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Rating Research Survey Reveals Investor Skepticism in all Sources of Investment Information
Credibility of Investment Advisors, Brokerage Firms and Corporations Declines Significantly Since June

Bedminster, N.J. (6 September 2002) - Investors’ confidence in their traditional sources of information about publicly traded companies continues to decline, according to a survey conducted by Rating Research LLC, a firm specializing in the assessment of corporate reputation. In June, 13% of U.S. investors said they were “very confident” in investment advisors as a “trusted source” for information about companies’ reputations; that figure dropped drastically to 6% in the most recent survey.

Similarly, there are signs of declining investor confidence in other sources including: the government (down from 10% to 8%); the media (7% to 5%); large brokerage firms (6% to 3%); and companies’ advertising and communications (6% to 1%).

“These findings illuminate the meltdown of faith among investors in the information they receive from established institutions, despite recent actions by the federal government to eliminate financial accounting abuses,” said Prof. Stephen A. Greyser, world-renowned marketing and reputation expert, Harvard Business School, and Rating Research Board Member. “Given the intense emotions involved here, it will require many entities –corporations, financial analysts, government and the media – to play a part in earning back investors’ good faith.”

Ironically, although investors mistrust the information available to them about corporate reputation, their desire for it has increased. Today, almost two-thirds (64%) of all investors say information about a company’s reputation is more important to them than one year ago. And this sentiment has grown significantly in just the past few months. In June, just over half of investors (54%) said this information was more important than a year ago.

The Rating Research Investor Confidence Tracking Survey included interviews with approximately 500 investors in three separate waves that took place in May, June, and most recently, August 2002.

Investor Confidence in Financial Information also Declines

Investor confidence in financial information provided by publicly traded companies also declined since the survey’s first wave in May. Today, almost one-half (49%) of investors say they are either “not very confident” or “not at all confident” in the financial information provided by corporations, more than double the number of investors citing the same viewpoint in the spring.

This confidence gap suggests a dramatically new scenario as compared to a year ago – and one that continues to worsen. Today more than six in ten (62%) investors claim they are less confident in the financial information provided by publicly traded companies than they were a year ago, as compared to 58% in June who felt this way and only 38% in May.

Confidence in the Ethical Business Practices of Corporate Senior Management Continues to Erode

Coupled with the lack of confidence in investment information, since June there has been a 13percentage point increase in the number of investors expressing a lack of confidence in the ethical business practices of senior management. Confidence in CEO ethics does not fare any better with a paltry three percent of investors today stating that they are “very confident” that CEOs of publicly traded companies engage in ethical business practices. In fact, almost six in ten (57%) investors express a lack of confidence in the ethical business practices of CEOs of publicly traded companies – an increase of 13 percentage points from the June survey.

“Investors rightly view the CEO as responsible for the reputation – and ethical behavior – of his or her company. Today’s business environment requires CEOs to view ‘reputation’ as a strategic asset that requires time and resources on an ongoing basis,” notes Prof. Greyser.” Board members of public corporations should view key intangible assets, such as reputation, as critical to increasing long-term shareholder value. How well senior executives manage their firm’s reputations should be considered in reviews of executive compensation.”

Rating Research LLC is a joint venture between The Ratrix Group and Opinion Research Corporation (NASDAQ: ORCl).

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More details on the survey and methodology are available.