Business leaders will discuss new ways of measuring a company’s reputational capital at a conference in London this spring.
The initiative, which is being led by the Institute of Chartered Accountants in England and Wales, hopes to stimulate research and debate about how boards of directors can more effectively value intangible assets such as corporate reputation.
The institute’s Centre for Business Performance, a think tank on ‘leading-edge business issues,’ has set up a ten-member steering group to lead the process. The group, which is chaired by the institute’s president Graham Ward, is looking at ways of measuring corporate reputation and other ‘intangibles’.
It has already published a report, Human capital and corporate reputation: setting the boardroom agenda, outlining some of the issues it thinks should be considered. There are also plans to set up research projects with business schools.
The conference is expected to be attended by senior members of the business community, institutional investors, professional bodies, representatives of the government and pressure groups. A summary of contributions is likely to be published this summer.
UK minister for corporate social responsibility Kim Howells is supporting the project. He has written a foreword in the group’s report, which outlines ‘brainstorming’ discussions on reputational capital at a meeting of the group held in January 2000.
Anthony Carey, director of the Centre for Business Performance and the project’s leader, said corporate reputation was now ‘one of the intangibles increasingly recognised as central to the success of companies in the 21st century,’ and that there was a growing demand for methods to measure it. But he added that ‘the definition, management and measurement of reputational capital are complex issues’ and said there was ‘an urgent need for boards of major companies to reassess the challenges and risks inherent in the growth in importance of intangibles, in particular reputational capital.’
Carey said that the conference would build on the work in the report, and on a round table meeting on reputational capital held in October last year and attended by analysts, auditors, accountants and investors.
He said the meeting had ‘produced a feeling that people definitely want to be doing more’, but had concluded that current measures of reputation were not robust. ‘There does seem to be definite interest at a senior level in producing measurements that won’t take them a whole year to get through but which will give them some help in assessing how their corporate reputation is affecting their value,’ he said.
Carey said that such measurements could take many forms. As one example, he cited market research among careers officers to find out which companies were most favoured by graduates. Further studies might then look at whether corporate reputation had been a factor in the decision by recruits with first class degrees to work for particular companies.
Carey acknowledged the difficulty of valuing reputational capital. ‘It seems easier to develop input measurements about what the company is doing, but harder to link those to what the actual outputs are,’ he said.
A recent study by the US-based Ernst & Young Centre for Business Innovation estimated that non-financial performance accounts for 35 per cent of institutional investors’ valuation of companies.