Valuing Business Reputation and Social Responsibility

Written on 4/13/2010 12:30:00 PM by Martha Ballesteros

Indeed, shareholder value, if not dictates, influences an investor’s or firm’s decision. A firm’s ultimate goal should be value creation, which occurs when share price for current shareholders is maximized. Shareholder wealth may come in the form of a dividend or the value or market price of one’s share. However, it should also take into account not only current profit but also future earnings as well as the timing, duration, and risks that go with it. For some, share price becomes the barometer for business performance. Financial management should create a long-term strategy that would emphasize in improving or raising the present value of a shareholder’s investment in a company as well as propose and implement projects that will increase the market value of the company’s securities.

In today’s changing world, not only technology has evolved, but also the financial environment. Considering the recent global financial crisis, profit creation has been necessary, if not for the development, at least for the survival of a lot of businesses. To create sustainable profit, businesses have also been concerned on creating value and banking on their reputation.

I believe maximizing shareholder wealth also involves being socially responsible and having good and upright corporate governance. A business or company that has a reputation for good corporate governance, as well as, engaging in socially responsible activities such as improving working conditions of employees and proper waste management, tends to attract more investors and shareholders because it adds value and competitiveness to the firm. Though the most popular and considered to pioneer the practice of corporate social responsibility (CSR) in the Philippines is the Ayala Group of Companies, other business have followed their lead such as, Petron, Meralco, Globe, and Jollibee.

It is a finance manager’s goal to not only seek short-term earnings but gain and maintain a reputation that would earn them long-term and sustainable profit as well as harmonious shareholder relationship by taking into consideration long-term benefits of the business, its shareholders, as well as the society.

Posted in business reputation, corporate social responsibility, CSR, shareholder value, shareholder wealth

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