Corporate Misdeeds Lead to Negative News Environment

News of Philanthropy and Innovative Products Puts Microsoft at Top of Index

CHICAGO, IL, February 21, 2007 – An increase in news about ethics-related corporate wrongdoing tops the 2006 Delahaye Index of corporate reputation, with more companies having net negative news for the year. News of corporate spying, improper back-dating of stock-options grants and manipulated earnings contributed to a sharp increase in negative news stories during 2006, moving Hewlett-Packard (NYSE:HPQ) down 28 spots at the end of 2006 to 40th place, UnitedHealth Group Inc. (NYSE:UNH) ranked 73rd and mortgage giant Fannie Mae (NYSE:FNM) in last place at 100.

The Index, a quarterly assessment of how news coverage reflects and helps to shape the corporate reputation of the 100 largest U.S. companies is conducted by Delahaye, a provider of media research and analysis services for communications, public relations and marketing professionals.

Commenting on the latest findings, Delahaye President Mark Weiner said, “Just when it appeared that major corporations and the executives who lead them had learned the importance of protecting and advancing their reputations through good behavior, allegations of misconduct have again emerged as a challenge to everything over which corporate leaders are held responsible.”

Delahaye found that the overall coverage of news improved dramatically for the financial sector during 2006, as media shifted attention away from high-profile negative themes towards stories about corporate advancement and continued economic performance. Reflecting this trend, Citigroup (NYSE:C) moved up 11 spots to seventh place, while Morgan Stanley (NYSE:MS) advanced ten spots to 12th place and Merrill Lynch & Co., Inc. (NYSE: MER) moved up five rungs to 15th place.

Although the Katrina hurricane news story played out in 2005, the Index year-end results revealed that the insurance industry continued to receive negative coverage throughout 2006 with fraud allegations and civil suits over policy claims, reflected by State Farm falling 23 spots to 95th place and The Allstate Corp. (NYSE:ALL) moving down 11 spots to 52nd place.

Stories of declining fiscal health continued to fuel negative news for the automotive industry as Ford Motor Company (NYSE:F) was ranked 98th and General Motors Corp. (NYSE:GM) took 72nd place.

The Index also revealed a thirty-percent increase in favorable coverage relating to innovative products and services during 2006. Microsoft Corp. (Nasdaq: MSFT) and Merck & Co., Inc. (NYSE: MRK) benefited most greatly by this phenomenon.

Elevated by news of innovative products such as Vista, strong financial growth and the charitable work of the Bill & Melinda Gates Foundation, Microsoft ranked at the top of the Index for four consecutive quarters in 2006.

Driven by coverage of new drugs and vaccines such as Gardasil, a cervical cancer vaccine and Januvia, a diabetes drug recently approved by the FDA and a highly publicized pharmaceutical assistance program for the needy, Merck steadily moved ahead 89 places in 2006 to end the fourth quarter in tenth place.

Among the most salient individual company Index results:

  • The Walt Disney Company (NYSE: DIS) enjoyed positive media coverage in 2006 as a result of its acquisition of Pixar Studios, strong DVD and box office sales with continued growth at domestic theme parks   capping off a high volume of favorable news that boosted the entertainment giant to second place in 2006.
  • Augmented by positive news of strong earnings, International Business Machines Corporation (NYSE:IBM) reaffirmed its leadership status for the technology sector, advancing to third place.
  • As news stories of a quarterly profit loss fueled negative news, Wal-Mart Stores, Inc. (NYSE:WMT) fell two spots on the Index in 2006 to fourth place.
  • The world’s leading chip maker, Intel Corporation (Nasdaq:INTC), was ranked in fifth place with mixed news of declining profits and Apple’s use of Intel microprocessors for Macintosh computers.
  • The Boeing Company (NYSE:BA) reaffirmed its leadership position in the aeronautics industry with news of Airbus production overruns and delays, as Boeing orders rose dramatically, placing them in sixth place for 2006.
  • Despite news of a strong backlash against huge profits, sky-high gasoline prices and record earnings, Exxon Mobil Corporation (NYSE:XOM) moved up five spots to 14th place with news of strong financial earnings.

Delahaye President Mark Weiner added, “Media coverage is an important element in managing one’s corporate reputation. Unlike reputation surveys which track the public’s view at a particular point in time, the media are unique in that they both shape future perceptions even as they reflect current opinion.”

2006 Year-End Delahaye Index: Top Ten Companies

  1. Microsoft Corporation
  2. The Walt Disney Company
  3. IBM
  4. Wal-Mart Stores Inc.
  5. Intel Corporation
  6. The Boeing Company
  7. Citigroup
  8. Verizon
  9. Goldman Sachs
  10. Time Warner

Methodology of the 2006 Delahaye Index

Delahaye begins by gathering news from America’s most prominent national news sources. From the New York Times and The Wall Street Journal to Fortune, ABC World News Tonight and Bloomberg, Delahaye captures news from all of the nation’s most influential general and business media. The 2006 Delahaye Index includes analysis of different print and broadcast news items to measure the reputations of the Top 100 U.S. companies.

Each company’s score is based on how many positive and negative reputation-driving attributes are found within each story. These attributes are classified into five dimensions: stakeholder relations, financial management, products and services, organizational integrity and organizational strength.

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