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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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Wallmart: Gently rolling head in aisle 4

C. HUYGENS - Tuesday, November 26, 2013
At a session with analysts after the 2012 Walmart (WMT) annual meeting, Bud Bugatch with Raymond James asked what effect company executives thought allegations of corruption in its Mexican operations would have on the company's reputation (Read More). As described in Reputation, Stock Price and You, Mike Duke, CEO of Walmart replied, "We will be a better company because of this."

Bloomberg reports this week that "the U.S. Department of Justice and the U.S. Securities and Exchange Commission are investigating allegations that Wal-Mart systematically bribed Mexican officials so it could more quickly open stores in the country. Federal and local government agencies in Mexico also are involved in investigations. Wal-Mart has said that it also has started inquiries into potential violations of the FCPA at operations in Brazil, India and China."

Earlier this week, Walmart announced that Mr. Duke would be stepping down after 4 years at the helm and nearly 20 months since he explained how the experience would make the company better. Wal-Mart’s shares gained 69 percent from Jan. 30, 2009, the last trading day before Duke became CEO, through Nov. 22 this year. The Standard & Poor’s 500 Index more than doubled in that time.

If better is not more valuable, is there another metric? Has Walmart used the experience to improve its standing with its stakeholders -- its reputation?

The Consensiv reputation metrics, powered by Steel City Re's measures of reputational value, reflect stakeholder expectations and their economic effects. Of the 15 firms in its sector, Discount Stores, Walmart has drifted from trending above the third quartile to trending below the third quartile of the metric, Reputation Premium. This indicates lost value. Its stakeholders are confident that this premium is appropriate as evidence by an extremely low Consensus Trend metric. The Consensus Benchmark,which is based on a one-year average standard deviation of the Reputation Premium, indicates at 5.2% a surprisingly volatile ride down for such a large company.

Yes, reputational health is still top quartile, but in a field that includes JCPenny and Sears, that's not so great. There are profound operational issues that are eroding Walmart's reputational value. Complacency, evidenced by Mr. Duke's tenure, is possible only because a slow leak takes years to sink a large ship.



For more background on the Consensiv reputation controls, click here. To view the November 2013 reputational value league table, based on Consensiv's metrics, and available exclusively at CFO.com, click here.

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