The new way to quantify company “intangibles”

The Maturity Institute and the KBA Consulting Group have announced a new method to quantify company “intangibles” to align business and societal value.

Using three research case studies, including Unilever and Barclays, MI and KBA have developed a tool to quantify the value of factors including corporate governance, company culture and the management of human capital.

These factors, captured in MI’s rating of Organisational Maturity (OMINDEX), can now be calculated in the build-up of a company’s market capitalisation, providing compelling evidence and a powerful rationale for boards, investors and policy makers to align and encourage business goals that can serve and benefit all societal stakeholders. KBA and MI’s analysis now shows:

1. A direct and quantifiable link between Organisational Maturity (MI’s evidence-based assessment of overall organisational health integrating governance, culture and human capital factors) and the ability of a company to create wealth for shareholders on an ongoing basis, in ways that enhance wellbeing for all legitimate stakeholders.

2. It is possible to quantify the additional wealth created as a consequence of a company making a conscious choice to create shareholder wealth in ways that also enhance societal value. It is also possible to quantify the shareholder wealth destroyed as a result of choosing to turn away from this approach to wealth creation.

3. It is possible to use this understanding to calculate the societal value contributed by the economic activities of any company over a given measurement period.

For business leaders, this analysis provides the clarity and the evidence they need to be able to make a conscious decision to go down the path of building mature, enduring institutions capable of creating wealth for shareholders in ways that also enhance societal value.

For institutional investors, it provides the evidence base and rationale they need to preference the allocation of investment funds towards such companies.

For the leaders of civil society, it will be possible to calculate the total societal benefit of both these things occurring, which could ultimately provide an important input into future public policy decisions – potentially including preferential tax treatment for companies or shareholders of companies whose actions create significant societal value.

This work is now the subject of a major research effort, which is described in a document: “Aligning the Interests of Business and Society”, which includes details of the Unilever and Barclays case studies.

The findings of this study are expected to provide the basis for a much more meaningful and actionable dialogue between institutional investors and the Boards of listed companies, consistent with the principles of responsible ownership that many investors are now adopting.

For more information, contact paul.kearns@maturityinstitute.com or denis.kilroy@kba.com.au