• Posted on: 16 October 2018

Despite the strides taken in reputation research during recent decades, the reputation of public sector organizations has remained rather neglected. Public sector organizations often measure intangibles with instruments designed for corporations, although their raison d’être differs fundamentally from that of the latter.

This paper attempts to fill the gap in reputation research on public sector organizations by developing the proposition that for public sector organizations a neutral rather than excellent reputation is ideal, as neutrality enables a critical operating distance, and the resources for maintaining an excellent reputation are scarce.

To test the idea of neutral reputation in practice, a study measuring the reputation of 12 Finnish public sector organizations among their stakeholders was conducted.
The results of the study found that the Finnish public sector organizations generally had a neutral reputation, though more research across countries and cultures is needed. The implications of the findings for theory and practice are also discussed.

Trust is a fundamental aspect of the moral treatment of stakeholders within the organization–stakeholder relationship. Stakeholders trust the organization to return benefit or protections from harm commensurate with their contributions or stakes. However, in many situations, the firm holds greater power than the stakeholder and therefore cannot necessarily be trusted to return the aforementioned duty to the stakeholder.

Stakeholders must therefore rely on the trustworthiness of the organization to fulfill obligations in accordance to Phillips’ principle of fairness (Business Ethics Quarterly 7(1), 1997, 51–66), particularly where low-power stakeholders may not be fully consenting (Van Buren III, Business Ethics Quarterly 11(3), 2001, 481–499).

The construct of organizational trustworthiness developed herewith is presented as a possible solution to the problem of unfairness in organization–stakeholder relations.

While organizational trustworthiness does not create an ethical obligation where none existed before, stakeholders who lack power will likely be treated fairly when organizational trustworthiness is present.