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Brands May Eclipse Government Regulation

In the past, opponents of government regulation have made the argument that the best regulation is self-regulation. In its purest form, that assertion may have...
August 8, 2006

In the past, opponents of government regulation have made the argument that the best regulation is self-regulation. In its purest form, that assertion may have been dismissed as merely self-interest. But now, a change in the business equation may be giving the argument new currency, only in a different way.

There's an interesting op-ed in the Washington Post that advances the view that long ago, the value of a company consisted largely of its "book value": physical assets such as factories and equipment, plus money in the bank. But today book value accounts for only about a third of the stock market capitalization of the top 150 U.S. companies; and that in the new economy, corporate value lies in intangible assets: patents, databases, know-how -- and brands.

The column notes that in defense of their bottom lines, firms like Wal-Mart, Starbucks and BP are tackling issues that governments won't touch - in essence, self-regulating ahead of government action in order to protect their brand, their positive reputation with consumers. "So brands are eclipsing factories in value, and big brands appear to be crowding out smaller ones and reaching all around the world," notes article author Sebastian Mallaby. "The next stage may be for companies not merely to outpace government but to pull government along."

A New Brand of Power (Washington Post 8/7/06)