Over his 70 years of investing, Warren Buffett has become more than a legendary investor - he is a true thought leader with an impeccable reputation. Going well beyond his craft of investing, he has showcased a mastery of both public speaking and reputation management.
In fact, in his 2010 Memo to Berkshire Hathaway Managers, the mogul asserted, “We can afford to lose money -- even a lot of money. But we cannot afford to lose reputation -- even a shred of reputation.” This emphasis on reputation is ingrained into Buffett’s decision-making process and lifestyle. There are multiple facets to earning, retaining and when needed, restoring a positive individual and corporate reputation. Reputation building starts at the top of an organization with the management. Leaders should both establish and uphold the values for a sound business. While creating lofty goals and values can demonstrate the ambition of an organization, it can be detrimental if the company cannot follow through on them. Corporate executives must lead by example and repeatedly reinforce the values the business strives to embody.
Throughout his career, Buffett has highlighted his concept of an “inner scorecard,” meaning holding true to one’s intrinsic values. He believes that even if others do not see or appreciate your good deeds, living authentically will lead to a happy, ethical life. Buffett not only holds these values personally, but also to anyone who represents his company. He encourages them to behave as if their actions will be printed on the front page of the leading newspaper by the most critical journalist and to be read by all. Furthermore, Buffett urges employees to define their own success and happiness.
In a financial crisis, a positive reputation can help a company overcome or emerge stronger. The concept of paying it forward became a heartwarming source of feel-good content during the pandemic. Businesses with strong values and a clear story were able to mobilize their community to provide resources to support them. The media embraced stories of small businesses making significant efforts to alleviate their employees from quality-of-life changes due to mandated shutdowns. A great example of the power of storytelling is Dave Portnoy, the founder of Barstool Sports. He created the “Barstool Fund” with the goal of helping impacted small businesses survive the pandemic. On social media, local shops submitted a financial aid application which included a story about their founding, mission, and values. Leveraging a celebrity network and strong social media following, Barstool Fund raised $39,850,091 from 229,038 supporters that saved 391 small businesses. Rather than solely focusing on the financial merits of the small businesses, these grants were allocated based on the reputation of the management’s determination to remain open and keep their staff. As a result of this initiative, Dave Portnoy’s - along with Barstool Sports - earned a positive reputation as a socially aware and responsible company.
With business halted during much of the pandemic, the media turned attention to the ethical portion of a company’s value that in the past could not be as easily quantified or audited. To investors, though, the tide is turning on this front. The increased importance of environmental, social, and governance (ESG) metrics have allowed for more informed investment decisions that factor a company’s values and impact on a broader audience of stakeholders. New evidence to quantify these factors has helped investors find companies that have the reputation and social initiatives to stay relevant and successful as corporate social responsibility continues gaining prominence for stakeholders and shareholders. ESG factors are now discussed in the same manner as profitability as an indicator of corporate success. This development emphasizes the importance of strong values that businesses must not only communicate with words and blank statements but also act on with the greater society in mind.
The pandemic exemplified the assertion made by Warren Buffett in 2010. Companies that acquired social capital with their stakeholders were able to parlay these good graces into business-saving fundraising and grants. As investors continue to place more emphasis on ESG initiatives, successful companies will feature a strong balance of business acumen and corporate social responsibility. These qualities will earn a strong reputation with unlimited potential to add value over the long-term.