Employee Talent Adds $4 Trillion in Market Cap to Blue Chip Stocks

This article originally appeared on Bloomberg, July 28, 2016

By Justin Morton

Companies that recruit more talented employees drive over $4 trillion in added-value to U.S. companies listed in the Dow Jones Industrial Average, according to a forthcoming study by management consultancy Talent Growth Advisors.

Intellectual capital "is not front-and-center" for most companies, but it drives almost 90 percent of the average company's value, said Tom McGuire, co-founder and managing partner of the Atlanta-based firm. TGA ranked Dow Jones Industrial Average components on its Intellectual Capital Index, which measures the dollar amount that employee talent adds to market value.    

On average, companies with high scores had higher price-to-earnings ratios, McGuire said.  

Visa Inc. leads the DJIA with the highest intellectual capital dollar value —   over $14 million per employee. It is followed by Apple Inc., and Microsoft Corp., while Wal-Mart Stores Inc., McDonald’s Corp., and Caterpillar Inc. ranked the lowest on the index.

"We are evolving from an industrial age to an information age — we still don't understand what drives value," McGuire said. The relationship between employees and intellectual capital could have consequences for employee compensation, he added. "Compensation should be spread out among employees proportionate to their contribution," he said.

Technology and healthcare sectors contributed the most to the $4 trillion in intellectual capital with 30 percent and 19 percent, respectively, the study showed.