CSR as Reputation Insurance

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1、CSRasReputationInsurance:PRIMUMNONNOCEREDylanMinorJohnMorganormanyfirms,themostpreciousassetliesnotonthebalancesheet,norinthehumancapitaloftheworkforce,butratherinitsreputa-tion.Forinstance,IBM’sreputationforbeinganenterprise-friendlyFandefficientsolutionsproviderhasenabledittobeatrivalsforbus

2、i-nessovermanyyears.McDonald’sreputationforbeingafamily-friendlyandeconomicalplacetoeathassustaineditsmarketshareinthefaceoffiercecom-petitionfromotherchains.However,reputationcanbeafragilething.ConsiderBritishPetroleum(BP)anditsrecentoilspillintheGulfofMexico.WhileBPhadforyearsinvestedinitss

3、unburstlogoandvarious“dogood”and“begreen”campaigns,itsreputationquicklyslippedawayinthemidstoftragedy:itsfirmvaluewas1decimatedbysome$100billion.AnotherexampleisToyota,whichbecamethelargestautomobilemanufacturerthroughitsreputationforreliabilityandvaluebuthassufferedasallegationsoffaultyaccel

4、eratorsandcover-upsoftheseproblemshavecometolight.ThiscanbeseenvividlyintheresalemarketwhereevenToyotavehiclesunaffectedbytherecallsdeclinedinvaluebyanestimated24-5%.LikewiseDell,whichbecametheleadingPCmanufacturerlargelyonthebasisofqualityandlowprice,hassufferedreversesinrecentyearsowingtol

5、aptopbatteriescatchingfireandotherqualitycontrolproblems.Thishascon-3tributedtoacumulativelossofathirdofitsmarketvalue.Inshort,reputationalriskisoneofthekeybusinessrisksthatfirmsface.Theusualbusinessresponsestosuchrisksaretoturntoinsurancemar-ketsortoself-insure.Forinstance,Google,whosereputat

6、ionrestsonthereli-abilityandspeedofitssearchresults,takestheunusualstepofdesigningitsownserverswithspecialfeaturessuchasapatentedinternalbackuppowersystem,4tomaximizereliabilityandefficiencyshouldaproblemarise.Manufacturerswhoaredependentonkeyrawmaterialswillroutinelyusefuturesmarketsto40CALI

7、FORNIAMANAGEMENTREVIEWVOL.53,NO.3SPRING2011CMR.BERKELEY.EDUCSRasReputationInsurance:PrimumNonNocerehedgepricerisk.Multinationalswilllikewiseturntocurrencymarketstohedgeexchangeraterisk.However,thereisnoobviousmarketforfirmsseekingtoinsureagainstrepu