comprise ethical corporate behavior, environmental initiatives and financial donations. And the dominant activity that their companies undertake in terms of CSR is charitable donations. This is very different from western companies and is probably a reflection that CSR is in the early stages of development in China and that corporate leaders are still defining what CSR can mean within a Chinese context.

CEOs are the number one managers of their company's reputation and CSR ¨C 75% of those polled said that the CEO was the guardian of their company¡¯s reputation, with the Board (12%) as the next highest. Similarly, 63% said that the CEO had the primary responsibility for managing CSR initiatives, with the Board at 16%. Both CEO percentages are significantly higher than was found in the August 2003 global study where, for example, among respondents from Europe only 44% saw the CEO as the prime guardian of corporate reputation.

Boards of Directors are not seen to be doing a very good job ¨ Only 28% of the CEOs polled thought that company Boards of Directors were doing a good job. Compare this level with the 2003 global study where 61% of N. American CEOs, 72% of European CEOs and 68% of Asian CEOs believed that Boards of Directors were doing a good job. Cultural differences may in part explain the different perspective in China. Powerful leaders are perceived to result in powerful companies and so individual leaders are often more important than Boards. However, as more Chinese companies transition from the public to private sectors and adapt to more western models of management one of the issues in China may well be the relatively small pool of qualified Board members for the potential number needed.

Third parties are limited influencers of corporate reputation ¨ While the Government as an opinion former and influencer of reputation ranks much higher in China than in the US or Europe, other groups, in particular financial analysts and NGOs, are seen by Chinese CEOs as having negligible impact, which is in contrast to how they are viewed elsewhere in the world. Similarly, NGO criticism polled only 5% as a potential threat to corporate reputation among Chinese CEOs. This suggests that either CEOs in China do not yet have as heightened concern about this type of criticism as their counterparts do in North America and Europe or that NGOs play a more passive and less antagonistic role in China than in the West.

Research Methodology Name lists were provided by The Economic Observer. 300 surveys were sent out in May 2004 with 102 returned and 20 additional face-to-face interviews. Codification and tabulation of the responses was handled by Sino-Monitor. The full results (Chinese and English versions) can be viewed at www.corporatereputationwatch.com.

About Hill & Knowlton Hill & Knowlton, Inc. is a leading international communications consultancy, providing services to local, multinational and global clients. The firm is headquartered in New York, with 70 offices in 37 countries as well as an extensive associate network. The agency is part of WPP Group plc (NASDAQ:WPPGY), one of the world's largest communication services groups. Hill & Knowlton is currently celebrating its 20th anniversary in mainland China. The firm was the first international PR firm to set up operations in China.

About The Economic Observer The Economic Observer is the leading Chinese weekly business newspaper, with a circulation of 390,000. It targets an audience that represents the powerful, the wealthy and the educated. The Economic Observer is highly regarded by the business community in China and thought by many to be as popular and influential as the Financial Times is in the West.

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