Lessons from the pandemic
Corporate Reputation Drive Stock Price Outperformance worth US $11.2 trillion
Company reputation underpins close to 30% of market capitalization through the confidence it inspires among the investment community. This, according to the latest The 2021 US Reputation Dividend report released today, equates to US$11.2 trillion of shareholder value across the S&P 500.
The Top 10 Most Valuable Reputations – the A’s have it
The study finds that confidence inspired by company reputations directly support nearly $3 in every $10 of market cap. The top ten most valuable reputation assets are led by Apple, Amazon and Alphabet, each with some 56% of their marketcap attributable to their reputation alone.
Talent Rises To The Top
In all, nine reputational components are measured including Quality of products / services, Quality of Management, Financial Performance, Innovation, ESG, Use of Corporate Assets, Global Competitiveness, Long-Term Investment Potential and People Management.
This year, interest in these last two factors combined account for almost one third (29.8%) of all reputation value across the index. Said Simon Cole, author of the study, “investors, prompted by the pandemic, are both looking beyond the crisis for growth and sensitive to the competition for talent that will fuel it as the present scramble subsides and attention shifts to retention and development.”
Reputation research expert and director, Sandra Macleod added: “Further covid flare-ups, concerns for rising inflation, a possible ‘crypto-quake’, post pandemic economic policy etc all contribute to the only certainty in an uncertain world which is that market sensitivity is likely to persist for some time. All of which has implications for how companies manage their reputation assets to secure shareholder value in the months ahead.”
It’s Not Just About Size
While size is a driver, it is only part of the story. Those in financial services and healthcare saw the biggest rises, and telecoms and energy, the lowest.
Likely Winners and Losers
Overall, reputation is seen as a positive asset for the majority of the S&P, being a net contributor in 91% of companies, but a drain in 9% at the bottom end. And that is likely to be exacerbated ahead as investor interests evolve, with a greater focus on ESG and global competitiveness. This, the study finds, will create up to $400 bn of value across the index, with losers being those less well placed on these key drivers.
The full report is available freely here.