Intangible Assets: They Need To Be On The Agendas Of Boards And Senior Managers

Michael D. Moberly   March 22, 2012

I am extrapolating somewhat, but in Rob McLean’s fine article titled ‘Intellectual Asset Strategy and the Board of Directors’ (IAM December/January 2006), which I believe is still very relevant today, he says ‘boards are frequently drawn into intellectual asset management issues when there is a crisis, such as a lawsuit involving intellectual property rights’. ‘Few boards’, McLean suggests, and which I believe still reflects reality, ‘deliberately allocate time to intellectual asset issues as a matter of course’.

It’s unclear whether the references to boards in McLean’s piece are directed solely to large, Fortune 1000 types of companies or also include small medium enterprises and multinationals, i.e., SME’s and SMM’s respectively? While my professional interests tend to focus on the latter, my 20+ years of experience in intangible asset issues suggests that boards and senior management as a whole, convey little interest in the consistent stewardship, oversight, and management of those assets.

Consequently, as McLean points out, intangibles remain largely relegated to being only periodically included on board and/or c-suite agendas. In part, that’s because intangibles are still frequently perceived as being primarily legal and/or accounting processes/functions versus fiduciary (strategic business) decisions.  McLean describes four levels of engagement to characterize boards’ interest, i.e., in…

Level I – boards’ are generally unaware of the importance of intangible (intellectual) assets and related strategies relative to company strategy or competitive industry trends…

Level II – boards’ may be peripherally aware that intangible (intellectual) assets have some importance in strategy and competitive trends at the company level…

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

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

McLean believes that if boards are being honest, most would characterize themselves as being in either Level I or II, a perspective which I believe is probably most reflective of today’s circumstance even though it suggests, if true, boards may well be out of touch with their fiduciary responsibilities as described in Stone v Ritter.  I suspect many readers find themselves in agreement with McLean’s assessment as being reflective of their personal observations and experiences.

So, however full board and senior managers’ plates may already be, their stewardship, oversight, and management of intangibles (intellectual) assets, i.e., leadership in sustaining control, use, ownership, and monitoring their value and materiality should become permanent fixtures on their respective agendas.  From the board and senior management perspectives, there are three broad, yet quite plausible, starting points to achieve this:

First – consider making changes in company governance structure and practices to genuinely reflect and be aligned with the economic fact that 65+% of most company’s value, sources of revenue, building blocks for growth and sustainability evolve directly from intangible (intellectual) assets.

Second – takes steps to ensure the right people receive the right information that allow them to focus on the right areas with respect to effectively and efficiently utilizing the company’s intangible (intellectual) assets. This includes information and insights related to maximizing, leveraging, and extracting value and whatever else can position those assets to deliver (more) value and competitive advantages.

Third – ensure the underlying responsibilities for identifying, assessing, and sustaining (protecting, preserving) control, use, ownership, and monitoring value and materiality of those assets is collaborative by including intangible asset specialists, legal counsel, accounting, risk management, IT, and relevant business units where intangible (intellectual) assets routinely originate and percolate!

While visiting  my blog, you are respectfully 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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