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Simon Wadsworth

How does a CEO’s image effect their firm’s reputation?

Posted by July 19, 2016
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A CEO’s reputation is inextricably linked with their company, often determining public perceptions of the overall brand. Therefore if a CEO’s reputation is put at risk, it can often threaten the image of their brand. How does a CEO’s personal image effect their firm’s reputation?

Sir Phillip Green

As a case study let’s look at Sir Phillip Green – the Chairman of leading British fashion retailer Arcadia Group. Big name brands such as Dorothy Perkins, Burton, Top Shop and previously British Home Stores (BHS) are all owned by Arcadia Group. Before BHS’ downfall he was knighted in 2006 for his charity and retail work. He has recently become the latest high-profile CEO whose image has been subjected to intense public scrutiny.

Green and BHS

In 2015, Green earned widespread condemnation for selling BHS for £1. Under new owner Dominic Chappell, BHS had a bad year and has since come under administration, with 11,000 employees now at risk of losing some, or all, of their pensions. Similarly to Woolworths, BHS attracts public interest because it is a famous, cross-generational, long-standing brand. It generates a lot of jobs and business for local high streets, heightening public interest in BHS’ success.

From 2000 to 2009, Arcadia Group invested £254m into BHS. The group only sold the firm in 2015, following six years of deterioration on BHS’ part. From Green’s perspective he did the right thing, fleeing a sinking ship before it went under. Green sold BHS to Chappell’s Retail Acquisitions, which had already declared bankruptcy three times and is now being wound down. Green and other investors earned millions of pounds during his time as BHS’ owner, as its value declined.

Commons hearing

This has put people’s pensions at risk, so the BHS case has become an issue of public interest. It received a hearing in the House of Commons in early June, throughout which Green’s colourful personality shined through. While being questioned, he often interrupted or even spoke over MPs. When proceedings did not go his way, Green’s displeasure visibly showed. He noted that the way one MP was looking at him was “really disturbing,” while also accusing Committee Chairman Iain Wright of being “really rude.”

Green’s reputation

MPs have openly stated that Green’s good CEO reputation, not to mention his knighthood, now depend on his ability to fulfil his promise to find a solution for BHS’ pension scheme. Releasing a joint statement after the hearing, Iain Wright, Chairman of the Business, Innovation and Skills Committee and Frank Field, Chairman of the Work and Pensions Committee, noted:

“We hope he will come up with an offer that is satisfactory to the Pension Regulator. However, he doesn’t only have to satisfy the Pensions Regulator – he is before the bar of public opinion. Much of his reputation now depends on how generously he responds.” Speaking further, Field commented that “a lot of [Green’s] credibility now rests on a very generous settlement” and that to restore public confidence, a £571m payment would prove incredibly cost-effective for the entrepreneur.

Effect on company image

Green has now apologised for BHS’ collapse, pledging to find a way to address the problems its pension scheme is currently facing. However, the Arcadia Group Chairman has failed to disclose the details of his rescue plan. Despite the ongoing BHS scandal, it is unlikely that the reputation of Green’s other companies will be damaged.

Sir Phillip is not like someone such as Richard Branson, the founder and owner of Virgin. As far as the public is concerned, Branson and Virgin’s images are inextricably linked. Branson is known as a transparent and honest individual, so people associate these ideals with Virgin, because they associate its brand with him. According to Business Zone, Branson’s reputation was valued at £263m in 2013.

This raises questions about whether Green should adhere to pressure to rescue BHS. His other businesses are thriving, so would it be worth it for him to bail out BHS?

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