Glossary of Key Terms

Ethics Reputation Components: Those elements of a company’s Ethics Reputation identified as measurable and significant in a statistical analysis using the RRC Ethics Reputation Model (see “Methodology”).

Ethics Reputation: An aggregation of perceptions among third parties of the extent to which a company’s behavior along the dimension of business ethics is considered admirable, average, or egregious.

Ethics Reputation Score: Derived, using the RRC Ethics Reputation Model, from the responses of senior industry executives surveyed. The score reflects the sum of perceptions of a company’s performance on key ethics components.

Ethics Reputation Rating: The rating assigned to a company’s Ethics Reputation by RRC’s Ethics Rating Committee on the basis of its analysis and weighting of, among other sources, the company’s Ethics Reputation Score, the information provided by the surveys of senior industry executives and financial analysts, analysis of business and financial media, and the opinions expressed by RRC’s industry experts.

Ethics Reputation Distress: Describes a state in which a company is perceived to have significant deficiencies in its Ethics Reputation that it is, or should be, attempting to correct. These deficiencies may result from one or more issues (e.g., financial or regulatory problems, product recalls, public relations debacles) that are symptomatic of fundamentally flawed business ethics, endemic failures in operational execution, and/or poor judgment on the part of key management. A company in this state of distress has ruptured or at least weakened basic elements of the public trust underpinning the company’s perception as an ethical corporate citizen, but not so irreversibly as to preclude it from any possibility of ethics reputation rehabilitation. The future of a company in this state rests squarely in the hands of its senior management. If management fails promptly and decisively to root out and remedy both the corporate behavior directly responsible for so endangering the company’s Ethics Reputation and the underlying corporate culture that sustains such behavior, it is highly likely that the company will be subject to significantly increased public scrutiny and legal and regulatory risk. A company experiencing severe ethics reputation distress is in serious jeopardy of a debilitating erosion of confidence in the firm among significant stakeholders (e.g., customers, suppliers, shareholders, employees) and the public at large. A company in this state may expect an Ethics Reputation Rating of E4 or E5, depending on the severity of its ethics reputation distress.

Ethics Reputation Default: Describes a state in which a company is perceived to have grossly violated the trust of significant stakeholders (e.g., customers, suppliers, shareholders, employees) and the public at large, thereby demonstrating, through its actions and those of its senior management, that promises and undertakings made to these constituencies are perceived to be of little or no value. A company in a state of ethics reputation default is so perceived to have flagrantly abrogated its ethical obligations to these constituencies that it is highly unlikely that it will ever be able to recapture even a modicum of their trust or respect. A company suffering from ethics reputation default may continue operations for some period as it atrophies at its core and eventually disintegrates, but such external appearances should not mask its failure to remain a viable business concern going forward. Companies in ethics reputation default have no reasonable expectation of ethics reputation rehabilitation. A company in this state will bear an Ethics Reputation Rating of E5, the lowest rating level assigned.

RRC: Rating Research LLC.