During my 25 years in the PR agency business, most senior communications executives at large corporations I have worked with focus their attention on major announcements, such as acquisitions, earnings results, changes in the C-suite, major product introductions, and crises. No surprises here.
What is rare is the executive who also devotes significant time and resources to promoting his or her company's intangible assets, such as its work force's talent and diversity, the innovativeness of the company including its intellectual property, its unique business models, corporate governance practices, or the power of its brands.
Why communicate intangible assets? Two words: Wall Street. Accounting research suggests that intangible assets generate 30% to 50% of a company's market capitalization. Much of the pioneering research about the financial value of intangible assets has been conducted by Baruch Lev, professor of accounting at New York University's Leonard Stern School of Business and author of the book Intangibles: Management, Measurement, and Reporting.
In the wake of Enron/WorldCom, several academic studies, including those conducted by the Wharton School of the University of Pennsylvania and Georgia State University, strongly suggest that investors pay a "premium" for the shares of companies with strong corporate governance practices (governance is an intangible asset). Apparently, well-articulated corporate governance practices assure investors that a company is less likely to announce a surprise earnings shortfall because of financial irregularities.
One of the strongest intangible assets is a company's "innovativeness," which is not the same as how much the company spends on research and development. A larger pharmaceutical company may spend more on R&D than a smaller one, but the smaller company may generate more commercially successful new products because of its alliances with smart biotech partners.
A company that fails to communicate the value of these assets to investors may not achieve full share price valuation. In most cases where we have managed intangible assets communications programs, other major business benefits result from them. If a company promotes itself as a "great place to work" (focusing on its work/life balance, benefits, and diversity programs), the resulting publicity will support its employee recruitment/retention efforts. If another company promotes its unique business models that generate successful new products, such as its alliance strategy, the publicity can help attract new partners for future alliances.
But mounting a successful intangible assets communications program requires considerable thought, planning, and effort. These programs typically begin with an audit that employs extensive interviews with senior executives, especially departmental heads, R&D executives, and often mid-level employees. This "mining" process helps identify the intangible assets that exist and also appeals to business media reporters at print, electronic, and online media outlets.
If intangible assets drive up to 50% of a typical company's market capitalization, can you afford not to promote them?
Andy Tannen is head of the New York corporate practice at Manning Selvage & Lee.