How your reputation impacts your shareholder value

By Helena Wennergren

When talking about the benefits of a strong corporate reputation, you might perhaps think about how it could benefit sales, improve your relations with external stakeholders, or strengthen internal feelings of pride. What you should not miss out on, however, is the powerful impact reputation has on the valuation of a company.

Reputation accounts for more than a third of the shareholder value

According to a recent study by the AMO network – "What price reputation [PDF]" – reputation accounts for more than a third of the shareholder value of the companies included in the report, adding up to the enormous sum of $16.77 trillion. Even more remarkable is the fact that reputation value is growing, while the market cap is declining: the gross amount rose by 2.1% over a 12-month period (to end Q1 2019), while the overall market cap dropped 0.4%.

The study covered the largest companies in the world, listed on 15 leading national indices, including the UK FTSE 100, CAC40 in France, DAX in Germany, IBEX in Spain, FTSEMIB in Italy, and OMEX in Sweden. It also covered global indices like S&P 500 (US) and HSI (Hong Kong).

Negative reputation = cost

Of the 1,611 companies that were included in the study, 79% saw a positive effect of their reputation, while 21% actually saw a negative result - in this case meaning that their market cap was reduced by $436 billion.

"Corporate reputation can be a major contributor to shareholder value but only when it’s performing well."

79% of companies creating $17,205 billion of shareholder value - 21% of comanies destroying $436 billon of shareholder value.

Money talks

It might seem like common sense, but this data can link actual figures to the abstract shareholder value of reputation. It’s safe to say: "your reputation matters". The corporate website plays an important role in this – according to our Capital Market Survey 2019, it is both the most used and the most trusted source of information about a company.

To increase the shareholder value of your company, your website must support this by at least:

1. Clearly conveying your message 
2. Being transparent with information that is requested by stakeholders
3. Being accessible and easy to use
4. Being in line with your brand. 

Does your website do the job for you? Get in touch with us and we can help you!