How Deception Can Undermine Responsibility and Reputation

Lessons from Academia and Business Communities 

Written by Paul A. Argenti

Over the last two decades, I have been conducting research into company’s practices in two key areas separately: corporate responsibility, and reputation.  Lately, however, I have begun to realize, as have other researchers from both academia and business, that the two are intertwined.  As a result, it’s safe to say that companies with a strong reputation are typically more responsible and those with a focus on responsibility tend to have a stronger reputation.  This is perhaps nothing more than common sense.  What has not been studied as carefully, however, are companies that are pretending to be responsible to gain a good reputation.  We see this segment on the rise as more and more companies realize the economic value that flows from having a strong reputation or from being seen as adding social value. Over the long term, however, pretending to be something you are not does not lead to success in terms of your reputation or add value on either the financial or social dimension.  Indeed, companies would do better to follow the advice of Socrates on this subject: “To gain a good reputation, endeavor to be what you desire to appear.”

In this article, I would like to first look at the concept of “deceptive virtue” in comparison to other approaches to reputation building, then look at three worst-case examples, and finally offer advice to companies hoping to succeed as responsible reputational players.

The Concept of Deceptive Virtue

Four Reputation Strategies

Adapted from Strategy + Business, Winter 2010[1]

As the above diagram indicates, research that I conducted with colleagues from Booz & Company highlighted four approaches to reputation building among major corporations today.  We determined that two of the approaches were no longer viable for long-term economic success.  Companies that are “negligent risk takers” put themselves at risk as society demands more and more from its institutions.  Tobacco companies fit into this category with their earlier support of the arts before they lost most of their license to operate.  Similarly, we determined that companies who we designated as “deceptive followers” were pretending to care about their responsibility to society, but secretly getting involved in activities that would eventually show them to be negligent risk takers.  Enron at the turn of the century is a good example here.  Instead, we recommended that companies at the very least should have a safety net in place to protect their reputation, or aim to overachieve by becoming a “trusted reputation player.” IBM is an example of a company that has decided to differentiate itself based on this notion with its “Smarter Planet” campaign.

Worst Case Examples: The Deceptive Followers

There are so many examples to choose from that the easiest way to narrow this down is to choose three examples representing three different areas: business, sports, and the military.

BP

BP started focusing on its “beyond petroleum” campaign at the turn of this century.  The company spent hundreds of millions of dollars to convince everyone that it was the trusted reputational player attempting to do the right thing in the energy industry.

Instead, over the next decade we learned that the company had major operational difficulties that led to leaky pipes in Alaska, exploding tanks in Texas (which killed 15 people), financial problems, and ultimately a scandal in which the CEO was found to be housing his lover in an apartment in London at company expense.  All of this paled by comparison to BP’s explosion in the Gulf of Mexico, which led to the death of eleven people and the worst oil spill in US history.  Clearly BP’s operations and its activities were not worthy of the beyond petroleum (a trusted reputation player designation) label and it has paid both in terms of billions of dollars and a scorched reputation.

Lance Armstrong

Lance Armstrong is a cyclist who won the Tour De France a record seven consecutive times between 1999 and 2005, but in 2012 he was disqualified from all wins for using and distributing performance-enhancing drugs.  He was subsequently banned from professional cycling for life.

Armstrong became a world renowned hero as a result of his widely reported fight against cancer followed by several amazing racing victories, which were billed as coming from a strong, virtuous hero. Nike invested millions of dollars to support Armstrong and his “Livestrong” campaign, which included a yellow bracelet that many cancer survivors and their families sported as symbols of strength and virtue.  When Armstrong’s deception came to light, all of his sponsors and most of his supporters bailed out.

David Petraeus

David Petraeus was seen as one of the greatest generals in American history and head of the CIA just a few months ago, but he allowed his biographer, Paula Broadwell, and a friend, Jill Kelley to undermine his reputation as a result of his extramarital affair with Broadwall and her spat with Kelley. He has subsequently been accused of granting excessive access to two, civilian neoconservative analysts when he was head commander in Afghanistan.  His fall from grace follows a pattern we have seen many times before in both government and corporations.

How to Succeed with Virtue

Following Socrates’ advice mentioned earlier is easier said than done, but the following three approaches can help any corporation avoid becoming a pariah among its constituents:

1. 1.     Apply the Front Page Test

Warren Buffett advises his employees to decide whether their actions would seem virtuous if they appeared on the front page of the local newspaper the next day.  Think of how many personal and corporate actions might have turned out differently, if they had the benefit of an Ebenezer Scrooge-like ability to see the article covering their questionable activities before an ethical lapse.

1. 2.     Stick With the Truth

I know this sounds so simple, but it really is the key to success.  I cannot tell you how many times a month I get a call from a company representative asking whether they can pretend to be something they are not.  The old saying is that “you can’t put lipstick on the pig” and expect it to look like anything other than a pig with lipstick.  The same is true for corporate behavior.  If what your doing is sketchy, others will see through it immediately.

1. 3.     Be Authentic

I like the second or third definition of this word in the dictionary, which comes from existential philosophy: “relating to or denoting an emotionally appropriate, significant, purposive, and responsible mode of human life.”  Being responsible today means not only doing things that others would deem to be appropriate, but also what you know to be the right thing to do.

Conclusion

Abraham Lincoln once said, “Character is like a tree and reputation a shadow. The shadow is what we think of it; the tree is the real thing.” As my colleague at the Arthur w. Page Society, Jon Iwata of IBM has said, communicators spend too much time focusing on the shadow rather than tending to the health of the tree. More time focusing on authenticity can only help corporations do the right thing and lead to a stronger reputation for your company in the long run.

Author bio:

Paul Argenit is Professor of Corporate Communication, The Tuck School of Business