On June 30 2008, Margaret (Peggy) M. Foran was appointed to executive vice president, general counsel and corporate secretary of Sara Lee Corp (NYSE:SLE).  In addition to overseeing the company’s worldwide legal activities, Peggy led Global Business Practices, risk management, internal audit and insurance activities, as well as environmental, safety and sustainability efforts. In our parlance, she was Sara Lee’s risk and reputation officer. She reported to Brenda C. Barnes, chairman and chief executive officer, Sara Lee Corp. On June 9th, after less than one year on the job, she abruptly stepped down “for personal reasons.”

What’s going on in the background? Dogs -- hot dogs, to be exact. There is the May 2009 lawsuit filed by Sara Lee against Kraft Foods (NYSE:KFT) for false advertising – the so called hot dog wars. There is the concurrent recall of 1700 pounds of Sara Lee Ball Park brand hot dogs for mislabeling.  Hardly steamy stuff.

Is there some reputational risk lurking for which an indication or warning might be found in the Steel City Re IA (Corporate Reputation) Index?. The Index, which correlates with reputation surveys such as those published by Forbes, Fortune, and Harris Interactive, captures the financial implications of stakeholder behaviors and expectations of stakeholder behaviors as determined by corporate reputation. The Index is a good leading indicator of financial performance and returns on equity.

 

The Steel City Re Index shows that the reputation metric has been hovering in the 40th percentile amond the 48 companies in the Packaged foods & meats sector this past year. Although there is a distinct upward movement from the 40th to the 50th percentile co-incident with Ms. Foran's appointment, the trend has otherwise been downward until a recent recapture of lost ground. Although EWMA volatility has been declining, it is still at 4log orders of magnitude. Economically, over the past twelve months, SLE has underperformed its peers by 16.5%. In short, the mystery is why the dog didn't bark.

By our indications and warnings metrics, this type of economic underperformance in the setting of an already low reputation index increases the risk of business process corner-cutting -- actions that can lead to business process failures and expose a company's reputation to a myriad of perils and headline risk.

Ms Foran joined Sara Lee with a stellar reputation of her own. In CEO Barnes' welcome announcement last year, she said "During her three-decade long career, Peggy has earned the respect of corporate leaders, stakeholders, directors, investors and peers. She is recognized worldwide as a true leader with a reputation for the highest levels of personal integrity." She had tours of duty at Pfizer, ITT, and JP Morgan. 

We'll be following this one closely.