Reputation is everything in today’s day and age because it is how a person or company picks up and moves on. When there is any kind of public failure where there is a breach of trust, the most important thing is to focus on reputation. This can be the hardest part about being in the asset management industry.
Farber, who is at the College of Business Administration at the El Paso campus of the University of Texas, has shown that there is a big difference between fraud firms and non-fraud firms. There are not as many controls in place before or after the incident – and this means that there is a wide opening for something to happen.
Farber conducted a study with 87 firms that were traded publicly that had some kind of SEC proceedings because of misleading and/or false financial reports. They were eager to build their reputation back up and therefor within three years, they have more outside board members, more audit committee meetings, and were virtually indistinguishable from the other companies that were matched within their industry.
What matters most at the end of the day with an asset management company is trust. Clients and investors need to be able to trust the company and the company needs to do whatever possible to make this happen. It is easy for a company to point the finger at a person in finance, but at the end of the day, this doesn’t go as far as making public apologies and strengthening the controls within the day to day operations.
Individuals within a company often feel they are playing by the rules, only to learn that they are in one of the largest scandals of all time. Employees are often required to sign codes of conduct, attend workshops, and go through countless hours of training.
Building a reputation backup can be done, though it takes some research to figure out what is best. The companies that are able to build a reputation back up quickly can move on – and learn their lesson from the whole ordeal without punishing their employees in the process. There is hope for assent management companies that have stumbled as long as they truly learn and make an apology for what has happened.