The combined value of the corporate reputations of Britain’s top 350 listed companies has almost reached £1 trillion, according to a new report.
Reputation Dividend estimates that, at the end of January, the combined reputational value of the FTSE 350 stood at a record £986 billion – slightly more than the entire gross domestic product of Australia.
The 2017 UK Reputation Dividend Report claims that corporate reputation now contributes, on average, 39 per cent to shareholder value in the FTSE 350. The calculations imply that the contribution of corporate reputation to shareholder value has almost doubled over the past ten years.
But the contribution of corporate reputation varies across the indices, companies and sector. On average, reputation contributes 42 per cent to the market capitalisation of a FTSE 100 company, but just 25 per cent in a FTSE 250 company.
Reputation Dividend estimates that Royal Dutch Shell
currently has the most valuable corporate reputation in the FTSE 100 index. Its
reputation contributes 57.6 per cent to its market capitalisation, up 3.8 per
cent points since 2016, and is valued at more than £100 billion - representing more than 10 per cent of the combined reputational value of Britain's 350 biggest listed companies.
Unilever slipped from first to second place, with a reputation worth £57 billion or 56.3 per cent of its market capitalisation. The downgrade follows criticism of the company’s strength in innovation and its leadership. GSK had the most dramatic reranking of its corporate reputation over the past year, moving from 40th position in the FTSE 100 to fifth. Its reputation now accounts for 49.6 per cent of its market capitalisation, up 10.1 percentage points, as the company was seen to improve on three fronts: leadership, innovation and attractiveness to talent.
Analysts at Reputation Dividend have identified nine factors, ranging from quality of marketing to financial soundness, that drive the value of reputation. The importance of each factor is not static, but instead determined by investor sentiment.
Recent political events, such as Brexit and Trump’s election, coupled with a wave of cash hitting the UK stockmarket, have led investors to rethink strategies. They are currently looking beyond fundamentals and are instead making judgments on long-term characteristics, such as a company’s ability to attract talent, its capacity to innovate and the quality of its goods and services. Indeed, a company’s ability to attract talent is currently the biggest influence on its reputation.