Building Corporate Reputation through Corporate Governance Essay

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Building Corporate Reputation through Corporate Governance
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´ c e d o m i r l j ub o j evi c
Faculty for Service Management Doboj, Bosnia and Herzegovina

´ gordana l jubojevi c
Higher School of Professional Business Studies Novi Sad, Serbia
The authors of the article deal with mutual relations of corporate governance and corporate reputation. The aim of this paper is to show that corporate governance design is in the function of better corporate reputation and to test the perceived relation between corporate governance and corporate reputation. The research expect to show: the necessity for integration of corporate strategy into business strategy (this issue will be even more present in the future) and to prove the opinion of consumers and corporations who claim that corporate governance is a necessity for corporate reputation development.
Key words: corporate governance, reputation, competitive advantage Literature Survey
A company achieves its competitive advantage when it succeeds to implement the strategy of value creation which is not possessed by its competitors on the market or in the industry. The sustainable competitive advantage may be achieved by disposing mechanisms that protect their competitive advantage from imitation. The established sustainable competitive advantage is the basis for the realization of superior organizational performance, survival and development. The theory of strategic management suggests that positive reputation may create competitive advantage and influence corporate performance.
Mrket efficiency determines the role of corporate reputation, and on an efficient market, the reputation plays the role of strategic property. There is a problem of identifying strategic resources in comparison to non-strategic ones, therefore it is best to say that strategies resources are the ones that significantly contribute to creating sustainable competitive advantages (Fombrun 1996).
According to Fombrun corporate reputation consists of four characteristics: credibility, reliability, responsibility and trustworthiness
(Fombrun 1996). m anag e m e n t 3 ( 3 ) : 221–233

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Cedomir Ljubojevic and Gordana Ljubojevic

According to Widerman and Buxel (2005), corporate reputation helps the companies to get good employees, attract consumers, increase consumers’ loyalty, which may be implemented as a factor of competitive performance and useful in obtaining the capital.
Without good reputation it is very difficult for a company to survive or to make progress. The key role of corporate governance has to be the improvement and protection of corporate reputation. Kitchen and Laurence (2003) have proven that reputation of a c e o and reputation of a company are linked to each other.
Good reputation is impossible to maintain without internal organization support. Argenti and Druckenmiller define corporate reputation as ‘a collective presentation of all participants image, built through the time and based on programs of company identity, its performance and perceptions of its behavior’ (Argenti and Druckenmiller 2004). The authors argue that organizations recognize the significance of corporate reputation in business goals achievements and in the function of competitive advantage maintenance.
The corporate reputation is a part of company’s assets along with tangible property, in balance sheet, workforce, social property (relations with suppliers, relations with consumers, local community and regulative institutions), and environmental property (energy, material resources, clean water, air and local environment; see Harrison
2007).
We talk about good reputation when consumers prefer the products and services of a company to available products of the competition that are similar in prices and quality. Good reputation is the key condition of stakeholders’ support to a company in competitive relations, and it is an important factor of value of organization on…