“The reputational damage alone amounts to about $10-15 billion of the eroded value over last year…”

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To close the list of the lamentable ten, we finally discuss the world’s most profitable company (for FY2007) – ExxonMobil – which shaved off a clean 18.4% from its shareholders’ kitty during the past year, to touch $376.5 billion in Mcap value. Yes, though the company’s shareholders have long rejoiced on the back of increasing fuel prices, Michael R. Englund, Principal Director and Chief Economist, Action Economics explains, “The oil company stock was boosted sharply, and ‘unsustainably’, by the explosion of energy prices that significantly overshot any reasonable assessment of the long-term supply-demand balance in the industry,” yet its shareholders are also amongst those facing the music. The primary reason why Exxon shareholders stand to greatest risk is not because it doesn’t want to “invest in sunshine” as Rex Tillerson, CEO, ExxonMobil says, but because it is hell-bent on being the ‘climate villian’. Having misstated climate change, with scientific debate of course, the corporate brand has always been the one to face maximum reputational damage. As per an oil industry expert, “The reputational damage alone amounts to about $10-15 billion of the eroded value over last year…” More so, there is the litigation risk that the company exposes its shareholders to, which as per market experts could cost them upto a brain-tingling $100 billion in the years to come. The issue with ExxonMobil today is just one: who knows which new policy will knock it off its feet?!

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Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist).


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