PUBLIC OPINION, RISK TO REPUTATION: THE ESSENTIALS OF SOCIETAL CORPORATE GOVERNANCE?

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Abstract

Research Question/Issue: This paper will examine the role of reputation regarding corporate governance in terms of performance, risk control and the possible role of legislature or behaviors in this field (in particular with regards to the recent Green Paper “Companies in the EU: a management of governance”, COM (2011) 164 final, of the 5th April 2011, of the European Commission).
Research Findings/Insights: Image, reputation, positive or negative opinion, notoriety of the companies and their managers are regarded as an element of their performance. It is accepted that public opinion, inherently linked to the reputation risk is an essential element of corporate governance. Regarding the need of a long term matter, particularly after the financial crisis, a short period of time is enough to transform a positive public opinion into a negative one. In addition, the assessment of public opinion is complex. Everyone can freely form an “opinion”. The opinion may be private and public. Public opinion refers to society, to citizens and to the people. Its classic means of expression are freedom of the press and freedom of speech. This question is particularly crucial regarding the role of the companies to the “society” as recently defined by the Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the committee of the Regions, A renewed EU strategy 2011-14 for Corporate Social Responsibility, the European Commission and the European Parliament (Brussels, 25.10.2011) COM (2011) 681 final).
Theoretical/Academic Implications: How to manage good corporate governance reputation ?As from 1979, the Anglo-Saxon doctrine has acutely highlighted the role of reputation risk regarding corporate governance but what is the situation within the EU? Has legislature, in Europe (and for example, in France), sufficiently acknowledged the concept of reputation risk control? – A long term period seems necessary for efficient corporate governance. Yet, CSR has given an additional power to social and environmental information which may, because it affects a more important spectrum (stakeholders…), cause a more important prejudice, whereas CRS is an "integral part" of corporate governance. Thus, in France, as pointed out in recital 10 of the policy 2006/46/CE but above all, as pointed out in article 53 of the said Grenelle 1 law (n° 2009-967 of the 3rd August 2009), “the quality of information regarding the way in which companies consider the social and environmental consequences of their activity and the access to this information constitutes essential conditions of good corporate governance”. The SRI funds also attempt to control the factors of reputation risk.
Practitioner/Policy Implications: The multiple vehicles of public opinion regarding corporate governance : in fact, CSR, largely consisting in the “reporting” of social and environmental values therefore on “societal communication”, which potentially contains so many possible public opinions to be expressed, may be “additions” to individual opinions. CSR rests on a true discourse which seems, to certain authors, removed from reality: “the reports on corporate social responsibility, summary document between the “say” and “do”, appear as a support of speech which, removed from the real situation, tends first and foremost, to show the “good faith” of organisations. Societal corporate e-governance with the aid of the internet further weakens the concept of societal reputation.

Keywords: Corporate Social Responsibility (CSR), European Union, Corporate Governance, Reputation Risk, Environmental Concerns, Shareholder Activism

How to cite this paper: Malecki, C. (2012). Public opinion, risk to reputation: The essentials of societal corporate governance? Journal of Governance and Regulation, 1(4-1), 176-188. https://doi.org/10.22495/jgr_v1_i4_c1_p5