“When you mess with reputation it is often fatal,” Nir Kossovsky, President and chief executive of Steel City Re, which analyzes reputational risk for public companies told me in a telephone interview on Monday. Reputation can be quantified and insured like any other business asset. Whereas a corporate brand is in essence a promise (e.g., your car will give you status), reputation is broader, more personalized and fragile. That’s bad news for Donald Trump.
Kossovsky describes reputation in the business context as the “value reflected in the behavior of stakeholders.” If you are a superb businessman with a sterling reputation, you’ll see the value of reputation in higher prices you can demand, higher volume of sales, less turnover by employees, better terms from vendors and easier credit terms. People want to be in business with you. If, however, your reputation is that of an incompetent blowhard and sleazy guy, you’re not going to be able to charge as much for hotel rooms (or fill them up), keep good employees and get favorable terms from vendors and creditors. You may even get harsher treatment from regulators and juries/judges who view you with suspicion.
One way to tell if Trump has damaged his business reputation and therefore his own pocketbook will be, Kossovsky explains, if the price of licensing his name (that goes on hotels and other properties) goes down in the future — or worse, if licensees want to end their agreement.
All of this is especially critical for Trump whose name is the driver of his business value. In that respect he’s like celebrity endorsers. Unfortunately, once your reputation goes down the drain, your reputational value often goes to “zero — fast,” says Kossovsky. It’s binary, as we saw with Tiger Woods; you’re either worth a lot or people don’t want you at all. Moreover, unlike corporate brands which can bounce back, one’s reputation is not so elastic. In concrete terms, if Trump’s racism, misogyny, business failures and bullying make him a social pariah he won’t merely sell a fewer books; publishers may not want to touch him at all.
Anecdotal evidence suggests this is already occurring. “A staple of Palm Beach’s high-end philanthropy circuit, the Mar-a-Lago Club boasts rich history, an 800-seat ballroom and ocean views,” the Associated Press observes. “But some major charities and fundraisers are now concerned with a different feature: the property’s owner, Donald Trump.” The report continues, “Following the leak of Trump boasting about grabbing women by their genitals and allegations that he inappropriately touched women — in two instances at Mar-a-Lago — the Susan G. Komen Foundation is leaning toward finding a new location for its Perfect Pink Party on Jan. 14, a million-dollar breast cancer fundraiser it booked a year ago.”
In the consumer products realm, there are warning signs as well. The New York Times reports:
Across the country, voters alarmed by the tenor of Mr. Trump’s campaign and the emerging accounts of his personal conduct are engaging in spontaneous, unorganized and inconspicuous acts of protest that take direct aim at perhaps his most prized possession: his brand name.
In more than two dozen interviews, they described creative methods of punishing his economic empire and expunging the once-esteemed reminders of him from their lives, closets, golf bags and bookshelves over the past few months. They have thrown out — or cut up — Trump neckties, called off stays at Trump hotels, even stopped imbibing Trump wines.
Ivanka Trump’s clothing brand raises unique problems. “A significant aspect in selection of clothing is built around what you want to convey,” Kossovsky (who is married to a style strategist) says. If Ivanka’s brand is not separable from Trump’s name, the likelihood young women want to wear her shoes and carry her handbags goes down substantially. In that respect her father did her no favors in talking about her in inappropriate, sexualized terms. He made it that much harder to separate “Ivanka” from “Trump.” Put differently, she’s going to have to deal with the “ick” factor going forward.
Even if none of the evidence of Trump’s alleged groping came out and he did not vilify multiple groups of Americans, Trump’s election message may have been inherently problematic for his business interests. His campaign is built around hatred and resentment of elites — the very people who can afford a premium to stay in his hotel or who would license his name to go on a building. It’s the perfect example of “biting the hand that feeds you.”
In determining reputation — the collective expectations we have about someone’s value — the various stakeholders essentially all get a “vote.” Ex-employees thinking he is vulnerable to employment suits, banks who want tougher credit, travelers who want cheaper rates, golfers who want to play a course without being reminded of the 2016 election horrors and book readers who want to learn how to be successful (not how to be a creep who loses nearly a billion dollars in one year) all will have a chance to weigh on Trump’s value long after the election is over. In that sense Trump’s noxious election rhetoric, treatment of women and business failures (which are now much more widely known by regular Americans) may actually damage his bank account and reduce the amount of attention he receives — which are the only things he really cares about.