Reading the Tea Leaves—Did Citigroup Risk Their Reputation During 2004–2005?
Presented at ICAA's Second International Conference Globalization – The Good Corporation June 26–28, 2007 Baruch College, New York City

Abstract

In this paper, we challenge the conventional wisdom that high‐quality news reports of questionable corporate business practices will stimulate various marketplace negative responses, which in turn, will pressure management to undertake actions designed to protect the organization's reputation. Analysis is confined to a relatively brief period of bad news relating to Citigroup, Inc. We conclude that while none of the expected negative marketplace responses are evident in widely available news sources, the CEO did exhibit significant concern and instituted a targeted reputation risk management program. In the absence of a concerned CEO, analysts should not, we suggest, expect a management team to respond with reputation‐enhancing corrective action solely as a reaction to negative publicity regarding questionable business practices.

Toward a Better Understanding of Organizational Efforts to Rebuild Reputation Following an Ethical Scandal

“…For instance, in the Union Carbide example earlier, UC's officials maintained guarded silence about the toxic nature of the gas and held back information from the press, medical workers, and relief agencies (Lepkowski, 1986). Additionally, Citigroup's reputation recently suffered dearly and the executives at the time chose corporate silence in order to keep the company name out of the public eye and avoid public debate as much as possible (York et al, 2008). However, CEO Charles Prince completely reversed the strategy of corporate silence at Citigroup on February 5, 2005 when he publicly announced the Five Point Plan (BusinessWeek, 2006).…”

“…Ronald Sims suggested by York et al (2008) Citigroup and Prince's efforts (redressive actions) represented a significant juncture in the company's approach to reputation. An approach intended to rebuild the company's reputation.…”

“…Reputation is formed by the beliefs that people hold about an organization based upon their experience with it, their relationship to it, and their knowledge gained through word of mouth or mass media (Barnett et al, 2002;Wartick, 2002;York et al, 2008). Reputation is also formed by internal structures and statements that define codes, strategic plans, mission or vision statements or corporate brand value propositions that clearly state what the company stands for.…”

“…It brings in customers and investors; it commands our respect'' (Fombrun, 1996, p. 4). Added benefits of a solid reputation include intangibles such as individuals feeling safe in purchasing stock, working in the company, and sharing company merits with others (York et al, 2008). Executives have been encouraged to identify and respond to operational risk as well as the traditional financial risk factors in their performance measurements systems.…”

“…Reputation is also formed by internal structures and statements that define codes, strategic plans, mission or vision statements or corporate brand value propositions that clearly state what the company stands for. Reputation also comes from the past behavior of the organization and wordof-mouth reputation based on what people say about the organization (Fombrun, 1996;York et al, 2008).…”