There are 45 companies (combined value $10 trillion) on the MAGA anti-DEI hit list.“The worst thing that can happen to a company is: You’re still on that list, but you’ve lost all your good faith and credibility with folks on the other side of these issues.” We call this situation a reputation crisis and a clear need for reputation insurance.
Investors are not good predictors of reputation value loss. At crisis day 155 for Crowdstrike, Boeing, and Southwest, the firms’ equities were -1.4%, -36.4%, and -26.8%. vs S&P500.
Boeing Company reputation crisis day 351. Equity is down 50.9% to peers; Steel City Re’s average observed losses on day 351 is 8.2%. Implications for manufacturers are illustrated in Steel City Re’s 16 April podcast: https://shorturl.at/kEfVL
Southwest Airlines reputation crisis. AAt crisis day 725, Southwest equity is under performing the S&P500 index by 62% and the US airlines index by 66.9%. Steel City Re’ Resilience Monitor warned that an operational failure was likely to trigger a reputation crisis.
Boeing employees are striking for…more input into product safety. This labor action is a manifestation of lost reputation value. This labor action is a stark reminder that angry, disappointed employees are one of many expressions of a reputation crisis. Corporate leadership and governors must be mindful that that the long tail of reputation risk typically includes costly investor, regulator, and yes, employee actions.
At the end of reputation risks’ long tail are board-level consequences, exemplified by the denouement of this infamous winter 2022 crisis precipitated by software quality issues, unaddressed. “Southwest Airlines on Tuesday announced an overhaul of its board of directors, including the planned departure of its executive chairman, Gary Kelly, after a meeting with a hedge fund that has called for sweeping changes at the company.” The takeaway: reputation risk management is always a vital governance issue.
Affirming in practice what it disclosed in January, Blackrock “engaged 2,683 times on strategy, purpose and financial resilience-related themes with 2,014 companies — more than any of its other engagement priorities — this proxy year. Given this information, board directors may want to prioritize financial resilience in their own work and in engagement with index funds.” Steel City Re can provide metrics and tools to support innovative strategies for strengthening financial resilience.
32.9% of companies, including American Airlines and US Bancorp, have compensation clawback policies for reputation harm.
Captives are a solution to the lack of innovation. Martin South, president and chief executive officer, Marsh, was being interview by Penny Randall Seach, group chief underwriting officer, Zurich Insurance Company in a Global CEO fireside discussion at AIRMIC called ‘Global forces driving change: a future outlook’ Because the industry is not offering products that address clients’s needs as risks evolve, “some $25 billion of Marsh clients’ premium is now being retained using this form of risk transfer.“ In other news, insurer AXA is reorganizing US operations. Layoffs are expected. Meanwhile, Steel City Re has on offer a remarkably innovative original outcome-based solution to the most complex risk of all. It is a solution insureds have wanted since 2005, and it is backed today by Tokio Marine Kiln.
Boeing’s Credit Rating on Cusp of Junk. Reputation risk is a going forward crisis of cash flow. $10bn bond offering cost Boeing $50mn more.