On Corporate Reputation: A Reply to Dobson

Dobson (1989) discusses the view that, as the modern day corporation has become a nexus for competing and conflicting stakeholder claims, its role as an efficient allocator of resources seems to be basically flawed. According to Dobson, conditions that must prevail if reputation is to be an effective contractual enforcement mechanism are necessary but not sufficient to guarantee ethical behavior. Reputation has limitations; it is only one of many criteria by which a stakeholder will decide to enter into a relationship with a firm. Reputations also are relative. There are 2 systemic or institutional problems with relying on a concern for reputation to police unethical behavior. The first is that unethical decisions are made by individuals, but the resulting poor reputation (if such is the result) will normally attach to the firm. The 2nd problem is that the offending manager may suffer little or no approbation from the peer group. There is a need to recognize the problem of short-term thinking and decision making stemming from the pressure to achieve quarter-by-quarter increases in sales and profits.