Holmes Report 19 Jan 2014 // 7:20PM GMT
The corporate reputations of companies listed on the London Stock Exchange account for close to £1 trillion (£911 billion) of market value, more than doubled their worth four years ago, according to the seventh annual study from intangible asset specialists Reputation Dividend.
The study identifies Unilever, Diageo and Royal Dutch Shell as the top performers in terms of reputational contribution for 2013.
At Unilever, reputation contributes 58.1 percent of overall value, or £42.2 billion, catapulting it into the top spot in the ranking, while at Diageo, reputation contributes 56.9 percent of market value (£28.3 billion). Last year’s number one, Royal Dutch Shell, slipped to third spot, with Glaxo SmithKline and SAB Miller—a newcomer to the top 10—rounding out the five strongest reputations.
The analysis found that on average, corporate reputation is delivering proportionately more value to FTSE100 companies (around 41 percent of market capitalization) than to the broader FTSE250 (around 25 percent), but suggests that the FTSE250 are now poised for growth based on expanding their footprints and improving reputation their strategies.
According to the study, the combined value of reputation across the FTSE100 and 250 grew by close to £108 billion, an increase of 13 percent in the year. The non-reputational component of market capitalisation was up 4 percentage points less.
According to Simon Cole, founder of Reputation Dividend, “Corporate reputations proved to be one of the main drivers of market cap growth.”
Adds reputation expert and Reputation Dividend director Sandra Macleod, “In a year marked by continued banking fraud, PPI misselling, supply chain issues such as the horsemeat scandal and sweatshops in the fashion industry, there is a growing need and appetite for companies to be held to accountable for their reputations above and beyond delivery of financial performance and in a way that assures investors and stakeholders that sound management is in place.
“While communications budgets continued to feel the pinch last year, their impact was more significant than at any time since the downturn started. Communications leaders should take a lot of credit for building the value of the assets in their charge. The growing professionalism of the function and its impact on corporate decision-making paid dividends.”
Meanwhile, companies such as AstraZeneca suffered a marked loss of reputation value. Issues relating to marketing practices in China, revenue and earnings pressures, and an ageing product portfolio combined to chip away at the confidence of investors and lead to halving of the reputation contribution to around 17 percent.
Perceptions of companies’ “ability to attract talent” and “use of corporate assets” are now the two most impactful characteristics, with messages relating to companies’ “ethical, community and environmental” credentials starting to find traction for the first time in three years.