Intangible Assets: Action Items On C-Suite and Board Agendas

 Michael D. Moberly    December 15, 2011

 I routinely engage in research reviewing articles, studies, academic papers and professional association papers on a range of issues related to intangible assets. Some that I find may have been written several years ago but maintain their relevance today  One such piece was written in 2006 by Rob McLean and appropriately titled ‘Intellectual Asset Strategy and the Board of Directors’ (IAM December/January 2006).

Up front, McLean states that ‘boards are frequently drawn into intellectual (intangible) asset management issues when there is a crisis, such as a lawsuit involving IP rights’.  But, ‘few boards’, McLean states ‘deliberately allocate time to intellectual asset issues as a matter of course’.  You will find no argument from me on that point as it is strongly supported by numerous studies.  I must add however, the tide is slowly changing in this arena as court cases and regulatory mandates are clearly sending some unmistakable fiduciary dictates.

Unfortunately, in reading McLean’s fine piece, I can’t ascertain for sure whether his references to ‘boards’ encompass only the proverbial Fortune 1000 types, or is more inclusive by taking in small medium enterprises and multinationals, i.e., SME’s and SMM’s? 

While my consultancy work and research interests tend to focus on SME’s, my engagements clearly leave the unmistakable impression that boards and management teams, regardless of company size:

  • convey little overt interest in intangibles
  • display few, if any incentives to exercise consistent stewardship, oversight, and management of intellectual (intangible) assets
  • intangibles are seldom, if ever, distinct action items on board and/or c-suite agendas
  • a significant percentage of boards and c-suites tend to perceive most any action related to intangible (intellectual) assets is a legal process (function), not necessarily a direct fiduciary responsibility and/or business decision.

With respect to possessing operational familiarity with intangibles, McLean posits that the knowledge – degree of familiarity boards, c-suites, and management teams possess about intangible assets can be categorized in four levels of engagement, i.e., they

 Level I – are generally unaware of the importance of intellectual (intangible) assets relative to their contributions to company strategy and competitive industry trends…

 Level II – may be peripherally aware that intellectual (intangible) assets have some importance relative to strategy and competitive trends but, at the company level only…

 Level III – have a high-level of understanding that intellectual (intangible) assets have some importance in strategy and competitive trends at the company level…

 Level IV – have a detailed understanding of the role that intellectual (intangible) assets play in strategic planning at both the company and business unit level…

 McLean also suggests (with respect to company boards), that if they were to be honest, most should describe themselves being at either the Level I or Level II category.   Again, there is no argument here that this perspective is closely aligned with reality.  Unfortunately, any absence of operational familiarity about intangibles will inevitably present companies with numerous (internal, external) missed opportunities. 

The unequivocal message we wish to send to c-suites, boards, and management teams is this……however full the managerial-fiscal plate may be, the fiduciary responsibilities related to effective stewardship, oversight, management and monitoring of the value and materiality of intangibles must should permanent fixtures on management team and board agendas…

From the board and management team perspective, there are three broad, yet plausible, starting points to help overcome any lack of operational familiarity about intangible assets like IP and intellectual capital:

 First – consider making changes in company governance structure and practices to genuinely reflect and be aligned with the reality that as much as 65+% of a company’s value, sources of revenue and ‘building blocks’ for growth lie in – are directly linked to intangible (intellectual) assets.

Second – take steps to ensure the right people receive the right information that allow them to focus on the right areas with respect to the company’s intangible assets.  This includes information and insights related to identifying, leveraging, and positioning those assets to extract – deliver the most value and competitive advantages that’s feasible.

Third – the underlying responsibilities for identifying, assessing, and sustaining (protecting, preserving) control, use, ownership, and value of intangibles should be a collaborative effort amongst intangible asset specialists, legal counsel, information security, risk management, IT, marketing, and particularly business units where intangibles most often originate!

While visiting  my blog, you are encouraged to browse other topics/subjects (left column, below photograph) .  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry at  314-440-3593 or [email protected]

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