Newsmaker: Dominik Heil: CEOs are failing reputation test

South African consumers have lost faith in corporate leaders even as these individuals continue to pocket whopping so-called performance bonuses.

There are a number of reasons for this, says Wits business academic and MD of Reputation Institute SA Dominik Heil, but it is mainly because of these business people's lack of visibility and failure to identify publicly enough with the concerns of society.

"There is no trust in leadership in the corporate sector to do what is required. In SA, for decades we have believed that, in some way, the private sector would carry us through."

Heil, 47, came to SA from Germany in 1993 and has a PhD in business strategy from Wits Business School, where he has been a lecturer for 13 years.

His stark assessment is based on findings of a recent reputation survey covering the top 20 companies listed on the JSE. Just over 1000 economically active members of the public from LSM 6 and above in the four most economically active provinces were asked to rate the companies on issues such as products, services, citizenship and leadership.

The results demonstrated the sharpest year-on-year drop in corporate reputation since Reputation Institute SA began doing the surveys six years ago.

"Last year we saw a lot of trust that leaders would step up to the plate. That confidence has suddenly collapsed. One would expect a gradual erosion of confidence. We were ... shocked."

Only Woolworths emerges with reputation intact, which is surprising given the wave of public disgust for its plagiarism of Frankies Olde Soft Drink Company products. The Advertising Standards Authority ruled that Woolworths had "deliberately and intentionally copied" them. Woolworths withdrew its copycat products but failed to admit culpability.

Given what Heil says about visible leadership being key, it is also surprising to find Pick n Pay so far behind Woolworths. Chairman Gareth Ackerman has been far more outspoken on issues such as nationalisation than his counterpart Ian Moir.

Heil says this does not invalidate his conclusion that invisible leadership has contributed to poor corporate reputation.

"We know from media tracking that CEOs are not in the media a lot. I am bringing my experience of working with companies. Company communications people are saying to me they don't know what to say to their CEOs to make them understand that they need to be out there."

One wonders how self-serving his conclusions are, but Heil says he values his integrity too much to use the survey to tout for business.

The reason Woolworths has a better reputation than Pick n Pay is because it is "more cognisant of its role in communities it operates in and gets its supplies from".

CEOs do not necessarily have to be outspoken about government, but they must give a sense of what they stand for, he says.

"Some overall value beyond turnover, return on investment and shareholder value. Some value they provide to customers and stakeholders and society in general. That may in some cases require the company to speak out against government."

Beer maker SABMiller's reputation is poor, in spite of a perception that it invests a lot in corporate social responsibility (CSR).

"The days when you could salvage your reputation by doing a few good projects on the side are over," says Heil.

"CSR either fits into an overall vision that companies live by and for, or it is just seen as a cynical attempt to look good."

SAB may spend on CSR, be well run and successful, "but what people are saying is that they're causing a major societal problem. They produce alcohol, which in a South African context leads to people getting drunk on a Friday and taking it out on their families. The problem of people being drunk in the townships over the weekend is a massive one."

The survey also reflects a backlash against executive greed.

"The message is, yes, these guys are talented and know how to run a company. But there's a feeling they're not sensitive to the broader society."

Executives are seen to be a small group acting in their own interests, "competing against each other for their remuneration and not realising they're totally out of touch with what is going on in society", says Heil.

Their company's financial performance may matter to shareholders, but does little for their reputation in the public's eyes.

"It is not something that people care about that much."

Sasol has managed to turn that around partially with its Inzalo black economic empowerment (BEE) share scheme. "Many people now own shares in Sasol."

It still has a poor reputation, however. Is this because of uncompetitive practices?

"I don't think we should home in on corporate governance," says Heil. "Leadership is the problem. Board chairmen and CEOs have to lead and be visible and people are saying it's not happening. These guys don't give us a clear sense of how they're going to pull us through the difficulties we're in as a nation."

Yet he believes poor corporate governance is an issue.

"We are seeing boards not really fulfilling their roles." There is a perception that BEE directors are not pulling their weight.

"The feeling is these are people who were deployed by the ANC to play a constructive role and all they do is enrich themselves at the cost of society.

"My experience of working in this field is you do not get a lot of visibility from those guys. And they have gone particularly quiet in the last 12 to 18 months."

A low corporate reputation has little to do with a sense that consumers are being ripped off.

"Everybody knows the banks are overcharging us but they're still held in relatively high regard."

Heil says the survey shows clearly that the "emotional bond people have with companies is going down", and that this will translate into declining support for those companies.

"When that emotional bond is weaker, people do not have the same propensity to buy from a company or work for a company. It has business consequences, bottom-line consequences."

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