What is a company worth? On its latest balance sheet, Apple showed assets of $261 billion, including $8.7 billion of “intangibles,” such as the positive views of the company held by consumers and investors. In recent months, the U.S. stock market has valued Apple at around $720 billion; the reasons for the gap between the company’s balance-sheet valuation and its market capitalization are intangible, too, in a sense. Coca-Cola has one of the world’s most valuable brands and counts $26 billion of the $91 billion in assets on its balance sheet as intangible; that, too, is far exceeded by the company’s market capitalization of around $170 billion. Much of the accumulated wealth in the world’s leading economies takes this undefined form.
But intangible value can evaporate overnight. In recent times, Enron, Lehman Brothers, and a host of other firms have suffered that fate when their actions destroyed their reputations—and their future business prospects. Any responsible corporate board should therefore be keen to find a way of measuring and thus managing the true value of the firm it oversees, including its sometimes evanescent intangible components. Yet too many boards and executives still see reputation management as mostly a matter of public relations, rather than as a central element of their business.
To save contemporary capitalism from this dangerous myopia, Jane Gleeson-White’s insightful book Six Capitals suggests a set of unusual prospective heroes: accountants, who can capture and quantify the factors that determine a firm’s reputation and thus its short-term financial value to shareholders and its long-term value to society. A “true and fair view” of a modern company, Gleeson-White argues, must take into account not only financial and physical assets but four other forms of capital as well: intellectual, human, social, and natural. Do this, she claims, and businesses will know and report their true worth and therefore operate more sustainably. No longer will they be able to report profits or assets that depend on the depletion of nonrenewable resources,
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