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Investors doubt CEO ethic.

NO MATTER HOW aboveboard CEOs operate, when it comes to investor trust, they can't seem to get no respect.

Less than half of all retail investors have confidence that CEOs of public companies are engaged in ethical business practices, per a new survey by Opinion Research Corp. (OPC). About four in 10 have very little or no confidence in the ethical standards of top execs. "That's not a good number," muses Jeffrey T. Resnick, managing director of the Princeton, N.J., firm.

True, the numbers have improved from a low in June 2002, but there's still a long way to go, says Resnick, who also runs OPC's corporate reputation management practice. "There is a trust chasm between where executives probably believe they are and where the public believes they are," he says. Nearly half of investors surveyed said CEOs do not care as much as they should about the reputation of their companies.

But assuming CEOs do care, and if most are acting ethically, why is it not translating to the masses? Paul Argenti, professor of corporate communication at Dartmouth's Tuck School of Business, says that ethical behavior, along with corporate reputation and communication in general, have been seen as too intangible to value or invest in. "But some 80 percent of the value of a corporation is based on intangibles," Argenti says. CEOs must get creative about quantifying the impact of ethical behavior and reputation on future profits, he adds, just as they measure the impact of an ad campaign on sales or other "squishy" numbers.

The other thing CEOs can do, Argenti suggests, is to consistently go beyond just the letter of the law. "There was nothing written down that said that [Boeing CEO Harry] Stonecipher couldn't have a relationship with a female executive of the company, but if he'd asked, someone else in the company could have told him that," he says. All CEOs would benefit from being more proactive about analyzing their company's reputational risk, he adds.

That said, analysts and investors, who helped create this problem, will have to do their part to solve it. "By putting this much pressure on people to perform, perform, perform or we'll whack you, they force people to act in ways that cut corners," says Argenti. "They want ethical behavior, but they're not willing to wait for it."
Retail investors' perception of the ethical business practices of
corporate executives

 June 2002 March 2005

Very or somewhat confident 35% 46%
Neither confident nor not confident 16% 14%
Not very or not at all confident 44% 38%

Confidence in CEO ethics by industry

Retail banking 59%
Automobile manufacturers 54%
Insurance 36%
Oil & gas 25%

Note: Table made from bar graph.
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Article Details
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Title Annotation:LASTING IMPRESSIONS; Chief executive officers
Author:Prince, C.J.
Publication:Chief Executive (U.S.)
Geographic Code:1USA
Date:May 1, 2005
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