Reputation Risk and Globalisation

Reputation Risk and Globalisation

Exploring the Idea of a Self-Regulating Corporation

Terry O’Callaghan

Recently, multinational corporations have begun to reinvent themselves as socially responsible actors. This is largely in response to activist pressure. These activists have perceptively understood the link between corporate success and corporate behaviour. Corporate self-regulation has emerged as an important mechanism to counter this activist pressure. The author argues that corporations have a capacity for self-regulation because their reputation is critical to their success. As such, reputation is beginning to discipline corporate behaviour. The book first explores the link between corporate reputation, corporate behaviour and self-regulation. The author then compares and contrasts various studies of multinational corporations that have sought to self-regulate.

Chapter 2: Disciplining MNCs: corporate reputation as a driver of ideational change

Terry O’Callaghan

Subjects: business and management, strategic management


A strong reputation is a prized commodity. It affords the bearer with advantages not readily available to others. Think of the financial value famous athletes are able to bring to a brand or product. Retired politicians with an unblemished record in government are often offered ambassadorial posts, or positions in international organisations, such as the UN. Judges are sometimes chosen to head parliamentary inquiries into matters of public concern because they are trusted to act honourably and in the interest of the whole community. The essence of a strong reputation is how a person is regarded by others. It is therefore exogenously derived. One can only earn a reputation in the context of a community. Robinson Crusoe, perhaps the most celebrated castaway of all times, lacked a reputation until he saved ‘Friday’ from certain death at the hands of his enemies. The ensuing relationship between master and servant restored something that Crusoe had lost when he became shipwrecked (Griffin, 2002: 8–9). The importance of a strong reputation to individuals, then, is nothing new. It is something that human beings have sought after for hundreds, perhaps thousands of years. Some have it. Some lose it. Some spend their entire lives striving for it. Reputation is one of those values that distinguish individuals from a social group. It means that they are held in high esteem. It is a relational quality and a quality that rests on trust and admiration. Like individual reputations, corporate reputations are also derived from the community.

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