Reputation, returns and market premium

Ntateko Khosa on how PR grows shareholder value

For investors, share prices are shaped as much by perception as by performance. Public relations and reputation management are no longer soft disciplines on the margins of business strategy; they are central to value creation.

A misjudged campaign can wipe billions off market capitalisation overnight, while a clear, disciplined brand narrative can unlock hidden equity. The challenge for boards is to recognise PR as a driver of valuation, not a discretionary cost.

Scandals and the price of silence

Markets punish reputational missteps swiftly. When Bud Light’s partnership with influencer Dylan Mulvaney sparked a consumer backlash in 2023, sales fell 26% and parent AB InBev lost up to 20% of its stock value in days—the brand’s bid for relevance translated into a drag on shareholder returns.

Reputation is also fragile in the digital economy. Coca-Cola’s 2024 AI-generated Christmas advert, lampooned online for its cold, dystopian quality, may not have directly impacted the share price, but it prolonged a downtrend. In hyper-transparent markets, reputational noise can lengthen periods of depressed valuations.

These examples confirm what investors know intuitively: reputation risk is a financial risk. PR failures are not confined to column centimeters; they are priced into earnings multiples and investor confidence.

When the brand drives the valuation premium

Conversely, strong brand stewardship and disciplined communication enhance investor value. Research from Interbrand suggests that 67% of companies in the S&P 500 may be inaccurately valued because analysts and investors underestimate brand strength in their valuations.

Interbrand’s analysis of more than 500 companies over five years found that many firms either trade below their true earnings potential or suffer excessive volatility because the investment community poorly understands brand strategy. Yet when brands actively communicate their role in driving growth, the disconnect narrows, and valuations improve.

The data is compelling: 76% of analysts and financial journalists surveyed by Interbrand agreed that a brand has a meaningful impact on valuation. Yet only 10% claim a deep understanding of brand positioning among the companies they cover.

This asymmetry creates an opportunity for businesses. By treating PR as an investor-facing tool and understanding how brand strategy underpins earnings resilience, companies can convert intangible strength into a tangible valuation premium.

Apple exemplifies this alignment. Its “Shot on iPhone” campaign reinforced product superiority while strengthening the wider ecosystem narrative. The result: rising sales, rising multiples, and a reputation for resilience that continues to command investor trust.

PR, in this sense, becomes more than media relations; it is investor relations by another name.

Tesla and the perils of “flooding the zone”

But brand equity can just as easily be squandered by undisciplined communication. Alexander V. Laskin, Ph.D., in recent research, highlights the risks of “flood the zone” tactics, which overwhelm the media cycle with a barrage of stories to drown out criticism.

Elon Musk’s embrace of this strategy, particularly through his involvement in U.S. political controversies, backfired on Tesla. Laskin’s data show that Tesla’s stock dropped 15.4% in a single day after Musk was questioned about accountability for the Department of Government Efficiency (DOGE), and overall, the company lost 24% of its value in the first 100 days of the new administration. Far from protecting Tesla, media saturation blurred its narrative, tying the brand to volatility and eroding investor faith.

The lesson is clear: visibility is not value. PR without credibility breeds instability. In saturated media environments, disciplined messaging and reputation stewardship are worth more than constant noise.

Balanced Scorecard: Reputation as a reportable asset

How, then, should companies institutionalise reputation management to stabilise and grow their share price? The answer lies in treating reputation as measurable, manageable, and reportable, just as financial capital is.

The balanced scorecard approach, pioneered in management theory and increasingly applied to investor relations, provides a framework for effective management. It requires companies to report on performance not only in financial terms, but also across customer, operational, innovation, and reputational dimensions. For shareholders, this broadens the lens of value creation.

Applied to reputation management, the balanced scorecard encourages firms to regularly brief investors on brand health, trust metrics, customer sentiment, and strategic communications. This reduces the informational gap identified by Interbrand, ensuring that analysts and investors have a better understanding of the brand’s role in sustaining growth.

Importantly, it also forces boards to align reputation management with strategy. Rather than firefighting crises or indulging in one-off campaigns, the company commits to continuous reporting on the issues that matter: sustainability practices, customer trust, innovation credibility, and corporate culture. Over time, this consistency translates into reduced volatility, higher P/E multiples, and stronger shareholder loyalty.

Warren Buffett’s annual letter to Berkshire Hathaway investors, as well as American Express’s clarity in articulating brand differentiation, are working examples of scorecard-style reporting. Both enjoy stable valuations in part because they actively manage expectations and narrative alignment.

The business bottom line

Public relations is not a discretionary spend; it is a line item in enterprise valuation. Companies that neglect reputation management risk volatility, mispricing, and a loss of market share. Those that integrate brand storytelling into investor relations stand to command a valuation premium.

In a market where 67% of companies may be undervalued due to misunderstood brands, according to Interbrand, the opportunity is vast. Boards that embed PR into their balanced scorecard will not only protect their reputation, but also grow it into shareholder value.

Reputation, in the end, is capital. The question is whether firms will treat it as such.