How Workplace Culture Impacts Your Company Value

It has been well-publicized that positive company culture pays dividends in terms of employee engagement, performance, and satisfaction. But companies with a positive workplace culture may be better situated on the stock market too.

Let’s take a look at how:

Company sexual harassment negatively impacts stock performance

 A 68-page report dated August 19, 2020 outlines that companies with high incidences of sexual harassment can expect increased labor costs, declines in profitability, and a -8.4% to -21.2% loss of share value.

You can read the report here.

Workplace injuries lead to loss of goodwill

The Department of Labor outlines the indirect costs of workers’ compensation insurance claims as:

• Wages for absences, time lost, and overtime;
• Administrative costs;
• Training costs;
• Lost productivity;
• Repair and/or replacement costs for machinery, materials, and property;
• OSHA fines and legal action;
• Third-party liability; and
• Loss of goodwill.

While a consensus has not been reached about the correlation between stock valuation and company goodwill, recent research on Chinese A-share listed firms indicate that “goodwill impairment avoidance has detrimental impacts on a firm’s future performance and stock price”. Moreover, the financial impact of the other indirect costs may result in underperformance and decreased revenue, both of which may lead to declining company value.

Data breaches result in long-term stock underperformance

Company share prices tend to plummet following data breaches. However, recent breaches have had a lesser impact on the market than earlier breaches. In fact, some companies have experienced stronger growth in the half of the 12-month period following the breach than they did in the lead up to it.

Nonetheless, the importance of maintaining a culture of privacy within your workplace cannot be understated. Especially since the impact of breaches appears to be long-term, as shown by Comparitech’s report on ‘How data breaches affect stock market share prices’, which details that breached companies underperformed the NASDAQ average by -13.27% after 3 years.

Meanwhile, Ponemon Institute’s 2017 report on ‘The Impact of Data Breaches on Reputation & Share Value’ suggests that a company’s response to a breach plays a large role in the recovery of its share prices.

You can read our blog for 3 essential steps to mitigate your losses & liability following a privacy breach.

If your company could benefit from some assistance in navigating workplace processes and policies to grow company value, reach out. We’re here to help!

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