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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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Office Depot: Announcing departures

C. HUYGENS - Tuesday, October 26, 2010
The study of ethics must be daunting judging from frequency corporate officers stumble. The latest: the chief executive of Office Depot (NYSE:ODP), the US office supplies retailer, is to resign less than a week after the company agreed to pay a penalty to regulators for selectively providing investors with earnings guidance.

For the academically challenged, the principles of ethical behavior can be summarized thusly: for the rationally minded, there is the Kantian categorical imperative; for the spiritual or religiously inclined, there is the golden rule.

The company said Steve Odland would step down on November 1, after serving five years as chief executive. The reputation metrics say this is reasonable.

The Steel City Re Corporate Reputation Index metrics show that Office Depot began the trailing twelve month period with a reputation ranking in the 12th percentile and dropped by last Thursday evening to the 7th percentile relative to the 125 companies in the Miscellaneous Retailers sector. Over the trailing six months, the Exponentially Weighted Moving Average (EWMA) of the Index's volatility has been high closing last week at a whopping 68%. The trailing twelve week reputation velocity and vector have been negative at-.35 and -.126 respectively. Consistent with this picture is an economic return that is both negative and nearly 50% below the median of the peer group.

Office Depot's reputation volatility stands out in contrast to the sector where the group's median reputation ranking steadily declined from the 60th to the 55th percentile over the trailing twelve months while volatility within the sector rose steadily from 0.24 to more than 0.26.  Last, Office Depot's intangible asset fraction has bounced quite a bit from more than 70% of market value to less than 30% settling down last week to around 40% -- some 30% below the sector median.

The rationale for providing investors selectively with earnings guidance was to reduce volatility. At the time, it may have seemed like a good idea.

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