Legacy of the BP spill: What's a reputation worth?

The leak is plugged. Six months after the Deepwater Horizon exploded and sank, unleashing the worst oil disaster in the history of the United States, BP is no longer monopolizing the top spot on the news agenda. What remains, however, is a reputation as black as the oil it pumps.

Not for the first time, a petroleum giant has run into an oil-spill disaster. The last time it happened on anything approaching this scale, Exxon was able to extricate itself from the muck in Alaska's Prince William Sound and become an organization recognized for its safety programs and so obsessive about them that analysts tell stories about Exxon canteen workers charged with taking the temperature of the lettuce so "nobody gets hurt."

Can BP pull an Exxon? Does it need to?

The value of a corporate reputation is one of the toughest issues that companies have to wrestle with. Some guard their reputations jealously. Others sell products that many find morally questionable – think cigarettes – but find no lack of profits or investors. Interest groups pressure managers to exit businesses that could hurt their reputation or start ventures that could build it. The payoff for such moves is unclear.

"When you get to the soft side of the ledger it gets very difficult," says Harlan Loeb, director of crisis and issues management at Edelman, a public-relations firm. "There's a reflexive discomfort with reputation, because it's not easy to measure."

Nevertheless, the public and CEOs are paying increasing attention to corporate reputation. For the first time in 10 years of surveying public attitudes toward business, Edelman's Trust Barometer this year found that "trust and transparency" were deemed as important as the "quality of services and products." An NYSE-Euronext survey of 325 CEOs worldwide found that three-quarters of firms had become more transparent about their risk policies.

But for BP, the road to image recovery is steep – and longer than it was for ExxonMobil. Exxon's stock endured a short-lived 10 percent dip in the aftermath of the Exxon Valdez spill in 1989. BP, by contrast, saw its stock price plunge 55 percent after the explosion aboard the Deepwater Horizon and has so far recovered only a little more than a third of that loss. It was kicked off the Dow Jones Sustainability Index and dropped by the FTSE4Good ethical index. A boycott BP page on Facebook has attracted more than 800,000 fans.

BP's string of disasters

Typically, negative public reaction fades as the media spotlight dims. But two disasters over the past five years hurt BP's image long before the Gulf spill. A 2005 refinery explosion in Texas City, Texas, that killed 15 workers was followed a year later by a 300,000-barrel pipeline leak in Alaska's Prudhoe Bay. When Tony Hayward took over in 2007, he promised to operate with "laser focus" on safety.

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