Let's first look at the reputation metrics from the Steel City Re IA (Corporate Reputation) Index? from 22 April when we last looked at this sector. The Index, which correlates with reputation surveys such as those published by Forbes, Fortune, and Harris Interactive, captures the financial implications of stakeholder behaviors and expectations of stakeholder behaviors as determined by corporate reputation. The Index is a good leading indicator of financial performance and returns on equity.
At that time, Ford (NYSE:F) showed a rising IA index and decreasing EWMA IA Index volatility with a final log magnitude of 2 while GM (NYSE:GM) showed opposite directional movements and a final volatility log magnitude of 3. From these data, we projected great financial results for the former, and ongoing dismal financial results for the latter. Honda (NYSE:HMC) was our highest ranked automotive firm on 22 April.
Let’s see how those financial projections panned out as demonstrated in these graphs from BigCharts.com.
Since April, Ford has returned nearly 100% on equity; GM has lost nearly 65%, and Honda (which had returned 45% for the year until 22 April) still had some firepower left and continued to move upwards, but underperformed the S&P500 for this period.
If we take the long view of a 2-year return, Honda just barely beats Ford but is in negative territory; both outshine the S&P500 which is about 30% off from the 2007 peak, and GM is, well, "underperforming."
Let's wrap this up with an homage to reputation management. Kudos to Ford for demonstrating the power of reputation mangement, and its ability to create value on the basis of expectations of further great things to come. This type of financial result is exactly what the Society seeks to promote. And kudos to Honda for demonstrating the power of a superior reputation to forge resilience. This type of financial resilience is exactly what the Society hopes will motivate companies to exercise best practices in the management of their intangible assets.
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