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Building a Good
Reputation
STEPHEN BRAMMER, University of Reading
STEPHEN PAVELIN, University of Reading
In this paper, we develop a conceptual framework
that emphasises the need, for the purposes of repu-
tation building, for fit between CSR activities and
other key characteristics of the firm. Furthermore,
using data on a sample of 227 UK PLCs, we provide
evidence in support of a role for fit in the link
between reputation and social performance, which
suggests a need to tailor CSR activities in light of
a firm’s size and the nature of its principle business
activity. Thus, we highlight the strategic impor-
tance of correctly identifying the appropriate scope
and extent of CSR activism.
Ó2004 Elsevier Ltd. All rights reserved.
Keywords: Corporate reputation, Social responsi-
bility
Introduction
Corporate social responsibility (CSR) is an issue that
has increasingly attracted business, political, and
public interest in the past decade. Anecdotal evi-
dence suggests there has been a shift in the breadth
and nature of the perceived responsibilities of com-
panies to the societies in which they operate. This
shift poses significant strategic dilemmas for corpo-
rate management. Companies are now forced to
make decisions concerning the type and degree of
responsibilities they have to stakeholders, such as lo-
cal communities, the natural environment, and
employees. Furthermore, these responsibilities must
be balanced against those they have to financial inter-
est groups such as investors and creditors. Clearly,
this task would be less complicated if one could be
sure that satisfying the expectations of social stake-
holders contributed directly to the financial health
of the organization. Unfortunately, existing evidence
provides neither good evidence in favour of the
‘business case’ for improved corporate social respon-
siveness (Griffin and Mahon, 1997), nor the means
for companies to identify those aspects of social
responsiveness that, given the nature of their busi-
ness environment, would be expected to bring the
greatest reward.
Advocates of social responsiveness often highlight
the catastrophic financial impacts of the collapse of
ethically and socially unsound businesses such as
Enron. However, this fall from grace should be
viewed alongside Enron’s formerly favourable track
record in many dimensions of social responsiveness,
such as charitable contributions and community-
based initiatives. A business case for CSR activism
derived from the desire to avoid Enron-like financial
ruin would only promote compliance with legal
requirements for proper business practices. If we
are also, and perhaps particularly, interested in those
dimensions of CSR that lie outside of, or exceed,
such requirements (e.g. charitable efforts on commu-
nity and environmental projects) we must look be-
yond Enron if we are to inform a relevant business
case.
Part of the difficulty in establishing the business case,
if any, for improved corporate social responsiveness
arises because both the desired outcomes (e.g. profit-
ability, stock performance, employee attraction,
motivation and retention, customer loyalty), and
the socially responsive behaviours (e.g. charitable
giving, investing in technologies that reduce environ-
mental degradation, improving product safety, pro-
viding safe working conditions for employees) are
fundamentally multidimensional. This permits the
study of such a wide variety of linkages that it is of-
ten possible to make, or deny, a business case for al-
most any arbitrarily chosen pair of indicators of firm
and social performance (Griffin and Mahon, 1997).
In this study, we examine the links between corpo-
rate reputation and corporate social responsiveness.
Reputation has been defined as, ‘‘a perceptual repre-
sentation of a company’s past actions and future
prospects that describe the firm’s overall appeal to
all its key constituents when compared to other lead-
ing rivals’’ (Fombrun, 1996, p. 72). As has been
704 European Management Journal Vol. 22, No. 6, pp. 704–713, December 2004
doi:10.1016/j.emj.2004.09.033
European Management Journal Vol. 22, No. 6, pp. 704–713, 2004
Ó2004 Elsevier Ltd. All rights reserved.
Printed in Great Britain
0263-2373 $30.00
highlighted, definitions such as this emphasise the
aggregate or summative nature of corporate reputa-
tions that reflect the perceptions of a host of individ-
ual stakeholders and that, therefore, reflect a broader
concept of the performance of the organization than
the various measures of financial performance previ-
ously employed to identify the payoffs from social
responsiveness.
In the investigation of the link between business and
social performance there is much to be gained from
the addition of conceptual sophistication above that
present in many existing accounts. Among other
weaknesses, most conceptualisations suggest that
the benefits (or costs) of improved social responsive-
ness apply to all types of social performance and that
they are available to, and therefore should be reaped
by, all organizations. Were this true, we should ex-
pect to see very little variance across firms in the pat-
tern of their social performance, whereas, in fact and
as we will show, such variation is considerable. In
the next section, we outline an argument, grounded
in stakeholder theory, which proposes that the repu-
tational payoffs to a firm of increased social respon-
siveness are contingent upon their being a fit
between the type of socially responsive behaviour
and certain firm characteristics. This framework pro-
vides both an explanation of the variation across
firms in their social performance and predictions
regarding the circumstances under which there will
be reputational payoffs to improved social
performance.
In addition to providing a good summative proxy for
the performance of organizations, corporate reputa-
tion has been identified as an asset of considerable
interest and importance in its own right. There is
general agreement that corporate reputations con-
tribute significantly to the long run competitive
advantages of organizations and that their manage-
ment is of critical importance to companies (Dow-
ling, 2004;Rose and Thomsen, 2004;Fombrun,
1996). However, there is less agreement concerning
the processes by which reputational capital is built
or destroyed. An important strand in this literature
has focused upon the role of social responsiveness
in influencing perceptions of organizations in the
eyes of their stakeholders.
A seminal empirical study by Fombrun and Shanley
(1990) provides evidence that social responsiveness,
as measured by the level of corporate charitable
donations and the presence of a separately endowed
corporate charitable foundation, is positively associ-
ated with corporate reputation. Indeed, Williams
and Barrett (2000) provide more recent evidence in
support of a positive link between philanthropy
and corporate reputation. However, in a recent con-
ceptual contribution, Dowling (2004) raises the possi-
bility that attempts to enhance reputations through
demonstrating social responsiveness may not be
credible in some industries, such as tobacco, nuclear
energy, and weapons manufacture, where negative
perceptions of the industry dominate the efforts of
particular companies.
This study makes two contributions. First, our con-
ceptual framework emphasises the need for fit be-
tween CSR activities and other key characteristics
of the firm if a reputational payoff is to be achieved.
Thus, we highlight the strategic importance to a firm
of correctly identifying the appropriate scope and ex-
tent of its CSR activism. Second, we analyse the link
between reputation and social performance, allowing
this link to vary across corporate characteristics.
Using data on a sample of 227 UK PLCs, we provide
evidence that for the purposes of reputation building
there is a need to fit CSR activities with other key
firm characteristics.
The paper is structured as follows. The next section
develops our conceptual framework before we move
on to outline the data employed in our empirical
analyses. Subsequently, we document the variation
across companies in reputation and social perfor-
mance, and analyse the linkages between the two.
Afinal section discusses the implications of the re-
search and concludes.
Corporate Reputation and Social
Performance
In developing a framework of the linkages between
corporate reputation and social performance, our
starting point is Fombrun and Shanley’s seminal
model which hypothesises that corporate reputa-
tions, ‘‘represent publics’cumulative judgements of
firms over time’’ which, in turn, hinge on firm’s, ‘‘rel-
ative success in fulfilling the expectations of multiple
stakeholders’’ (Fombrun and Shanley, 1990, p. 235).
Afirm’s current reputation is determined by the sig-
nals that publics receive concerning its behaviours,
whether directly from the firm or via other informa-
tion channels, such as the media or the stock market.
Stakeholders are expected to have diverse prefer-
ences over firm actions, process and outcomes and
reputational assessments depend upon the congru-
ence between the apparent behaviours of the firm
and the expectations and preferences of those publics
(Fombrun and Shanley, 1990).
In this paper, we confine ourselves to a discussion of
the links between social performance of organiza-
tions and their reputations. In particular, we propose
that the nature and strength of these links are contin-
gent upon corporate characteristics that condition the
expectations of stakeholders concerning the conduct
of particular organizations. We will begin by outlin-
ing a general case for a link between reputation and
social performance, before extending the argument
to permit corporate characteristics to mediate this
BUILDING A GOOD REPUTATION
European Management Journal Vol. 22, No. 6, pp. 704–713, December 2004 705
relationship. In so doing, we will concentrate on two
particular corporate characteristics—industry and
firm size—that, we argue, play a particularly impor-
tant role in conditioning the link between reputation
and social performance.
Existing work has argued that social responsiveness
promotes favourable relationships with primary
stakeholder groups. This is because social respon-
siveness facilitates the process of ‘identification’,
whereby an individual perceives a good fit between
his values and his beliefs about an organization
(Dowling, 2004). Achieving such a fit is important be-
cause stakeholders (such as shareholders, employees,
consumers, pressure groups, Government and regu-
lators) that do not view the firm as following legiti-
mate courses of action have the power to either rest
power from managers, or to at least hamper the exe-
cution of corporate strategy (Mitchell et al., 1997).
Such ‘salient’stakeholder groups demand attention
from corporate management and, to the extent that
firms behave in accordance with their expectations,
they will be willing to continue to participate in the
activities of the firm. To the extent that social respon-
siveness helps managers, ‘‘induce constructive con-
tributions from their stakeholders’’ (Donaldson and
Preston, 1995), we should expect it to augment the
firm’s reputation since the expectations both of man-
agers and other stakeholders are satisfied. Indeed,
contributions from the strategy literature have ar-
gued that developing and sustaining good relation-
ships with stakeholders can help to form new and
valuable intangible assets (Hillman and Keim, 2001).
However, the links between social performance and
reputation may be more complex than has been sug-
gested thus far. If the demands made of the firm are
diverse, and perhaps conflicting, the response must
be balanced and multi-faceted. Furthermore, since
operationalizations of corporate reputation are typi-
cally summative, in that they assess the status of an
organization in the eyes of many of its stakeholders
(if not all and if not with equal weight), there is un-
likely to be a straightforward relationship between
social performance and reputation. Instead, it is
likely that the overall reputational impact of social
responsiveness is jointly contingent upon which
dimension of social responsiveness is under consid-
eration, and which business sector the firm is primar-
ily associated with.
We propose that distinctions between types of busi-
ness activities, and between types of social perfor-
mance, play important roles in defining the
relationship between social performance and corpo-
rate reputation. Crucially, the perceived relatedness
of social performance to a firm’s activities is subject
to variation both across sectors, and within sectors
across types of social performance. The spectrum of
business activities can be divided into sectors such
as resources, retail, chemicals (including pharmaceu-
ticals), construction, high technology, banking, utili-
ties, business services, etc. Similarly, we can divide
social performance according to its focus upon com-
munities, the environment or employees.
Industry may be expected to be a key influence on
the fit between social performance and firm reputa-
tion, and therefore the strength of the link between
the two, because sectors are inherently more closely
related to some types of social performance than to
others. This relatedness springs directly from the
variation across sectors in the strength of stakeholder
expectations for specific socially responsive behav-
iours. Fulfilment of these expectations, where they
arise, enhances the perceptions of the organization
in the eyes of these stakeholders, whereas the failure
to do so harms the reputation of the organization
among these constituencies.
For example, the existing empirical literature has
identified a number of sectors as having high envi-
ronmental impacts, e.g. the metals, resources, paper
and pulp, power generation, water, and chemicals
sectors (Clemens, 2001;Bowen, 2000;Sharma et al.,
1999;Hoffman, 1999). In contrast, other industries,
particularly newer manufacturing industries and
the service sector have significantly lower environ-
mental impacts and are associated with fewer highly
visible environmental issues. Where firms create sig-
nificant environmental externalities, they typically
face strong scrutiny from local communities, regula-
tors, and environmental pressure groups that expect
such organizations to reduce and make reparation
for such impacts. The environmental performance
dimension of social performance is therefore more
closely related to business activities that face visible
environmental issues, and we expect good environ-
mental performance to be more positively associated
with corporate reputation in such sectors.
Conversely, where environmental issues are less
apparent, it may be that the implementation of envi-
ronmental management and reporting systems bring
negligible benefits via the improved relationships
with environmentally concerned stakeholders such
as regulators, legislators and pressure groups. Given
this, the accompanying administrative costs may
cause the net effect of investment in environmental
performance to harm the financial performance of
the organization, and so make it less likely that the
expectations of creditors and shareholders are met.
If this is the case, a high level of environmental per-
formance would be expected to harm the overall rep-
utation of the firm in the eyes of its stakeholders.
Other industries are associated with alternative is-
sues, for example, the tobacco and alcoholic drinks
industries are associated with highly visible social is-
sues. They are thought to produce large social exter-
nalities (e.g. crime and health) and are subject to
strong regulatory regimes (competition, safety and
taxation). Similarly, the defence and pharmaceutical
industries receive particular attention from ethical
BUILDING A GOOD REPUTATION
706 European Management Journal Vol. 22, No. 6, pp. 704–713, December 2004
pressure groups, and the profile of workplace health
and safety concerns is relatively high in the construc-
tion, transportation, and resource extraction sectors.
In contrast, all three aspects of social performance
may be perceived to only distantly relate to the busi-
ness services and high technology sectors, due to the
relative lack of environmental impact, proximity to
final consumers, and employee health and safety
issues.
To summarize, it is expected that the nature of the
link between reputation and social performance is
influenced by the nature of the stakeholder environ-
ments firms face. To a great extent, expectations con-
cerning corporate social responsiveness are related to
the nature of the firm’s principle business activity,
such that firms are expected by stakeholders to par-
ticipate in activities designed to mitigate, or offer
compensation for, antisocial outcomes typically asso-
ciated with that line of business. Social performance
that is perceived to bear little or no relation to a
firm’s activities may be thought of as wasteful man-
agerial excess, and so harm reputation, whereas
examples perceived as relevant are more favourably
viewed.
In addition to a firm’s industry, its size may also play
a role in influencing the nature of the link between
social performance and reputation. Size matters for
a number of reasons. First, a number of contributions
have emphasised that larger firms may be particu-
larly susceptible to scrutiny from stakeholder groups
since they are highly visible to external groups and
more commercially vulnerable to adverse reactions
among such constituencies (Roberts, 1992;Watts
and Zimmermann, 1978). The level of pressure to
demonstrate social responsiveness falls dispropor-
tionately upon large firms because they are more
‘available’to relevant publics, in the sense that these
publics tend to be better informed regarding their
activities (Tversky and Kahneman, 1974). Second,
larger firms have larger and more diverse stake-
holder constituencies than smaller firms because they
are, on average, more diversified across geographical
and product markets. It is more likely, therefore, that
they are subject to demands for social responsiveness
from (at least some part of) their stakeholder constit-
uency. Third, corporate size has itself become a con-
troversial issue. As some business organizations
have grown to a scale that rivals and surpasses the
economic activities of many countries, debate has
intensified surrounding the accountability of such
large organizations to individuals, local communities
and the wider society.
These arguments suggest that, for a number of rea-
sons, corporate reputation may, in general be more
closely linked to social responsiveness for large orga-
nizations than for small organizations. By demon-
strating their social responsiveness, large firms can
satisfy the expectations of their stakeholder constitu-
encies, demonstrate their accountability to society,
and encourage advantageous outcomes from the
high level of public and political scrutiny to which
they are subject. It is worth noting these arguments
suggest that the influence of firm size on the link be-
tween social performance and reputation should ap-
ply equally across all dimensions to social
performance.
Method
Our sample consists of 227 UK PLCs chosen largely
according to the availability of reputation data (see
below
1
). Therefore, this sample, while drawn from
a wide range of industrial sectors, is not randomly
selected. Instead, there is a focus upon the largest
firms within each industrial sector, including 90%
of FTSE 100 companies. Nevertheless, there is consid-
erable variation in reputational scores both within
and between industrial sectors.
Corporate Reputation
To measure corporate reputation we utilise the
‘Britain’s most admired companies’survey from
Management Today, 2002, which employs a similar
methodology to that used to construct the Fortune
Index, a commonly-used measure of the reputations
of US firms (e.g. Fombrun and Shanley, 1990;
McGuire et al., 1988;Fryxell and Wang, 1994). The
chairmen, managing directors and selected main
board directors of the 10 largest companies in 24
industrial sectors were surveyed, as were analysts at
a selection of leading investment companies. Partici-
pants were asked to rate each company in their sector
(excluding their own company) on a scale of zero
(poor) to 10 (excellent) for their performance in nine
criteria: quality of management; financial soundness;
ability to attract, develop and retain top talent; quality
of products/services; value as a long term invest-
ment; capacity to innovate; quality of marketing;
community and environmental responsibility;
2
use
of corporate assets. The assessments received for each
firm were averaged across criteria and respondents to
produce a single reputational score.
Social Performance
Social performance data were obtained from the Eth-
ical Investment Research Service (EIRIS), who spe-
cialise in the measurement of corporate social
performance against a consistent and objective set
of criteria, principally for the consumption of inves-
tors. EIRIS survey firms concerning their social per-
formance, but also undertake their own research.
As a result, they are able to provide social perfor-
mance scores for a firm irrespective of whether it par-
ticipates in an EIRIS survey. They offer the largest
BUILDING A GOOD REPUTATION
European Management Journal Vol. 22, No. 6, pp. 704–713, December 2004 707
and most complete multidimensional social perfor-
mance coverage of UK firms, covering issues relating
to employment, the environment, community, hu-
man rights and supply chain management. Due to
the limited availability of data regarding the last
two of these, we will restrict our attention to the first
three dimensions of social performance.
Our indicator of employee responsibility is based
upon five separate components relating to health
and safety systems, training and development, equal
opportunities practices, employee relations and job
creation and security. Similarly, our indicator of envi-
ronmental responsiveness is based upon four separate
components relating to the quality of environmental
policies, systems, reporting and performance. Our
indicator of community responsiveness is entered as
a single measure by EIRIS. Following the general ap-
proach used by Graves and Waddock (1994) for
KLD data,
3
we translated the EIRIS text-grade rating
for each measure into a number-grade rating. Each
environmental measure has five text categories; the
employment measures have three text categories,
while community has four. We coded each of the envi-
ronment text scales into five point scales, each of the
employee responsibility text scales into three point
scales and created a four-point scale for community
responsiveness. In each case, the codes began with a
value of 1 and larger numbers indicated more social
responsiveness. To summarise, our measures of the
three dimensions of social performance are:
vCommunity performance graded 1 to 4.
vEnvironmental performance: policies; systems;
reporting; and performance. Each category
graded 1 to 5. Environmental impact score out
of 20.
vEmployee performance: health and safety; train-
ing and development; equal opportunities;
employee relations; job creation; and job security.
Each category graded 1–3. Employment responsi-
bility score out of 18.
To arrive at a single aggregate measure (termed so-
cial performance) we summed the three scores hav-
ing normalised each to a 1–4 grading. This
generates an overall score out of 12.
Other Corporate Attributes
A measure of each firm’s size (the natural logarithm
of the value of total assets), and principle business
activity (approximately equivalent to the three-digit
NACE industry) were extracted from accounting
data courtesy of DataStream. Using the DataStream
industry classification, we allocated each firm to
one of twelve sectors: Retail, Finance, Utilities,
Chemicals,
4
Resources, Consumer products, High
technology, Construction, Business services, Trans-
portation, Engineering, Media.
Results
This section will be divided into two parts. The first
focuses upon the patterns of reputation and social
performance across firms, as reflected in the averages
across the sample as a whole, and by the manner in
which these averages vary with firm size and across
sectors. The aim is to familiarise the reader with the
scope and character of the data and provide some
useful (and scarcely reported) stylised facts in re-
spect of both corporate reputation and social perfor-
mance. The second section explores the key focus of
the paper, the link between reputation and social
performance, as reflected by the correlation between
the two, and the manner of its variation with firm
size and across sectors.
Patterns in Reputation and Social Performance
Over the sample as a whole, some 227 firms, the
average reputational score is 52.8; the average social
performance score is 4.00; the average scores relating
to community, environmental and employee perfor-
mances are 1.44, 4.68 and 5.98, respectively. These
figures provide useful benchmarks against which to
assess the reputation and social performance of indi-
vidual firms (which we will not do here) or groups of
firms, suitably defined. We will begin by defining
such groups according to firm size (as measured by
total assets).
As we have firm size data for only 215 of the 227
firms, we must use this slightly smaller set of firms
for this part of the analysis. We ranked the firms in
terms of their size and divided them into five
groups, each containing 43 firms. The size range in
group 1 is £8 m to £525 m, in group 2 is £570 m to
£1,284 m, in group 3 is £1,290 m to £2,901 m, in
group 4 is £2,968 m to £7,425 m and in group 5 is
£7,505 m to £358,534 m. Thus, there is considerable
variation in total assets across the sample and also
notable differences between groups in terms of aver-
age firm size. Table 1 presents the patterns in aver-
age reputation and social performance across the
five size groups.
Table 1 shows that, among our sample, larger firms
tend to hold better reputations. However, the (ab-
sence of) shading in the bottom half of the table illus-
trates the reputational differences between the size
groups are largely statistically insignificant. It is only
when comparing the average reputations in groups 1
and 5 (the smallest and the largest) that one finds lar-
ger firms have significantly better reputations than
smaller firms. Therefore, these findings are indicative
of a general tendency for larger firms to be more
highly regarded, but one that is only starkly signifi-
cant when the differences in size are approaching
the broadest found among UK PLCs.
BUILDING A GOOD REPUTATION
708 European Management Journal Vol. 22, No. 6, pp. 704–713, December 2004
Regarding all aspects of social performance, again
larger firms tend to achieve higher scores. However,
these differences between size groups are far more
commonly statistically significant. For overall social
performance, all pair-wise differences between
groups (1 & 2, 1 & 3, 1 & 4, 1 & 5, 2 & 3, 2 & 4, 2
& 5, 3 & 4, 3 & 5, 4 & 5) are significant, and the same
is true of community performance. For environmen-
tal and employee performance, almost all differences
are similarly significant. In each case, it is the differ-
ences between adjacent size groups (2 & 3 for the for-
mer, 1 & 2 and 3 & 4 for the latter) that are not
sufficiently marked. Therefore, these findings are
indicative of a general tendency for larger firms to
be more socially responsive, and one that is starkly
significant across the full breadth of the size range
found among UK PLCs.
Moving away from firm size, we can return to the
full sample of 227 firms to group firms instead
according to their principle business activities. We
allocate each firm to one of twelve industrial sectors
(as described previously) to investigate the variation
in reputation and social performance across diverse
business environments. Table 2 presents the patterns
in average reputation and social performance across
the twelve sectors; Table 3 summarises, for both rep-
utation and social performance, the differences be-
tween the average score for a particular sector and
that recorded across all other firms - the sign indi-
cates whether that sector is associated with a rela-
tively high (+) or low () score, and shading
indicates whether any such differences are statisti-
cally significant.
There is considerable and significant variation across
sectors regarding both reputation and social perfor-
mance, and particularly the latter. However, before
inspecting individual sectors, it is worth noting a
general tendency for a sector to exhibit above aver-
Table 1 Average Reputation and Social Performance across Firms, by Firm Size
NB. Shading indicates significance at the 95% level of confidence
Table 2 Average Reputation and Social Performance across Firms, by Sector
Sector nAverage Reputation Average Social Performance
Overall Community Environment Employee
Retail 27 55.6 3.60 1.44 3.81 5.33
Finance 26 49.4 5.35 2.00 5.85 8.38
Utilities 15 47.3 6.00 2.07 7.87 7.87
Chemicals 18 52.9 4.58 1.56 5.61 6.94
Resources 9 57.6 6.69 2.22 9.11 8.56
Consumer products 21 52.1 4.30 1.52 5.19 6.29
High technology 25 49.4 2.59 1.04 2.44 4.44
Construction 31 55.3 3.39 1.06 4.71 4.52
Business services 24 55.0 2.27 0.83 2.08 4.46
Transportation 13 54.4 4.42 1.54 5.54 6.23
Engineering 8 58.8 2.96 1.00 4.00 3.75
Publishing 10 51.2 4.38 1.90 3.70 7.50
All firms 227 52.8 4.00 1.44 4.68 5.98
BUILDING A GOOD REPUTATION
European Management Journal Vol. 22, No. 6, pp. 704–713, December 2004 709
age reputations and below average social perfor-
mance or below average reputations and above aver-
age social performance. This is true of seven sectors:
Retail, Business services and Engineering adhering to
the former pattern; Finance, Utilities, Chemicals and
Consumer products adhering to the latter. This sug-
gests that the pressure for social responsiveness is
associated with a poor reputation. Perhaps CSR
activism provides a means to rebuild a bad name.
Conversely, in sectors where good reputations are
commonly found there may be less impetus to be so-
cially responsive as firms are less burdened by stake-
holder concerns regarding the strategic positioning
of the organisation.
There are five departures from this pattern. In Re-
sources, firms exhibit relatively strong social perfor-
mance despite enjoying relatively good reputations.
This may reflect the particular salience of a wide
variety of community-, environment- and employ-
ee-related issues in that sector. For example, the
end-use of extraction sites has often become a notable
local community and environmental issue and the
working conditions of miners throughout the world
are subject to continuing debate. A similar pattern
is found in the Transportation sector, where the
external pressure may primarily be exerted by the
extensive regulatory infrastructure that is brought
to bear on much of that industry. Conversely, the rel-
atively poor social performance of High Technology
firms may reflect the absence of salient social issues
in that sector.
The other two exceptions derive from unusual pat-
terns of behaviour across the three dimensions of so-
cial performance. In particular, in all but two sectors
there is, in all three dimensions, either relatively high
or relatively low performance. However, in Con-
struction, relatively poor community and employee
performance is matched with relatively good envi-
ronmental performance; in the Media sector, rela-
tively good community and employee performance
is matched with relatively poor environmental per-
formance. It is worth noting that these behaviours
seem to reflect the relative importance and unimpor-
tance of environmental issues in the Construction
and Media sectors, respectively.
Table 3 Mean Differences in Reputation and Social Performance, by Sector
NB. Shaded cells indicate that the difference in means is significant at the 95% level of confidence
Table 4 Correlations between Reputation and Social Performance, by Size Group
Size Group Correlations between Reputation and Social Performance
Overall Community Environment Employee
1 0.062 0.100 0.048 0.014
2 0.134 0.253 0.042 0.083
3 0.131 0.123 0.124 0.072
40.023 0.124 0.085 0.107
5 0.444
***
0.408
***
0.369
**
0.290
*
All firms 0.257
***
0.286
***
0.210
***
0.157
**
*
The coefficient is significantly different from zero at a 90% level of confidence
**
The coefficient is significantly different from zero at a 95% level of confidence.
***
The coefficient is significantly different from zero at a 99% level of confidence
BUILDING A GOOD REPUTATION
710 European Management Journal Vol. 22, No. 6, pp. 704–713, December 2004
The Link between Reputation and Social
Performance
We have shown a tendency for larger firms to have
both better reputations and better social performance.
However, we have also shown a tendency at the sec-
tor-level for better average reputations to be matched
with poorer average social performance. While one
can interpret the latter as evidence that social perfor-
mance can be used to augment reputation, it is fair to
say that the link between the two is somewhat unclear
from the preceding analyses. Our next aim is, to at
least some extent, clarify the nature of this link as it
exists among our sample of firms. To do so, we will
inspect the firm-level correlations between reputation
and our measures of social performance. Firstly, we
group firms according to their size.
Table 4 presents the correlation coefficients between
reputation and each of overall social performance,
community performance, environmental perfor-
mance and employee performance, for each of the
five size groups. The coefficients that are significantly
different from zero (at a 90% level of confidence or
greater) are indicated with asterisks. Across the sam-
ple as a whole, there are significant positive coeffi-
cients relating to all four measures of social
performance. This indicates a positive firm-level link
between reputation and social performance—that
better social performance is associated with a better
reputation. However, only four of the coefficients
that relate to the five size groups are statistically sig-
nificant, all of which are positive—again indicating a
positive link between reputation and social perfor-
mance—and all of which relate to group 5—indicat-
ing that the link is most pronounced among the
largest firms. It is worth noting that these findings
are consistent with a reputation-building property
of social performance that is, across all types of
CSR activities, strongest among the largest firms.
As such, they are consistent with the predictions of
the conceptual framework outlined previously.
Table 5 presents the results of the same type of firm-
level correlations, but with firms grouped according
to their principle business activity, rather than size.
Again, all coefficients that are statistically different
from zero are also positive. However, there is consid-
erable variation across sectors. For example, in only
four sectors (Finance, Chemicals, Resources and Con-
sumer products) is there a significant link between
reputation and overall social performance. Further-
more, there is marked variation across the three
dimensions of social performance both across and
within sectors. For example, in Retail the insignificant
coefficients on environmental and employee perfor-
mance, and indeed on overall social performance,
are matched with a significant positive coefficient
on community performance. This perhaps reflects
that sector’s proximity to final consumers, and the lo-
cal communities in which they live. In contrast, a po-
sitive and significant link between reputation and
social performance is found for all three dimensions
in the Consumer products sector. This suggests that
the manufacturing activities of such firms ensure they
face a broader set of salient social issues.
Looking down the columns of Table 5, it is worth
noting, for each dimension of social performance,
in which sectors there is a significant positive link
to reputation. For community performance, such a
link is found in Retail, Finance, Utilities, Chemicals,
Consumer products and Business services. For envi-
ronmental performance, such a link is found for
Chemicals, Resources and Consumer products. For
employee performance, such a link is found for Fi-
nance and Consumer products. These patterns are
Table 5 Correlations between Reputation and Social Performance, by Sector
Sector nCorrelations between Reputation and Social Performance
Overall Community Environment Employee
Retail 27 0.296 0.349
*
0.227 0.241
Finance 26 0.573
***
0.663
***
0.293 0.576
***
Utilities 15 0.424 0.452
*
0.302 0.354
Chemicals 18 0.586
**
0.599
***
0.461
*
0.345
Resources 9 0.759
**
0.389 0.970
***
0.430
Consumer products 21 0.651
***
0.567
***
0.639
***
0.395
*
High technology 25 0.285 0.329 0.228 0.203
Construction 31 0.282 0.229 0.243 0.167
Business services 24 0.230 0.367
*
0.153 0.043
Transportation 13 0.407 0.399 0.300 0.439
Engineering 8 0.371 0.045 0.479 0.489
Media 10 0.201 0.028 0.261 0.169
All firms 227 0.257
***
0.286
***
0.210
***
0.157
**
*
The coefficient is significantly different from zero at a 90% level of confidence
**
The coefficient is significantly different from zero at a 95% level of confidence
***
The coefficient is significantly different from zero at a 99% level of confidence
BUILDING A GOOD REPUTATION
European Management Journal Vol. 22, No. 6, pp. 704–713, December 2004 711
broadly consistent with expectable cross-sector vari-
ation in stakeholder environments. The sectors
highlighted for community performance are (apart
from Business services) close to final consumers (as
Chemicals includes Pharmaceuticals and Finance in-
cludes a large number of High Street banks and
insurers). Those highlighted for environmental per-
formance are closely associated with environmental
concerns. That those highlighted for employee per-
formance have large workforces, but encounter few
salient health and safety issues, is somewhat surpris-
ing and perhaps reflects a general pressure to dem-
onstrate social responsiveness in those sectors.
Conclusion
In this paper, we develop a conceptual framework
that emphasises the need, if a reputational payoff is
to be achieved, for fit between CSR activities and
other key characteristics of the firm. Furthermore,
using data on a sample of 227 UK PLCs, we provide
evidence in support of a role for fit in the link between
reputation and social performance. In particular, our
findings suggest that, for the purposes of reputation
building, there is a need to tailor CSR activities in
light of both a firm’s size and the nature of its princi-
ple business activity. Thus, we highlight the strategic
importance to a firm of correctly identifying the
appropriate scope and extent of its CSR activism.
Regarding the importance of fit, organisational attri-
butes other than size and industry may also be rele-
vant. There is ample scope for future work to
investigate the importance, for the purposes of repu-
tation building, of fit between social performance
and firm characteristics such as broad corporate
strategy, media exposure and profitability. It could
be, for example, that the positive reputational im-
pacts from good social performance are contingent
upon financial performance that is acceptable in the
eyes of financial stakeholders, or upon the firm pur-
suing a wider strategy to develop, among its custom-
ers, an association with quality-provision rather than
cost-minimisation.
As we argued at the outset, examination of the link
between the social responsiveness of organizations
and their general performance has produced mixed
results. Our analysis suggests that this link is more
complex than has been appreciated in much of the
existing literature, and specifically that the payoffs
to being socially responsive are contingent upon
organizational characteristics. Further research that
deploys this central logic in an investigation of the
relationship between social and financial perfor-
mance would, we suggest, prove fruitful. In addition,
future research of this kind may refine and extend
the distinctive normative prescriptions for corporate
strategy in the area of social responsiveness devel-
oped here.
Notes
1. We have reputation data for 240 firms. However, restricted
availability of other data (principally regarding social perfor-
mance) necessitated the loss of 13 of these firms from the
sample.
2. Given our focus upon the links between social performance and
reputation, it would be preferable to remove a score for
perceived social (community and environmental) responsive-
ness from these reputational scores. Unfortunately, we cannot
do this. However, we believe that this component, which
contributes only one ninth of the score, is dominated by other
aspects of reputation. Furthermore, existing evidence suggests
that similarly constructed aggregated measures of reputation
speak most directly to a firm’s reputation as an investment (e.g.
Fryxell and Wang, 1994).
3. Kinder, Lindenberg, Domini and Company (KLD) is a social
choice investment advisory firm that objectively rates (mainly
US) firms on nine dimensions of social performance.
4. The chemicals sector includes pharmaceuticals. We tested the
sensitivity of our findings to this aggregation and found the
omission of pharmaceutical companies from the chemicals
sector brought no material change in the results.
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STEPHEN BRAMMER,
Department of Manage-
ment, University of Bath,
Claverton Down, Bath
BA2 7AY, UK. E-mail:
mnssjab@management.bath.
ac.uk
Stephen Brammer is Lec-
turer in Business Eco-
nomics at the University
of Bath, UK. His current
research addresses empiri-
cal issues in the business and society field from the
perspective of strategic management. Recent publica-
tions include articles in the Journal of Business
Ethics and Business Ethics: A European Review.
STEPHEN PAVELIN,
The Business School,
University of Reading,
Reading RG6 6AH, UK.
E-mail: s.pavelin@reading.
ac.uk
Stephen Pavelin is Lec-
turer in Economics at the
University of Reading,
UK, having previously
held posts at the Univer-
sity of East Anglia, UK
and University College Dublin, Ireland. His current
research interests include foreign direct investment and
corporate social responsibility, and recent publications
include articles in the International Journal of
Industrial Organisation and Business Ethics: A
European Review.
BUILDING A GOOD REPUTATION
European Management Journal Vol. 22, No. 6, pp. 704–713, December 2004 713
