Corporate reputation is responsible for more than £1 trillion of shareholder value for the constituents of the FTSE 100 and FTSE 250 indices, up eight per cent on last year, new research has revealed.
The 2018 Reputation Dividend Report reveals that corporate reputations contribute, on average 38 per cent of a company's market capitalisation, although its impact is greater for the FTSE 100 index than the FTSE 250. Indeed, the reputational value of the FTSE 100 index rose 8.5 per cent over the past year against just a rise of 1.7 per cent for its companion index.
Corporate reputation is currently Unilever's most valuable asset, worth a whopping 56.7 per cent of the Anglo Dutch company's £65 billion plus market capitalisation. The report claims that investors have dismissed concerns initially raised by Kraft Heinz's failed bid for the purpose-driven company, and instead focused on chief executive Paul Polman's announcements of sales growth improvements and pipeline innovations ahead of schedule.
Shell, which last year had the most valuable corporate reputation, has slipped to second place. Reputation is now worth 55.3 per cent of is £117 billion plus market capitalisation. The research attributes this slight decline to 'financial stresses of recent years'.
Drinks giant Diageo and pharma group GSK, with similar market caps in excess of £33 billion, also have similar reputation contributions, at 50.4 per cent, up one percentage point, and 50.3 per cent respectively. House builder Berkeley came in fifth. It has one of the smallest market caps in the FTSE 100 at around £2.8 billion, of which reputation contributes just over half. The report attributes its success to the introduction of caps on executive pay, a positive attitude to a post-Brexit world and a broader stakeholder sensitivity.
The analysis underpinning the report considers nine factors, ranging from a company's ability to attract and retain talent to its community and environmental responsibility programmes, that contribute to its corporate reputation. Against a background of economic uncertainty, increasing attention has focused on the quality of management which is now responsible for 16 per cent of a company's market capitalisation. The combination of strong management, financial soundness and use of corporate assets currently accounts for 41 per cent - or £428 billion - of the value of Britain's top 350 listed companies.