Corporate Treatment of Veterans as an ESG Factor and a Potential Source of Incremental Returns
January 1, 2019
Strategy & General Management
veterans, performance, environmental social and governance (ESG), data, data providors
St. John's University
There are significant social and psychological differences between military veterans and nonveterans (Hicks, Weiss, Coll, and McDonald 2017). Thus, at the corporate level the influx and persistence of veterans within firms influences both the employers’ current and future performance. The systematic study of the impact of these influences is just beginning (Atuel et al. 2017). This study posits that the hiring and training of veterans is both consistent with a firm’s corporate and social responsibility (CSR) objectives, and a source of economic value to the firm. The study proposes the following: Investors, both active and passive, integrate environmental, social, and governance (ESG) criteria as a barometer to measure the degree to which capital deployment supports a long-term return that is not only forecastable, but sustainable. Investor relations professionals, management teams, and boards should continue to understand the influence ESG maintains over cost of capital. Price multiple appreciation is strongly correlated to an increase in the return on invested capital (ROIC) over the cost of capital if a corporate team can provide the investment community with a clearly defined long-term cost of capital. Effective messaging now requires the incorporation of ESG, not simply to earn goodwill from external stakeholders, but to optimize valuation. This study examines how this corporate messaging also applies to social key performance indicators (KPIs) related to programs for military veterans. To date, none of the major ESG data providers have included military-related KPIs in their core offerings. The findings indicate that ESG data providers and their clients may be overlooking important positive indicators relating to management quality and potential incremental returns.