Ideas and Impressions
Yesterday afternoon my cousin Ignacio Hernandez raised me through Facebook the next question: Will it affect the corporate image Telefónica around the fuss that has been mounted over the issue of the ARE and its executives bonuses? The answer is complex and certainly not to develop on Facebook. Thus, although it took days mulling over the matter, I anticipate a little post that he planned to express some ideas and views.
Let's get some background: Last February 25, Telefónica announced record profits of 10.167 million euros, 31% more than in 2009, largely through the acquisition of Vivo, the Brazilian operator, which had contributed to improving the extraordinary results. Within the overall picture is True, the company saw a 5% drop revenues in Spain because, he explained Cesar Alierta, chairman of the company, to lower consumption per customer in each of the different business areas of Telefónica, and high competitive intensity (I understand that the high penetration of mobile telephony and internet in the population, making the customer in a critical stakeholder to be retained at any price).
Despite these findings, the surprise jump last week. On Wednesday 13, Telefónica announced a redundancy plan to cut its staff by 20% in Spain, which means eliminate 5,600 jobs. Along with this measure, the telecommunications giant announced as many (eliminating positions, sell non-strategic assets and linking remuneration to productivity improvements, not to inflation) of face-to offset falling income in our country. Just two days later, the company informed the CNMV its intention to propose a deal in bonuses to its executives valued at 450 million euros. From then until now, critics have occurred and Telefonica have rain suits from the government, unions and opposition, besides being the result of fierce criticism in social networks and different forums of opinion. Do you happen Phone bill this scandal? The answer is not simple.
In the coming days publish an academic paper to an investigation that we conducted professor Jesús García de Madariaga (my supervisor) and myself on the impact of the practices of Corporate Governance or Corporate Governance on the reputation of corporate governance practices empresas.Por means, inter alia, the validity of a code of ethics, the existence of independent directors or the clarity and transparency in remuneration policies address both high-wing pair to board members . Our main finding is that indeed there is a clear positive correlation between corporate governance practices and corporate reputation. That is, the better was the performance in terms of good governance, the better the reputation of the companies studied. Our study has limitations. First, it is based on the automotive sector. Second, we analyzed correlation, not causation. Finally, it is made at a time of economic growth. This last aspect is significant, because the truth is that reputation is not a stable concept, but is based on perceptions and environments, from a time now, have varied greatly.
The relationship between reputation and a company's financial results is also evident. Moreover, there are very interesting studies have shown that capital markets are able to value intangible assets such as corporate reputation, thus impacting on investment decisions of individual agents who are participating. Today, in addition, there are sustainability indexes in which Telefónica is listed: the Dow Jones Sustainability Index and FTSE4Good London. Investors who analyze these indicators generally include ethical criteria to their investment decision. In that sense, it is worth remembering that in England, for example, socially responsible investment has already reached 30% of total investment and that in countries like Holland, it verges on 40%. EIRIS, which produces reports for this type of indicators and which is the EPM tool I could use me in my thesis, it is bound to penalize Telefónica by this incident. First you ask for an explanation, if you answer, do not always do, assessments, and if not successful, will lower its rating. Under normal conditions, Telefónica will be punished. In 1997, when it emerged that Nike was using children in its factories in Vietnam and Indonesia and that working conditions at its plants were regrettable and even punishment is inflicted, its price per share fell more than 50%.
The problem is that Telefónica, through which has been the holder of a monopoly for a long time and a sound investment policy, which enabled it to have a highly diversified global presence, is a haven investment in times that are so complicated for the stock markets. Put another way, I left little doubt that this scandal is going to happen short-term bill. So that stakeholders can penalize a company, they need alternatives that do not require them to sacrifice certain attributes. That is, do not know if the situation so complicated that they have our economies, there are many investors willing to yield returns in the interests of another company ethics. True, in any event, BP saw its shares fell 40% last July 2010 when the spill in the Gulf of Mexico, but that was global and it has happened here.
Then there is the case of clients. For there to be a boycott and that it is effective, it takes on new alternatives that are neither lower quality or more expensive. Today, the telecommunications market is an oligopoly of four friends. There are not many alternatives and, besides, change is expensive, because with such a high penetration of mobile phone fixed telephone and internet in the homes of the major OECD countries, the customer is a critical stakeholder group. You can only grow while maintaining the haves and stealing some of the competition.
However, despite two previous paragraphs, Telefónica should be aware that increasingly more people have against it. There are over 50 groups on Facebook called "I hate Telefónica" or similar forums of the web pages of major newspapers are full of comments announcing low and overflowing indignation at the news of the ERE and the bonus and there is growing web pages questioned where the service gives Telefónica customers. In PradoRey, verily, we had to terminate. In two and a half years, I have not been able to respond to a single internal mail or hold with the Blackberry and I was getting duplicate mails. Telefónica, with a pair, has closed the case without resolving it. At the end is always the same: no company can turn its back on the society it operates. If the CIS has been saying for almost two years that unemployment is the greatest concern to the English, and while acknowledging that the company's first responsibility is economic, it is last week's fireworks. In a society in which the client is no longer king, but the dictator can not continue serving mediocre. Overall, I am convinced that we like Telefónica most slightly worse than a few days ago and that really they should be worrisome.
Finally, conclude with an observation: At the end of the RSC is a relative concept that depends on the morality of each society. In other words, the shares of Telefónica are considered legitimate or not depends on us and our attitudes.
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