{"id":4199,"date":"2021-06-04T17:44:21","date_gmt":"2021-06-04T12:14:21","guid":{"rendered":"https:\/\/www.speakin.co\/edit\/?p=4199"},"modified":"2021-06-04T17:44:21","modified_gmt":"2021-06-04T12:14:21","slug":"brands-are-missing-from-the-board-room","status":"publish","type":"post","link":"https:\/\/www.speakin.co\/edit\/brands-are-missing-from-the-board-room\/","title":{"rendered":"Brands are missing from the Board room"},"content":{"rendered":"\n<!-- Quick Adsense WordPress Plugin: http:\/\/quickadsense.com\/ -->\n<div class=\"fff31b069dab2d4baa9938924ee8e97c\" data-index=\"1\" style=\"float: left; margin: 10px 10px 10px 0;\">\n<script async src=\"\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js\"><\/script>\r\n<ins class=\"adsbygoogle\"\r\n     style=\"display:block; text-align:center;\"\r\n     data-ad-layout=\"in-article\"\r\n     data-ad-format=\"fluid\"\r\n     data-ad-client=\"ca-pub-8586106947150931\"\r\n     data-ad-slot=\"4223625083\"><\/ins>\r\n<script>\r\n     (adsbygoogle = window.adsbygoogle || []).push({});\r\n<\/script>\n<\/div>\n<h3>Did you know that 94.6% or 19 out of 20 listed firms in the world do not have a board representation for marketing?<\/h3>\n<p>I have forever wondered why the 21st century CMO is not a permanent invitee on the board.\u00a0 In 2019, global businesses spent USD\u00a0614 bn to establish or strengthen brand assets. These are nothing but assets because they have a direct and material impact on performance.<\/p>\n<p>This is not some clever compliance arithmetic at work. It&#8217;s not nice to not have reported, and I will explain why. Imagine that (God forbid) there was an injunction in a court which prevented your firm ( or\u00a0 NGO )\u00a0 from using your trademarks for at least a few months.<\/p>\n<h3>Would it be business as usual? How many different ways might the firm have been impacted only by the loss of trademark usage?\u00a0 We have isolated 34.<\/h3>\n<p>Last month, I did a CII\u00a0 masterclass for 50 odd CMOs on brands as core business assets. And given what we saw in the previous paragraph, the fundamental question we debated is why the brand was missing a permanent representative\u00a0on the board.<\/p>\n<p>It will come as no surprise to anyone reading this piece that balance sheets represent less than 30% of the average firm\u2019s value today. This is irrespective\u00a0of category. It is not an FMCG or luxury goods bias.\u00a0 Carborundum Universal, an abrasives firm, trades at a price to book value of 6.73. In fact, the Sensex 30 is on average valued at 5 times its book value.<\/p>\n<p>So, where is the rest of the value set, and why is it not captured or\u00a0reported with the same granularity as the items on the balance sheet? Over the last three decades, the\u00a0world has come to accept that the two primary intangible asset groups hidden outside the balance sheet are intellectual property ( Literally the \u2018recipes\u2019 of the firm) and brands ( \u2018reputation\u2019 of its offerings )<\/p>\n<h3>Why is this relevant now?<\/h3>\n<p>If the largest and most influential assets ( i.e. property of shareholders ) are sitting hidden in plain sight outside the books, then it is obvious that we are not cognizant of how they can contribute to performance or value creation. And hence by implication,\u00a0we are governing an underperforming firm, nine times out of ten, Or 19 times out of 20, being more precise. It\u2019s a bit like saying that a pilot runs a plane on one out of four engines and then wondering why it is underpowered.<\/p>\n<!-- Quick Adsense WordPress Plugin: http:\/\/quickadsense.com\/ -->\n<div class=\"fff31b069dab2d4baa9938924ee8e97c\" data-index=\"2\" style=\"float: left; margin: 10px 10px 10px 0;\">\n<script async src=\"\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js\"><\/script>\r\n<ins class=\"adsbygoogle\"\r\n    style=\"display:block; text-align:center;\"\r\n    data-ad-layout=\"in-article\"\r\n    data-ad-format=\"fluid\"\r\n    data-ad-client=\"ca-pub-8586106947150931\"\r\n    data-ad-slot=\"5455236699\"><\/ins>\r\n<script>\r\n    (adsbygoogle = window.adsbygoogle || []).push({});\r\n<\/script>\n<\/div>\n\n<p>Therefore, wouldn\u2019t you agree that giving these assets their rightful place at the top table is just good governance? But what does the governance of intangible assets actually entail? Over the last thirty-odd years, some enlightened countries ( France, Germany, Sweden, Japan and Denmark )\u00a0 had decided that the least they could do was to provide clear guidelines to capture the value of these assets outside of the financial statements. Some individual firms have gone further.<\/p>\n<h3>Overall, our own interventions have led up to four clear board priorities for brands:<\/h3>\n<p>&nbsp;<\/p>\n<ol>\n<li><strong>Board oversight<\/strong>: An independent director\/committee\u00a0accountable for brand assets.\u00a0Consisting of brand professionals who have led businesses. This implies both a strong understanding of the asset as well as its impact on business performance. 6% representation is a joke.<\/li>\n<\/ol>\n<p>&nbsp;<\/p>\n<ol>\n<li><strong>Information symmetry<\/strong>:\u00a0 A well laid out mechanism for impairment testing and asset value reporting, separately for brands. Shareholders should have clarity on the position of these large assets just like they do with tangible assets.<\/li>\n<\/ol>\n<p>&nbsp;<\/p>\n<ol>\n<li><strong>Return on brand capital<\/strong>: Set up clear and convergent\u00a0metrics to return on these assets in particular. The gross return on capital tells us nothing about how individual\u00a0assets contribute to performance and value creation.<\/li>\n<\/ol>\n<p>&nbsp;<\/p>\n<ol>\n<li><strong>Brand due diligence:<\/strong> The board and its appointed investment committees demand and have access to due diligence on-brand\u00a0assets of acquisition targets. Most of the time, we are buying companies at many times the value of the books, with little or no idea of what that premium is supposed to contribute to future performance. How does that make for a sound investment logic?<\/li>\n<\/ol>\n<p>For my money, these are the four essentials for getting brands to where they belong, namely, into the boardroom. For any business category, anywhere in the world.<\/p>\n<p>Does it really make sense that most of a firm\u2019s value lies undisclosed, unaccounted for and underleveraged? Especially in a world where value seems to be moving further and further away from land, infra and stash?<\/p>\n<p><em>I would love to know what you think! <\/em><a href=\"mailto:rjt@equitor.com\"><em>rjt@equitor.com<\/em><\/a><em>\u00a0<\/em><\/p>\n\n<div style=\"font-size: 0px; height: 0px; line-height: 0px; margin: 0; padding: 0; clear: both;\"><\/div>","protected":false},"excerpt":{"rendered":"<p>Did you know that 94.6% or 19 out of 20 listed firms in the world&#8230;<\/p>\n","protected":false},"author":191,"featured_media":4303,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[287,4,1178,25],"tags":[],"class_list":["post-4199","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-business-management","category-business-transformation","category-marketing"],"_links":{"self":[{"href":"https:\/\/www.speakin.co\/edit\/wp-json\/wp\/v2\/posts\/4199","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.speakin.co\/edit\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.speakin.co\/edit\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.speakin.co\/edit\/wp-json\/wp\/v2\/users\/191"}],"replies":[{"embeddable":true,"href":"https:\/\/www.speakin.co\/edit\/wp-json\/wp\/v2\/comments?post=4199"}],"version-history":[{"count":0,"href":"https:\/\/www.speakin.co\/edit\/wp-json\/wp\/v2\/posts\/4199\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.speakin.co\/edit\/wp-json\/wp\/v2\/media\/4303"}],"wp:attachment":[{"href":"https:\/\/www.speakin.co\/edit\/wp-json\/wp\/v2\/media?parent=4199"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.speakin.co\/edit\/wp-json\/wp\/v2\/categories?post=4199"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.speakin.co\/edit\/wp-json\/wp\/v2\/tags?post=4199"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}