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MISSION:INTANGIBLE, the blog of the Intangible Asset Finance Society, offers critical comments on intangible asset, corporate reputation, and finance; supplemented by quantitative reputation metrics. Intangible assets include business processes, patents, trademarks; reputations for ethics and integrity; quality, safety, sustainability, security, and resilience; and comprise 70% of the average company's value. MISSION:INTANGIBLE is a registered trademark of the Intangible Asset Finance Society.

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Ethics: Hedging

C. HUYGENS - Thursday, August 04, 2011
According to the National Association of Corporate Directors' NACD Daily (4 Aug), companies are counterbalancing perceived social wrongs with an alternative set of socially responsible actions.

One of the propositions behind socially responsible investing is that companies do "well" by doing "good." But according to the Wall Street Journal (Aug. 1, Lahart), economists Matt Kotchen of Yale University and Jon Jungbien Moon of Korea University suggest that an important reason companies do good is to paper over their errors. The two economists measured Corporate Social Irresponsibility (CSI) and Corporate Social Responsibility (CSR) using a database that monitors companies on about 80 measures of social responsibility, and they found that companies offset their bad behavior by engaging in CSR.

There may be PR benefits to hedging bad with good; but to the extent that the "bad" acts set the stage for a reputational crisis, ethical hedging may prove itself as effective in a moral liquidity crisis as financial hedging turned out to be during the great financial liquidity crisis.
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