What Is the Goldman Sachs Brand Really Worth?

When Goldman Sachs pledged earlier this month to pull back the curtain that has shrouded the firm for much of its 142-years, the news drew more than a few skeptics from the woodwork.

"I don't view this as groundbreaking stuff," said one banking industry analyst. Another characterized Goldman's self-evaluation as mere "window dressing." Yet another raised doubts that the move would help scrub Goldman's "black box" image.

Indeed, Goldman's march to evolve its reputation hasn't always moved in a straight line forward.

In November 2009, when the firm launched a $500 million initiative to assist small businesses, critics asserted that the half-billion dollar investment in America's economic recovery was little more than a pittance when stacked against the firm's record profits at a time when global markets remained in turmoil.

In December 2009, Goldman was one of the first major financial institutions to formally align risk and reward with respect to its executive compensation structure--a move that federal "pay czar" Kenneth Feinberg lauded in an interview on Charlie Rose. But even those efforts did not dissuade a major pension fund from filing suit over compensation policies that it said "vastly overcompensate management and constitute corporate waste."

A month earlier, CEO Lloyd Blankfein was among the first banking industry executives to offer an apology for his firm's role in the financial crisis and publically commit to reforming its practices. Still, the impact of the SEC's charges that resulted in a record-breaking $550 million settlement, and later became a catalyst for enactment of the Dodd-Frank financial regulatory reforms, further drove the need for the bank to buttress its reputation.

Fast forward six months. As of January 18th, Goldman's share price has rebounded to $174.44 per share from a mid-2010 low of $131.08 per share. While 2010 was a year that many at Goldman might like to forget, this 33 percent increase demonstrates the potential for vastly different fortunes in 2011.

Even Goldman's controversial relationship with Facebook has provided some--albeit limited--indication of a branding bounce back. The firm's decision to withdraw the investment from U.S. investors, while certainly embarrassing, does demonstrate its willingness to put its reputation for compliance ahead of short-term business goals. The message: Goldman is learning its lesson ā€“ even if it is doing so on the fly.

But with such a volatile flow of reputational ups and downs, one can't help but ask the question: What is Goldman's brand really worth?

The answer lies in the very art and science of brand management, which offer a glimpse of the tremendous value potential of a strong Goldman brand--and make clear that every reputational step Goldman has taken in the last four years has put it on a path toward transforming that potential into reality.

According to research compiled by CoreBrand, which develops quantitative data based on proprietary metrics that assign dollar values to corporate brands, Goldman's brand power (a measure of familiarity and favorability) has declined sharply since 2004. For example, Goldman's third quarter 2010 brand equity stood at a poor 5.8 percent (measured as the contribution that the brand itself made to the company's overall market capitalization) compared to the brokerage industry average of 11.0 percent.

Paradoxically, Goldman's weak brand equity helps to explain why recent reputational credits have not had an immediate impact in the marketplace. Importantly, when this equity is weak, the brand simply doesn't matter as much in the public's mind. At the same time, these data make clear that a five percent gain in the brand equity index (which would equal the industry average) equates to approximately another $5 billion in market capitalization. A potentially robust ROI, given the relatively small investment of consciously managing its corporate brand.

The Catch-22, of course, is that if brand equity is weak, thereby blunting the impact of proactive reputational efforts, how can it ever improve and make a larger contribution to shareholder value?

The answer: slowly and consistently.

While brands sometimes take only minutes to destroy, they are built--and rebuilt--over time. There are no panaceas or silver bullets. What is required is a patient and deliberate approach that emphasizes an agreed on common goal, consistency of execution, and patience above all else. It's about being the tortoise; not the hare. And it's about resisting the temptation to change course because progress isn't as immediate one might expect.

Today, the Goldman's reputation may not be as strong or as synonymous with corporate responsibility and good governance as the company's stakeholders might prefer. But by staying focused on the vast value potential currently locked in its brand; continuing to demonstrate leadership on the dominant marketplace issues of the day; and refusing to let the inevitable bumps in the road divert it from this course, Goldman is on the right path toward securing the reputational strength that will make a tangible positive impact on the firm's future value.

Written with James Gregory

Richard S. Levick, Esq., is the president and chief executive officer of Levick Strategic Communications, a crisis and public affairs communications firm. He is the co-author of The Communicators: Leadership in the Age of Crisis and Stop the Presses: The Crisis & Litigation PR Desk Reference, and writes for Bulletproofblog. Mr. Levick is on the prestigious list of "The 100 Most Influential People in the Boardroom," which is compiled by the NACD and Directorship Magazine. Reach him at rlevick@levick.com.

James Gregory is a corporate branding and communications expert and the CEO of CoreBrand, a company specializing in quantifying and optimizing brand opportunities for companies ranging from start-ups to the upper echelons of the Fortune 500.

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