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CONTRIBUTORS

Amritha Kasturirangan, CFA

Portfolio Manager,
Research Analyst,
Franklin Equity Group
United States

Nick Getaz, CFA

Portfolio Manager,
Franklin Equity Group
United States

Matt Quinlan

Portfolio Manager,
Franklin Equity Group,
United States

Nayan Sheth, CFA

Portfolio Manager,
Research Analyst,
Franklin Equity Group
United States

Preview

At the start of this century, a now-leading technology provider, Microsoft, was struggling in an increasingly competitive marketplace. Plagued by infighting, bureaucracy and other organizational challenges, the company failed to innovate and product development faltered. When new management took the helm several years later, they identified transforming Microsoft’s culture as a high priority. Currently considered one of the most valuable companies in its industry, management’s focus on culture proved crucial to the company’s eventual turnaround and subsequent growth.

As a concept, company culture is intangible and may be underappreciated by investors. It refers to the collective values, perspectives and practices that form the identity of a business.1 Traditional valuation methods cannot captured it, and it may not bear much relation to official mission statements.2 In today’s world, investors may be drawn to businesses where technology adoption drives productivity, but they may not recognize how a strong culture and a motivated, unified employee base can enable productivity that fosters improved profits and dividend growth.

Read the  to learn more.

Endnotes

  1. Source: Wong, B. “What Is Company Culture? Definition & Development Strategies.” Forbes Advisor. August 15, 2023.
  2. Sources: Edmans, A. “Does the stock market fully value intangibles? Employee satisfaction and equity prices.” Journal of Financial Economics. March 30, 2011. Sull, D., Turconi, S., Sull, C. “When It Comes to Culture, Does Your Company Walk the Talk?” MIT Sloane Management Review. July 21, 2020.

 

WHAT ARE THE RISKS?

All investments involve risks, including possible loss of principal.

Equity securities are subject to price fluctuation and possible loss of principal.

Dividends may fluctuate and are not guaranteed, and a company may reduce or eliminate its dividend at any time.

Investment strategies which incorporate the identification of thematic investment opportunities, and their performance, may be negatively impacted if the investment manager does not correctly identify such opportunities or if the theme develops in an unexpected manner.

Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio. Past performance does not guarantee future results.