Academic journal article Journal of Organizational Culture, Communications and Conflict

Corporate Reputation Management: Citibank's Use of Image Restoration Strategies during the U.S. Banking Crisis

Academic journal article Journal of Organizational Culture, Communications and Conflict

Corporate Reputation Management: Citibank's Use of Image Restoration Strategies during the U.S. Banking Crisis

Article excerpt

INTRODUCTION

Image management is essential to corporations and other organizations, particularly in crisis situations. The financial crisis in the United States, which led to the failure of a large number of banking firms, has made firm reputation management extremely important. More stakeholders exist in bank governance than in non-financial types of businesses due to banks' role in promoting the stability of the economy and the liquidity function. Therefore, loss of confidence in the banking system can cause serious, systemic economic problems. The bailout for the financial industry and the financial rescue packages offered to select large U.S. banking firms as part of the Troubled Asset Relief Program (TARP) and the TARP Capital Purchase Program served to appease some concerns of bank customers and stockholders. However, the economic crisis and its aftermath continue to cause much concern for all stakeholders of banking firms.

The first purpose of this paper is to discuss the importance of corporate reputation management when crisis situations threaten the company's image. The second purpose is to illustrate the use of communication theory to analyze corporate responses to crises. Finally, we use two crisis response frameworks, Coombs' (2007) Situational Crisis Communication Theory (SCCT) and Benoit's (1995) Image Restoration Typology, to analyze Citigroup (Citi) responses to the company's 2008 financial crisis. We also evaluate the effectiveness of Citi's responses using Coombs' SCCT and Benoit and Czerwinski's (1997) framework.

In late November of 2008, Citi's CEO, Vikram Pandit called the company's universal banking model "the right model" and said that its strategy was to be "the world's truly global universal bank" (Read & Lepro, 2009). Days later, the government stepped in with millions of dollars of bailout money to prevent the bank from failing. Citi was criticized for not having a credible management team or a credible board (Dash, 2008). In fact, William Smith of Smith Asset Management said that "the problem with Citi is the model, the execution, the management" (Read & Lepro, 2009). Throughout its financial crisis, Citi faced several situations that threatened its image and necessitated a response.

An analysis of Citi's responses to events precipitated by the U.S. financial crisis using two theoretical frameworks (Coombs, 2007; Benoit, 1995) provides useful information to bank managers, communication professionals, and investors concerning the types of responses firms may offer in response to crisis events and the effectiveness of these responses in maintaining or restoring the firm's reputation following a crisis. Results of the analysis indicate that Citi used bolstering strategies most often to respond to events that threatened its image. When firms use bolstering strategies, they attempt to build their images by telling stakeholders about past and current good works (Coombs, 2007) and they use other forms of puffery to reduce the offensiveness of the crisis (Benoit, 1995). Citi also used corrective action strategies in its responses when the company tried to make amends for the wrong that was committed and took steps to prevent recurrence of the crisis (Coombs, 2007; Benoit, 1995). Stakeholders are most concerned by how the crisis affects them. By using corrective action strategies the company communicates what actions it plans to take to protect stakeholders from future harm. We also find that Citi used effective communication strategies in five of the ten excerpts we analyzed according to Coombs (2007) and Benoit & Czerwinski (1997) frameworks.

CORPORATE CRISIS AND REPUTATION MANAGEMENT

Corporate crisis is defined as an unexpected, nonroutine event that creates uncertainty and threatens an organization's legitimacy (Seeger, et al., 1998). Crises can harm stakeholders (community members, employees, customers, and stockholders) both psychologically and financially (Coombs, 2007). …

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