Oxford University Centre for Corporate Reputation
Moelis - the making of an investment bank
Ken Moelis left his job as president of UBS AG's investment bank in July 2007. He decided to set up his own firm - one that would build long-term relationships with clients and look after their interests. Investment banking is an intensely competitive business. How could Ken build the reputation of his start-up to compete with bulge bracket firms like Goldman Sachs, JP Morgan, Barclays and his own former employer, UBS?
The case examines the changes that have occurred in investment banking, especially the conflicts of interest that now exist between the trading and investment banking activities of the bulge bracket firms. Moelis's partnership structure, resistance to a star culture and focus on advisory services like M&A and restructuring allowed it to avoid some of the pitfalls. The personal reputations of Ken Moelis, Mark Aedy (head of the European office) and other well-respected partners were also critical to the success of Moelis & Company.
Building the reputation of Dubai International Financial Centre (DIFC) Courts
The establishment of the Dubai International Financial Centre (DIFC) in 2004 was designed to make the emirate a more appealing venue for international businesses to set up offices, with fewer restrictions on ownership, and tax breaks for those located within its boundaries. But while firms were happy to conduct business within Dubai, some were reluctant to commit to basing themselves there and being subject to a local legal system that they were unfamiliar with and which had an uncertain reputation. The answer for Dubai was the establishment of DIFC Courts: common law courts - the familiar system for international business - operating within Dubai's own civil law jurisdiction. Initially, the volume of cases was small, and there was confusion around the remit of the Courts. With the arrival of a new Registrar in 2008, the awareness, reputation and caseload of DIFC Courts grew substantially. The case follows the ways that DIFC Courts established confidence among different stakeholders to make this possible.
QMM/Rio Tinto in Madagascar. Case A: protecting the island's biodiversity
QMM, a subsidiary of mining giant Rio Tinto, began construction of an ilmenite mine in Madagascar in 2006. From a reputational perspective, the location of the mine made it one of the most sensitive projects that Rio Tinto had ever attempted. Madagascar is one of the world's biodiversity hotspots, with a very rich collection of species that exist nowhere else in the world. In recent times, the country has lost some 75 per cent of its native flora species due to human activities. The area where the ore deposits were identified happened to be in one of the island nation's most ecologically diverse regions. Not surprisingly, NGOs and the international media raised objections to the project.
The case outlines how QMM's environmental and conservation team demonstrated to sceptical outside observers that the company's actions would contribute economic benefits while leaving no lasting environmental and social harm.
QMM/Rio Tinto in Madagascar. Case B: engaging with local communities
Bringing a capital-intensive mining project to an impoverished country like Madagascar had significant reputational implications for QMM and its parent, Rio Tinto.
Geographical isolation had left the Anosy region, the mine’s proposed site, with very few job opportunities and a degraded infrastructure. In a country where two-thirds of people earned less than $1.25 a day, and nearly 90 per cent earned less than $2 a day, Anosy stood out for its extreme poverty. When QMM first began exploring the area’s potential, it focused on biodiversity (see Case A). Even then, the company realised that engaging with communities was an important part of any sustainability programme; as the head of its environmental team emphasised - "Biodiversity can’t work without community participation."
Over time, QMM increased its active engagement with local communities. Yet almost from the beginning, it struggled to defuse tensions that arose between the company and the region’s residents.
The case explores how QMM responded to a fluid and dynamic situation, where local residents’ expectations about what, and how much, the company should provide – in terms of jobs, infrastructure, and resettlement compensation – continued to escalate.
Eni - a 'guest' oil business in the Republic of Congo
The integrated energy company eni is Italy’s largest industrial firm and one of the largest oil companies in the world. It has substantial operations in a number of developing countries and has the largest presence of any international oil company, both in the Republic of Congo and throughout Africa. Eni’s strong internal culture, based on the values and philosophy of its first president, Enrico Mattei, has long guided its approach to working with developing countries. As Mattei emphatically stated to the leaders of producer countries during the 1950s and 1960s: “It’s your oil; we are guests.”
This case examines how eni’s corporate values shaped its sustainability programmes in the Republic of Congo and elsewhere. The case also considers the reputational opportunities and threats inherent in these activities, both for eni and for companies in the oil and gas industry generally.
Reputation and reorganisation
The transformation of the Vatican Museums
The Vatican Museums are one of the world’s most popular and iconic cultural attractions. In 2013 they received 5,459,000 visitors – the fifth most visited such institution in the world. Under pressure from such numbers, in 2007 the Museums faced a number of challenges: improving the visitor experience; reducing unauthorised access and guiding; halting the deterioration of the artworks; and addressing staff dissatisfaction. How could staff be persuaded that change was possible and then be mobilised to drive it forward? How could those outside the organisation be persuaded to engage in new partnerships that could change perceptions and drive progress?
Reputation and restructuring
Arcandor - doomed to fail?
At the end of 2004, the German retail conglomerate Arcandor, then known as KarstadtQuelle, was on the verge of bankruptcy. Thomas Middelhoff, the charismatic and controversial ex-CEO of the media firm Bertelsmann, was brought in to turn the company around. By 2007, Arcandor’s share price had shown signs of recovery and the company appeared on the way to better times. But in the summer of 2009, Arcandor filed for bankruptcy. What went wrong? Could anything have saved the company? This case considers the cultural, economic, managerial, strategic and reputational factors that affected Arcandor’s performance.
British Nuclear Fuels Limited (BNFL) - Case A: containing a crisis
In September 1999, the management team at British Nuclear Fuels Limited (BNFL) was stunned to learn that a story was about to appear in the Independent newspaper alleging that employees had falsified data concerning BNFL’s mixed oxide (MOX) fuel pellets - a serious breach of quality protocols that may have compromised the integrity of the nuclear fuel. Even worse, a shipment of these pellets was at that moment headed for BNFL’s customers in Japan.
A new group CEO, Norman Askew, was appointed to deal with the crisis. How could he reassure the company’s international customers, the media, regulators, employees and the company’s sole shareholder – the British government – that the management was able to contain the crisis? And how would the crisis affect the government’s long-term goal of privatising BNFL?
British Nuclear Fuels Limited (BNFL) - Case B: breakup
In July 2003, the UK government began a strategic review of British Nuclear Fuels Ltd (BNFL). One month before the review began the government appointed a new CEO, Mike Parker, the former head of Dow Chemical Co. As he participated in the review and got up to speed with the company, Parker became aware that there was a fundamental tension between the government and BNFL’s Board. Much of the discussion on the government’s side revolved around breaking up the company and selling its assets; BNFL’s Board believed the objective was to privatise the company in order to ensure its expansion and the growth of the UK’s nuclear industry generally (see BNFL Case A). BNFL had spent five years vertically integrating and diversifying in order to make itself a world-class player that would be attractive to a buyer or to investors in an initial public offering.
Although it was aware of the government’s changed priorities, the Board continued to believe that some kind of public-private partnership that would keep BNFL largely intact was still possible. But in December 2003, Secretary of State Patricia Hewitt outlined the conclusions of the strategic review: it mandated a radical restructuring, including a strategy for breaking up the company. Parker now faced a number of reputational challenges: doubts about management competence signalled to regulators, the media, and the wider public; and managing the new agenda with the company's internal stakeholders. How could he ensure that the Board, management, the unions, and employees would cooperate?
Reputation and wrongdoing
Parmalat - Europe's biggest corporate bankruptcy
Parmalat, the Italian dairy and food conglomerate, was declared bankrupt in 2003 after a multi-billion-euro hole was discovered in its accounts. The company's debts amounted to around €14.1 billion. Its founder, Calisto Tanzi - previously one of Italy's most respected businessmen, with a reputation for high moral standards and philanthropy - personally orchestrated a vast global fraud and was jailed for 18 years.
Drawing on the prosecutor's analysis of the company's dealings, and considering the network of personal and professional relationships that fostered the criminal conspiracy, we examine why the threat of losing reputation was not enough to prevent a disastrous series of decisions, and how key indicators signalled the true nature of the company before the truth was revealed.
Mabey & Johnson - the UK's first overseas bribery prosecution
Mabey & Johnson (M&J) was an entrepreneurial engineering company of the kind that Britain loves to champion: combining expertise, innovative flair and a “can-do” attitude. Having adapted and improved Bailey bridge technology made famous in the Second World War, M&J took its cost-effective bridging solutions all over the world and carved out a successful niche in some of the most challenging international territories. Its products were widely respected, and its operations were supported by the likes of the World Bank: providing affordable infrastructure fast in areas that were in direst need, sometimes after natural disasters. M&J and its staff were duly recognised for services to British industry.
Things changed with the introduction of new anti-corruption legislation: incentive payments disguised as commissions, once considered a normal part of business practice, were now off-limits. When the M&J Board attempted to put in the controls to prevent bad practice, and deal with particular individuals, the move backfired dramatically. Faced with counter-claims of endemic corruption, and damaging publicity, the company took the decision to self-report to the authorities in the hope of limiting the fall-out. In the event, the degree of disclosure in this process left M&J vulnerable to severe penalties - enforced by the Serious Fraud Office, which was delighted to have an exemplar case to pursue. It led to the imprisonment of senior executives, and the near destruction of the business. But what options were open to Mabey & Johnson?
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