How much do tax avoidance allegations harm a company’s reputation? The perception that multi-national corporations aren’t paying their fair share certainly gets a lot of people’s backs up. That’s why politicians of all stripes continue to talk up how tough they plan to be on ‘closing loopholes’ and making it harder to shift profits offshore. But it's not clear just how much bad it can be for a company's brand.
New research by the Reputation Institute suggests that avoidance allegations have significantly damaged the reputations of Starbucks and Amazon, two of the US corporations most frequently derided for their tax affairs. According to its Reptrak scoring system, based on public perceptions of seven reputational factors, Amazon’s reputation has dropped six points to 74 out of 100, and Starbucks fell five points to 56.
‘Products and services are of course always the most important factor in determining reputation; however, it is fascinating that we are witnessing such a surge in the importance of governance,’ says James Bickford, MD of the Reputation Institute. ‘Having a positive influence on society is now the third most important attribute, behind having high quality products and being value for money.
‘The reputations both Starbucks and Amazon now have for avoiding large tax bills in the UK have meant they are regarded very poorly in terms of corporate governance. In order to have an excellent reputation it is becoming imperative for businesses to successfully communicate societal value, openness and fairness.’
Tax might be a factor, but outrage over the companies’ arrangements is nothing new – it’s been in the headlines for several years now. While both of them did slump on the governance criteria there were other issues at play.
Amazon’s workplace ranking plummeted 14 percentage points to 51 – perhaps thanks to Scottish Liberal Democrats leader Willie Rennie’s claim that the company had ‘created intolerable working conditions for many’ after at least one worker was found camping near its Dunfermline warehouse in December. Starbucks lost points in the innovation, leadership and citizenship criteria, though it’s not clear why.
As long as corporate tax avoidance continues there will be consumers who tut their disapproval. But those who get everything else right needn’t worry too much. Amazon maintains a high score of 85 for product quality and there are few signs of poor financial performance in its UK business. More evidence that the most critical element of your reputation remains your ability to deliver what your customers want, when and how they want it.