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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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MSCI: Business is war profiteering

C. HUYGENS - Monday, November 04, 2013
Business, management guru Gary Hamel explained, is war. Companies battle for supremacy, annihilate the competition, fight for market share and conquer new territories. And while this metaphor is limiting, it works with respect to war profiteers.

Huh? Consider Joseph Heller's infamous Milo Minderbinder. A U.S. Army Air Corps mess officer during the second world war, his war profiteering business model draws revenues from both sides of the conflict when he begins contracting missions for the Germans, fighting on both sides in the battle at Orvieto, and bombing his own squadron at Pianosa.

Now consider the proxy advisory firms. They provide recommendations to shareholders regarding governance practices and also provide consulting services to the companies whose boards and directors they assess. This "war profiteering" has become as undesirable as auditors that also charge management consulting fees of their audit clients, and credit firms that also provide consulting services to the firms they score. The SEC, Congress and other regulators have been indeed considering.

MSCI Inc. (MSCI), the global stock market index provider, reported October 31st that it has hired Morgan Stanley to explore options of sale or other possibilities for Institutional Shareholder Services Inc. (ISS), its Rockville, MD governance proxy advisory unit. The problem is that is not clear, given the scrutiny, whether ISS, or any of its competitors, will be able to deliver the independent, objective shareholder analyses required in today’s more demanding governance marketplace, and make money. ISS, GMI Ratings, Glass Lewis and Marco Consulting are all in the same boat. The question: have they collectively taken a torpedo below the waterline?

How this might affect MSCI Inc. may be gleaned from the Consensiv reputation metrics that reflect stakeholder expectations. Of the 16 firms in its sector, Financial Publishing/Services, MSCI Inc. draws a slightly better than average Reputation Premium. Its stakeholders are more confident than average in that value with a Consensus Trend that is in the second quartile with an absolute value of 1.9% and a Consensus Benchmark at a comfortable 7%. But with all that, its reputational health is just average suggesting that disposal of ISS, the problem child, may deliver a reputational value boost.

For more background on the Consensiv reputation controls, click here. To view the October 2013 reputational value league table at CFO.com, click here.

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