考克斯圓桌會議moderncapitalismandfinancialcrisi課件

ModernCapitalismastheSolutiontotheFinancialCrisis:

TheCauxRoundTableApproachStephenB.YoungGlobalExecutiveDirectorTheCauxRoundTableBelgrade,December20081ModernCapitalismastheSolut22FinancialmeltdownsareasystematicDysfunctionofcapitalismTulipmania–1620MississippicompanyFrance1719/1720SouthSeaCompanyLondon1711/1720WallStreet1929Junkbonds1980sDs/telecom1990sSub-primemortgages/CDOs33"Men,ithasbeenwellsaid,thinkinherds;itwillbeseenthattheygomadinherds,whiletheyonlyrecovertheirsensesslowly,andonebyone!"CharlesMackay

“IrrationalExuberance”AlanGreenspan4"Men,ithasbeenwellsaid,tCharlesMacKay,ExtraordinaryPopularDelusionsandtheMadnessofCrowds,withaforewordbyAndrewTobias(1841;NewYork:HarmonyBooks,1980).MikeDash,Tulipomania:TheStoryoftheWorld'sMostCovetedFlowerandtheExtraordinaryPassionsItAroused(1999)PeterM.Garber,FamousFirstBubbles:TheFundamentalsofEarlyManias(Cambridge,MA:MITPress,2000).CharlesKindleberger,Manias,Panics,andCrashes:AHistoryofFinancialCrises(Wiley,2005,5thedition)5CharlesMacKay,ExtraordinaryWhatCausesaFinancialCrisis?Mis-pricingofriskIncreasesinrealriskarenotcapturedinnominalmarketpricesAssetpricesbecomeirrationalValuationbecomesunrealistic6WhatCausesaFinancialCrisisPresentvaluereflectstheriskofactuallyreceivingfutureincomeCapitalvalueisafunctionofincome!Misjudgmentsaboutfutureincomedistortpresentcapitalvalues77Infinancialbubbles,mis-pricingissustainedbyinfusionsofdebtHigherandhigherassetvaluesaresupportedbyborrowedfundsExcessliquidity–basedonfuturepromisestopay–transformsinvestmentintospeculation;atradingmentalitytakesoverthemarkets;prudencelosesouttogreed;illusiontrumpsreality–foratime8Infinancialbubbles,mis-pric"OfalltheoffspringofTime,Erroristhemostancient,andissooldandfamiliaranacquaintance,thatTruth,whendiscovered,comesuponmostofuslikeanintruder,andmeetstheintruder'swelcome."99DynamicsoftheCurrentCrisisSub-primemortgageloansmade,moreandmoreagainstfutureresalevalueofthehome,notagainstrealincomeMortgageloanspackagedandsoldtoglobalcapitalmarketsCollateralDebtObligations(CDOs)issuedtofinancepurchasesofpackagesofsub-primemortgagesandtoinvestinhedgefundsCreditDefaultSwapsinventedtogiveaddedvaluetoCDOsDebtupondebtupondebtLowinterestrateenvironmentIncentivestructuredrivenbyfeesnotinvestmentinlongtermreturns10DynamicsoftheCurrentCrisisCurrentCrisisisGlobalAIGFortisIcelandEUguaranteesbankdepositsUKtakesovertwobanksEquitymarketsinAsiatankPriceofOildropsby50%Realeconomiesloseemploymentandconsumerdemand11CurrentCrisisisGlobal11Whenfinancialmarketsimplode,capitalismlosesliquidity,exchangesofgoodsandservicesfall,outputisreduced,employmentiscutDebtmustbetakenoutofthefinancialsystemAssetvalueshavetoberesetatlowerlevelsAssetownersloosewealth12WhenfinancialmarketsimplodeWorldEconomicOrderhasinadequatemechanismstopreventfinancialcrisesWTOIMFWorldBankG8OECDBankforInternationalSettlements13WorldEconomicOrderhasinadeCentralBanksmuststepupandinjectliquidityintotheglobalsystemoffinancialintermediationGovernmentbudgetsmustinjectnewcapitalinfinancialinstitutionsBankruptciesmusteliminateamountsofliquidity–bothequityanddebtBearSterns-$80to$2 -LehmanBrothers-liquidated14CentralBanksmuststepupandWhatisthefairvalueofaninvestmentinbusiness?QualityIncomeStreamHighnetpresentdiscountedvalueGoodcapitalizationmultiplierGoodCorporateValue(WarrenBuffetwouldbuyit)15WhatisthefairvalueofaniTodaywheredoesmostcorporatevaluecomefrom?IntangibleAssets!16Todaywheredoesmostcorporat50BestPerformersof2005

BusinessWeekBurlingtonNorthernSantaFe: Marketvalue:$29.2billion Balancesheetassets: 103%ofmarketvalue($30.3billion) Goodwill:NoneCaterpillar: Marketvalue:$49billion Balancesheetassets:95.9% Goodwill:4.1%UnitedHealthGroup: Marketvalue:$79billion Balancesheetassets:52% Goodwill:48%Apple: Marketvalue:$58billion Balancesheetassets:19.8% Goodwill:80.2%

1750BestPerformersof2005

Bus50BestPerformersof2005

BusinessWeekMicrosoft: Marketvalue:$279billion Balancesheetassets:33.7% Goodwill:66.3%BestBuy: Marketvalue:$26.3billion Balancesheetassets:39% Goodwill:61%Starbucks: Marketvalue:$27.8billion Balancesheetassets:12% Goodwill:88%

GoldmanSachs: Marketvalue:$61.7billion Balancesheetassets:1.1% Goodwill:98.9%1850BestPerformersof2005

BusWhatistheMostCommonFormofIntangibleWealth?GovernmentIssuedFiatMoneyItsvalueistobeusedaslegaltenderWhatisaDollarworthtoday?Adollarbillhasnotangibleworth;whatisthevalueofinkonpaper?Itsvalueliesinthemindofwhoeverwilltakeit.19WhatistheMostCommonFormo

WhatisAnotherVeryDesirableCommonFormofIntangibleWealth?StocksandBondsWhoDeterminestheirValues?20

WhatisAnotherVeryDesiraFinancialMeltdownof2008BearStearns: onFriday,$80persharebookvalue;onSundaysoldfor$2pershareLehmanBrothers: Billionsinbalancesheetassets; liquidatedasnoonewantedtobuythemonagoingconcernbasis21FinancialMeltdownof200821Whatisacompanyworth?

Howtowemeasureitsvalue?Mostsimplecalculation:DiscountednetpresentvalueoffutureincomeXcapitalizationmultiplier22Whatisacompanyworth?

HowtFirstFundamentalConclusionYoucannotestablishvaluewithoutputtingriskintothecalculationWhatistheriskofnotachievingpredictedfuturerevenue?Howcertainareestimatesoffutureincome?Whataretheriskfactorsthatdeterminethecapitalizationmultiplier?AhigherriskdemandsalowermultiplierHigherrisk>moreuncertainty>lowerpresentvalue23FirstFundamentalConclusionYoNote:

Eachsourceofriskdrivesbusinessvalueupordown24Note:EachsourceofriskdriSecondFundamentalConclusionManagementofRiskEnhancesEnterpriseValueRiskmanagementleadstomorecertainincomeRiskreductionleadstohighervaluation25SecondFundamentalConclusionMHowdoyoumanagerisk?-Eachriskhidesinarelationship-customers-investors-governmentregulation-employees-Eachrelationshipisanintangibleassetofthebusiness(AssetscanAppreciateorDepreciate).-Loweringriskforeachrelationshipenhancesthequalityofintangibleassetsandincreasesbusinessvaluation26Howdoyoumanagerisk?-EachrCSR&ValuationIntangibleAssets=CSRStakeholderRelationshipsCustomersEmployeesOwners/InvestorsSuppliersCompetitionStrategiesCommunitySupport27CSR&ValuationIntangibleAsseTangibleValuesIntangibleValuesFinancialCapitalTangibleAssets(GenerallyAuditedFinancialInformation)(GenerallyNon-audited,Non-financialInformation)IntellectualpropertyUnallocatedgoodwillLaborenvironmentBrandloyaltySustainabilityQualityofemployeesCommunitysupport28TangibleValuesIntangibleValuGrowingImportanceofIntangibleWealthChangeinUSEmployment:Dec2007-Nov2008

tangiblesector(manufacturing,construction,naturalresources,realestate,wholesaleandretail,transportationandwarehousing)

-1,791,000jobs

intangiblesector(education,healthcare,computersystemdesign,financeandinsurance,scientificresearch,etc.)

+515,000

jobs allotherservices -635,000jobs

29GrowingImportanceofIntangibToimprovecompanyvaluation,

ImproveCSRrelationships!

GoodCSRRelationshipsLeadtoTheSustainableCorporation

30Toimprovecompanyvaluation,

HowtomeasureCSRRelationshipsUseCRTArcturusRiskAssessmentInstrumentNewmetricsforenhancedprofitability31HowtomeasureCSRRelationshiHowtoManagefor

SustainableValue?CRTTheoryoftheFirmArcturus32HowtoManagefor

SustainableTheoryoftheMoralFirm(selfinterestconsidereduponthewhole)33TheoryoftheMoralFirm33CapitalAccountsCapitalAccountsareyourdefenseagainstriskandyourresourcebaseforcompetitiveinitiatives FinanceCapital PhysicalCapital HumanCapital ReputationCapital SocialCapital34CapitalAccountsCapitalAccounFINANCECAPITAL Traditionalcapitalaccount–stockofreadymoneyandamountofsunkcashinvestments35FINANCECAPITAL35PHYSICALCAPITAL TraditionalcapitalaccountPlantandequipmentToolsofthetradeSubaccountreallyoffinancialcapitalaspurchasedwithmoniesraisedinthepast36PHYSICALCAPITAL36HUMANCAPITAL Non-traditionalcapitalaccount -intangibleasset -vitalforsuccessinservicesandhightechbusinesses -takescareofcustomerneedsanddemands37HUMANCAPITAL 37REPUTATIONCAPITAL (brandequity;goodwill) -neededforqualityincome -neededtogetlowcostofcapitalandthebestemployees -getsyouthroughroughtimes -avoidscommoditypricing/buildsvalueadded38REPUTATIONCAPITAL38SOCIALCAPITAL Internal: -culture -leadership -strategyExternal: -ruleoflaw/nocorruption -education -publichealth -publicgoods:marketregulation,transportation,etc.39SOCIALCAPITAL 39

Inter-relationshipsamong

capitalaccounts

SocialCapital+ReputationCapital+ HumanCapital >> FinanceCapital+ PhysicalCapital40Inter-relationsStakeholders:Customers–moralcompassforcapitalismEmployees–moralagents,notpartsforamachineOwnersandInvestors–fiduciarydutiesofloyaltyand duecareSuppliers–friends,notfoesCompetitors–competewithqualityandinnovation,not priceCommunities–enhancesocialcapitaltoenhancefuture profitability41Stakeholders:41Stakeholdersand

CapitalAccountsInternalSocialCapital=owners/employees/suppliers/competitivestrategyExternalSocialCapital=CommunityReputationCapital=customers/employees/ owners/suppliers/communityHumanCapital=employees42Stakeholdersand

CapitalAccoTakingDueCareofStakeholdersEnhancesCapitalAccounts;UnderminingStakeholdersPutsCapitalAccountsatRisk43TakingDueCareofStakeholderHowCanyouMeasureand,therefore,ManageStakeholderRelationshipsAndallacompany’sCapitalAccounts?4444ASKQUESTIONS!AssesstheQualityofyourrelationships4545Category1.FundamentalDuties2.Customers3.Employees4.Owners/Investors5.Suppliers/Partners6.Competitors7.Communities1.Responsi-bilitiesofBusinessCriterion1.1Criterion1.2Criterion1.3Criterion1.4Criterion1.5Criterion1.6Criterion1.72.EconomicandSocialImpactofBusinessCriterion2.1Criterion2.2Criterion2.3Criterion2.4Criterion2.5Criterion2.6Criterion2.73.BusinessBehaviorCriterion3.1Criterion3.2Criterion3.3Criterion3.4Criterion3.5Criterion3.6Criterion3.74.RespectforRulesCriterion4.1Criterion4.2Criterion4.3Criterion4.4Criterion4.5Criterion4.6Criterion4.75.SupportforMulti-lateralTradeCriterion5.1Criterion5.2Criterion5.3Criterion5.4Criterion5.5Criterion5.6Criterion5.76.RespectfortheEnvironmentCriterion6.1Criterion6.2Criterion6.3Criterion6.4Criterion6.5Criterion6.6Criterion6.77.AvoidanceofIllicitOperationsCriterion7.1Criterion7.2Criterion7.3Criterion7.4Criterion7.5Criterion7.6Criterion7.7

ArcturusRiskAssessmentInstrument–CriteriaMatrix46Category1..6.CompetitAssessmentFramework–Criterion/BenchmarkExampleCUSTOMERS(SectionB)1B-BeyondShareholderstowardsStakeholders-CustomersDoesthecompanyprovideitscustomerswithqualityproductsandservicesatreasonableprices,andonfairterms,whileprotectingtheirhealthandsafetyandtheirphysicalenvironment,andrespectingtheircultureandindividualdignity?POINTSTOCONSIDER–Thecompanyseekscustomerfeedbackonitspractices,monitorsimpacts,andispreparedtomodifyproductionorserviceasaresult,plusprovidesrelevanttrainingofstaff.Point(s):Pleasecircle1 2 3 4 5 6 7 Pleasewritedownanyconcerns,explanationsoradditionalcommentsonhoworhownot,thecompanyisperforming.____________________________________________________________________________________________________________________________________________________________________________________________________________________2B-Economic&SocialImpactofBusiness-CustomersDothecompany’sproductsandservicescontributetotheeconomicandsocialadvancementofitscustomersandtothewell-beingoftheircommunities?POINTSTOCONSIDER–Qualityofproduct/servicedevelopment;productqualityandsafety;adherencetorelevantcustomer,safetyandenvironmentalcodes;products/servicespositivelyimpactlivingstandards?Point(s):Pleasecircle1 2 3 4 5 6 7 Pleasewritedownanyconcerns,explanationsoradditionalcommentsonhoworhownot,thecompanyisperforming.____________________________________________________________________________________________________________________________________________________________________________________________________________________47AssessmentFramework–CriteriTheCorporateImprovementCyclePerformanceImprovementPerformanceFeedbacktoManagementManagementActionCRTAssessment48TheCorporateImprovementCyclWhoParticipates?

BoardofdirectorsCEOSeniormanagementDivisionheadsandgroupmanagersUnitmanagersEmployees49WhoParticipates?BoardofdirSampleGapAnalysisbetweenManagementsandEmployees

(ProvidedbyCRT-Japan)A.FundamentalDutiesB.CustomersC.EmployeesD.Owners/InvestorsE.Suppliers/PartnersF.CompetitorsG.CommunityPerformancebyPrinciple1.ResponsibilitiesofBusinesses6.5/5.26.3/5.16.0/4.86.8/5.25.9/4.96.1/4.86.4/5.444.0/35.42.Economic/SocialImpactofBusiness6.0/5.35.6/4.76.7/4.54.9/4.44.9/4.46.6/4.65.1/5.239.8/33.13.BusinessBehavior6.4/5.05.8/5.05.8/4.26.2/5.05.0/4.55.5/4.65.2/4.539.9/32.84.RespectforRules5.9/5.36.8/5.96.5/5.66.5/5.76.1/5.66.2/5.66.9/5.244.9/38.95.SupportforMultilateralTrade6.9/5.26.3/5.06.5/5.26.2/5.26.0/4.86.4/4.47.2/5.045.5/34.86.RespectforEnvironment7.0/6.66.0/5.35.7/4.46.3/5.65.2/4.24.4/4.44.7/4.039.3/34.57.AvoidanceofIllicitOperations6.7/5.86.5/5.86.8/6.56.3/5.46.5/5.26.0/5.25.9/5.744.7/39.6PerformancebyStakeholder45.4/38.443.3/36.844.0/35.243.2/36.539.6/33.641.2/33.641.4/35.0298.1/249.150SampleGapAnalysisbetweenMaSampleRadarChart(ProvidebyCRT-Japan)Visionnotyetfullyembeddedacrossthecompany.Nointegratedlocalcommunitydevelopmentprogramacrossdifferentcountries.Companyinternalcommunicationispoorontheissueofenvironment.Customers'trustisweak.Communicationwithsuppliers/partnersispoor.Highlevelofcompliance,riskmanagementandinternalaudithavebeenachieved.

51SampleRadarChart(ProvidebyHowDoCompaniesCreateValue?TheGoodTheBadTheUgly52HowDoCompaniesCreateValue?TheGood

(MoralCapitalism)RiskAssessment/continuousRiskReductionOptimizeStakeholderBenefits53TheGood

(MoralCapitalism)RiTheBad

(BruteCapitalism,CronyCapitalism)FeedShareholders,AbuseStakeholdersCommoditypricing/competeonpricing/lowcostsRentseeking(marketpower)Takethemoneyandrun:shorttermismUnsustainableValuations-EventualFailure54TheBad

(BruteCapitalism,CrTheUgly

(Puntingonthetradingfloor)Nonetwealthcreation;speculationintrading(RobPetertopayPaul)IrrationalExuberance

(Markettraders/shorttermism)FalseValuations

(Enron:PonziScheme;subprimemortgages,CDOs, CDSs)Encourageunsustainablepricingofsecurities

(CDOs,CDSs)INEVITABLEFINANCIALMELTDOWN55TheUgly

(PuntingonthetradThankYou56ThankYou56ModernCapitalismastheSolutiontotheFinancialCrisis:

TheCauxRoundTableApproachStephenB.YoungGlobalExecutiveDirectorTheCauxRoundTableBelgrade,December200857ModernCapitalismastheSolut582FinancialmeltdownsareasystematicDysfunctionofcapitalismTulipmania–1620MississippicompanyFrance1719/1720SouthSeaCompanyLondon1711/1720WallStreet1929Junkbonds1980sDs/telecom1990sSub-primemortgages/CDOs593"Men,ithasbeenwellsaid,thinkinherds;itwillbeseenthattheygomadinherds,whiletheyonlyrecovertheirsensesslowly,andonebyone!"CharlesMackay

“IrrationalExuberance”AlanGreenspan60"Men,ithasbeenwellsaid,tCharlesMacKay,ExtraordinaryPopularDelusionsandtheMadnessofCrowds,withaforewordbyAndrewTobias(1841;NewYork:HarmonyBooks,1980).MikeDash,Tulipomania:TheStoryoftheWorld'sMostCovetedFlowerandtheExtraordinaryPassionsItAroused(1999)PeterM.Garber,FamousFirstBubbles:TheFundamentalsofEarlyManias(Cambridge,MA:MITPress,2000).CharlesKindleberger,Manias,Panics,andCrashes:AHistoryofFinancialCrises(Wiley,2005,5thedition)61CharlesMacKay,ExtraordinaryWhatCausesaFinancialCrisis?Mis-pricingofriskIncreasesinrealriskarenotcapturedinnominalmarketpricesAssetpricesbecomeirrationalValuationbecomesunrealistic62WhatCausesaFinancialCrisisPresentvaluereflectstheriskofactuallyreceivingfutureincomeCapitalvalueisafunctionofincome!Misjudgmentsaboutfutureincomedistortpresentcapitalvalues637Infinancialbubbles,mis-pricingissustainedbyinfusionsofdebtHigherandhigherassetvaluesaresupportedbyborrowedfundsExcessliquidity–basedonfuturepromisestopay–transformsinvestmentintospeculation;atradingmentalitytakesoverthemarkets;prudencelosesouttogreed;illusiontrumpsreality–foratime64Infinancialbubbles,mis-pric"OfalltheoffspringofTime,Erroristhemostancient,andissooldandfamiliaranacquaintance,thatTruth,whendiscovered,comesuponmostofuslikeanintruder,andmeetstheintruder'swelcome."659DynamicsoftheCurrentCrisisSub-primemortgageloansmade,moreandmoreagainstfutureresalevalueofthehome,notagainstrealincomeMortgageloanspackagedandsoldtoglobalcapitalmarketsCollateralDebtObligations(CDOs)issuedtofinancepurchasesofpackagesofsub-primemortgagesandtoinvestinhedgefundsCreditDefaultSwapsinventedtogiveaddedvaluetoCDOsDebtupondebtupondebtLowinterestrateenvironmentIncentivestructuredrivenbyfeesnotinvestmentinlongtermreturns66DynamicsoftheCurrentCrisisCurrentCrisisisGlobalAIGFortisIcelandEUguaranteesbankdepositsUKtakesovertwobanksEquitymarketsinAsiatankPriceofOildropsby50%Realeconomiesloseemploymentandconsumerdemand67CurrentCrisisisGlobal11Whenfinancialmarketsimplode,capitalismlosesliquidity,exchangesofgoodsandservicesfall,outputisreduced,employmentiscutDebtmustbetakenoutofthefinancialsystemAssetvalueshavetoberesetatlowerlevelsAssetownersloosewealth68WhenfinancialmarketsimplodeWorldEconomicOrderhasinadequatemechanismstopreventfinancialcrisesWTOIMFWorldBankG8OECDBankforInternationalSettlements69WorldEconomicOrderhasinadeCentralBanksmuststepupandinjectliquidityintotheglobalsystemoffinancialintermediationGovernmentbudgetsmustinjectnewcapitalinfinancialinstitutionsBankruptciesmusteliminateamountsofliquidity–bothequityanddebtBearSterns-$80to$2 -LehmanBrothers-liquidated70CentralBanksmuststepupandWhatisthefairvalueofaninvestmentinbusiness?QualityIncomeStreamHighnetpresentdiscountedvalueGoodcapitalizationmultiplierGoodCorporateValue(WarrenBuffetwouldbuyit)71WhatisthefairvalueofaniTodaywheredoesmostcorporatevaluecomefrom?IntangibleAssets!72Todaywheredoesmostcorporat50BestPerformersof2005

BusinessWeekBurlingtonNorthernSantaFe: Marketvalue:$29.2billion Balancesheetassets: 103%ofmarketvalue($30.3billion) Goodwill:NoneCaterpillar: Marketvalue:$49billion Balancesheetassets:95.9% Goodwill:4.1%UnitedHealthGroup: Marketvalue:$79billion Balancesheetassets:52% Goodwill:48%Apple: Marketvalue:$58billion Balancesheetassets:19.8% Goodwill:80.2%

7350BestPerformersof2005

Bus50BestPerformersof2005

BusinessWeekMicrosoft: Marketvalue:$279billion Balancesheetassets:33.7% Goodwill:66.3%BestBuy: Marketvalue:$26.3billion Balancesheetassets:39% Goodwill:61%Starbucks: Marketvalue:$27.8billion Balancesheetassets:12% Goodwill:88%

GoldmanSachs: Marketvalue:$61.7billion Balancesheetassets:1.1% Goodwill:98.9%7450BestPerformersof2005

BusWhatistheMostCommonFormofIntangibleWealth?GovernmentIssuedFiatMoneyItsvalueistobeusedaslegaltenderWhatisaDollarworthtoday?Adollarbillhasnotangibleworth;whatisthevalueofinkonpaper?Itsvalueliesinthemindofwhoeverwilltakeit.75WhatistheMostCommonFormo

WhatisAnotherVeryDesirableCommonFormofIntangibleWealth?StocksandBondsWhoDeterminestheirValues?76

WhatisAnotherVeryDesiraFinancialMeltdownof2008BearStearns: onFriday,$80persharebookvalue;onSundaysoldfor$2pershareLehmanBrothers: Billionsinbalancesheetassets; liquidatedasnoonewantedtobuythemonagoingconcernbasis77FinancialMeltdownof200821Whatisacompanyworth?

Howtowemeasureitsvalue?Mostsimplecalculation:DiscountednetpresentvalueoffutureincomeXcapitalizationmultiplier78Whatisacompanyworth?

HowtFirstFundamentalConclusionYoucannotestablishvaluewithoutputtingriskintothecalculationWhatistheriskofnotachievingpredictedfuturerevenue?Howcertainareestimatesoffutureincome?Whataretheriskfactorsthatdeterminethecapitalizationmultiplier?AhigherriskdemandsalowermultiplierHigherrisk>moreuncertainty>lowerpresentvalue79FirstFundamentalConclusionYoNote:

Eachsourceofriskdrivesbusinessvalueupordown80Note:EachsourceofriskdriSecondFundamentalConclusionManagementofRiskEnhancesEnterpriseValueRiskmanagementleadstomorecertainincomeRiskreductionleadstohighervaluation81SecondFundamentalConclusionMHowdoyoumanagerisk?-Eachriskhidesinarelationship-customers-investors-governmentregulation-employees-Eachrelationshipisanintangibleassetofthebusiness(AssetscanAppreciateorDepreciate).-Loweringriskforeachrelationshipenhancesthequalityofintangibleassetsandincreasesbusinessvaluation82Howdoyoumanagerisk?-EachrCSR&ValuationIntangibleAssets=CSRStakeholderRelationshipsCustomersEmployeesOwners/InvestorsSuppliersCompetitionStrategiesCommunitySupport83CSR&ValuationIntangibleAsseTangibleValuesIntangibleValuesFinancialCapitalTangibleAssets(GenerallyAuditedFinancialInformation)(GenerallyNon-audited,Non-financialInformation)IntellectualpropertyUnallocatedgoodwillLaborenvironmentBrandloyaltySustainabilityQualityofemployeesCommunitysupport84TangibleValuesIntangibleValuGrowingImportanceofIntangibleWealthChangeinUSEmployment:Dec2007-Nov2008

tangiblesector(manufacturing,construction,naturalresources,realestate,wholesaleandretail,transportationandwarehousing)

-1,791,000jobs

intangiblesector(education,healthcare,computersystemdesign,financeandinsurance,scientificresearch,etc.)

+515,000

jobs allotherservices -635,000jobs

85GrowingImportanceofIntangibToimprovecompanyvaluation,

ImproveCSRrelationships!

GoodCSRRelationshipsLeadtoTheSustainableCorporation

86Toimprovecompanyvaluation,

HowtomeasureCSRRelationshipsUseCRTArcturusRiskAssessmentInstrumentNewmetricsforenhancedprofitability87HowtomeasureCSRRelationshiHowtoManagefor

SustainableValue?CRTTheoryoftheFirmArcturus88HowtoManagefor

SustainableTheoryoftheMoralFirm(selfinterestconsidereduponthewhole)89TheoryoftheMoralFirm33CapitalAccountsCapitalAccountsareyourdefenseagainstriskandyourresourcebaseforcompetitiveinitiatives FinanceCapital PhysicalCapital HumanCapital ReputationCapital SocialCapital90CapitalAccountsCapitalAccounFINANCECAPITAL Traditionalcapitalaccount–stockofreadymoneyandamountofsunkcashinvestments91FINANCECAPITAL35PHYSICALCAPITAL TraditionalcapitalaccountPlantandequipmentToolsofthetradeSubaccountreallyoffinancialcapitalaspurchasedwithmoniesraisedinthepast92PHYSICALCAPITAL36HUMANCAPITAL Non-traditionalcapitalaccount -intangibleasset -vitalforsuccessinservicesandhightechbusinesses -takescareofcustomerneedsanddemands93HUMANCAPITAL 37REPUTATIONCAPITAL (brandequity;goodwill) -neededforqualityincome -neededtogetlowcostofcapitalandthebestemployees -getsyouthroughroughtimes -avoidscommoditypricing/buildsvalueadded94REPUTATIONCAPITAL38SOCIALCAPITAL Internal: -culture -leadership -strategyExternal: -ruleoflaw/nocorruption -education -publichealth -publicgoods:marketregulation,transportation,etc.95SOCIALCAPITAL 39

Inter-relationshipsamong

capitalaccounts

SocialCapital+ReputationCapital+ HumanCapital >> FinanceCapital+ PhysicalCapital96Inter-relationsStakeholders:Customers–moralcompassforcapitalismEmployees–moralagents,notpartsforamachineOwnersandInvestors–fiduciarydutiesofloyaltyand duecareSuppliers–friends,notfoesCompetitors–competewithqualityandinnovation,not priceCommunities–enhancesocialcapitaltoenhancefuture profitability97Stakeholders:41Stakeholdersand

CapitalAccountsInternalSocialCapital=owners/employees/suppliers/competitivestrategyExternalSocialCapital=CommunityReputationCapital=customers/employees/ owners/suppliers/communityHuman