MISSION INTANGIBLE

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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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GlaxoSmithKline: Measure it, already!

C. HUYGENS - Wednesday, April 23, 2014
Pundits lamenting that reputation is the hardest risk to manage would do well to remember the adage, "you can't manage what you can't measure." The choice is simple: lament or deploy metrics. Metrics of what, you might ask?

Reputational value is an outcome of stakeholder expectations of operational performance. The measure of that value is best evidenced by the financial consequences of stakeholder actions. Stakeholders reveal their expectations with the way they use their wallets to buy, lend, regulate, or otherwise do business.

The reputation metrics reported by Consensiv score reputational value from a proprietary array of financial sources, bringing together heretofore disparate data points into an aggregate measure of stakeholder expectations.

Read more.

GSK: Ethical pharmaceuticals discover ethics

C. HUYGENS - Thursday, December 19, 2013
In a comment on Glaxo Smith Kline (GSK) on the Society's Linked-In page, reputation consultant Andrea Bonime-Blanc wrote, "Sometimes it takes scandal to make progress: after serious fines and scandals, GSK's CEO has just announced potentially groundbreaking steps connecting the most important dots of good corporate citizenship: desired employee behaviors to performance incentives such that overly aggressive sales targets and bonuses no longer lead to unethical or illegal behavior. Time will tell but this is extremely promising." Do the metrics bear her out?

The Consensiv reputation metrics, powered by Steel City Re's measures of reputational value, reflect stakeholder expectations and their economic effects. Of the 30 firms in its sector, Major Pharmaceuticals, Glaxo Smith Kline has generally hovered above the third quartile of the metric, Reputation Premium. Its most recent value was the 76th percentile. Its stakeholders are confident that this premium is appropriate as evidence by an extremely low Consensus Trend metric of 1.4%.  The Consensus Benchmark,which is based on a one-year average standard deviation of the Reputation Premium, indicates at 3.4% a progressively more stable course.

The data suggest that the "don't be unethical" strategy is being believed by stakeholders; it is not clear if that leaves them assured that the company's ethics are yet worth valuing at a greater premium.



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.

GlaxoSmithKline: Move along - there's nothing to see

C. HUYGENS - Wednesday, November 03, 2010
Stakeholders expect pharmaceutical products to be safe and effective by design and meet quality standards by process. The complaints lodged against GlaxoSmithKline (NYSE:GSK), which last week agreed to pay the fourth largest fine in FDA’s history in relation to the production and sale of “adulterated” drugs, are therefore notable. From the Financial Times last week:

“… investigations unearthed manufacturing issues that included micro-organisms in Bactroban ointment, a topical antibiotic used to treat skin infections in babies; non-sterile doses of Kytril injection, an anti-nausea drug used by cancer patients; Paxil CR tablets for depression that lacked the active ingredient; and Avandamet tablets for diabetes that were super-potent and sub-potent.”

The issues have been on the table since at least 2003, and the costs were booked in the 2nd quarter financial results. Still, the lack of reputational consequences other than what may be minor recent equity movement is curious.

Over the trailing twelve months, GSK’s reputation ranking as measured by the Steel City Re Corporate Reputation Index rose from the 92nd to the 96th percentile among the 233 companies that comprise the ethical drug manufacturers sector. The exponentially weighted reputation moving average volatility was barely measurable at 0.3%, and the trailing twelve week velocity and vector values were 0. Its intangible asset fraction has been flat at nearly 100% which is greater than the industry mean of about 83%. In fact, the only sign that anyone was trading the stock was the fall in equity value so that the company’s performance this past year is about 7% below the median of this peer group.




Stakeholders may not have reacted to a large extent for one of several reasons. One could be that GSK’s reputation is so strong and resilient that this minor event was viewed as an aberration rather than a core risk. Another could be that, as with the airline industry, stakeholders have become complacent. The latter explanation is consistent with the relatively low ranking of the entire sector (less than 20th percentile) and its decreasing internal volatility.

Ho hum, indeed.

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