Volume: 100

The past few years have seen previously unthinkable corporate behemoths - from financial firms such as Lehman Brothers to iconic car manufacturers

such as Saab - felled by economic turmoil or by unforgiving customers and tough rivals. And do not put away the black garb yet - the pace of corporate

funerals is set to pick up.

The average lifespan of a company listed in the S&P 500 index of leading US companies has decreased by more than 50 years in the last century, from 67

years in the 1920s to just 15 years today, according to Professor Richard Foster from Yale University. Today's rate of change "is at a faster pace than ever",

he says. Professor Foster estimates that by 2020, more than three-quarters of the S&P 500 will be companies that we have not heard of yet.

In the world of institutions, commercial corporations are newcomers. Their history comprises only 500 years of activity in the Western world, a tiny fraction

of the time span of human civilization. In that time, as producers of material wealth, they have had immense success. They have been the major vehicle for

sustaining the exploding world population with goods and services that make civilized life possible. In the years ahead, as developing countries expand

their standards of living, corporations will be more needed than ever. Yet, if you look at them in the light of their potential, most commercial corporations

are dramatic failures-or, at best, underachievers. They exist at a primitive stage of evolution; they develop and exploit only a fraction of their potential. For

proof, you need only consider their high mortality rate. The average life expectancy of a multinational corporation-Fortune 500 or its equivalent-is between

40 and 50 years. This figure is based on most surveys of corporate births and deaths. A full one-third of the companies listed in the 1970 Fortune 500, for

instance, had vanished by 1983-acquired, merged, or broken to pieces.

It is perhaps unsurprising that the country where people live the longest is also home to some of the oldest companies in the world.

In Japan, there are more than 20,000 companies that are more than 100 years old, with a handful that are more than 1,000 years old, according to credit

rating agency Tokyo Shoko Research. There is even a specific word for long-lived companies in Japanese: shinise.

The list includes Nissiyama Onsen Keiunkan, a hotel founded in 705, which is thought to be the oldest company in the world.

Longevity is, of course, a relative term. Autenrieder, a German brewery, is the oldest-known commercial establishment, having been founded in 1650, the

same year in which Japan’s two longest-living, sake-makers Kaganoi and Yukawa were founded. The Dutch porcelain maker Royal Delft was established a

few years later in 1653. America, too, has its share of 300-plus-year-old entities. Shirley Plantation the oldest active plantation in Virginia and one of the

oldest family-owned businesses in North America dates back to 1614.

In terms of oldest continuously operated businesses, the U.S. can cite Cigna (1792), State Street (1795), Crane & Co. (1801), DuPont (1802), Colgate (1806)

and many more

The Secrets of Corporate Longevity

What accounts for these impressive lifespans? Achieving this degree of longevity “doesn’t happen by accident,” answers Mary Kier, CEO of Chicago-based

search firm Cook Associates, who has written extensively on the subject. “It happens to companies that have character. It happens when owners or CEOs

or chairmen know how to keep their composure, even in times of economic crisis, and how to invest their money wisely to sustain the long term. It happens

when employees feel it is their company, too. They do what’s right all the time. If they do that, they have a better chance of longevity and sustainability.”

Business of Survival - Corporate Longevity

One of the keys at large, publicly traded companies like General Electric, Kier says, is the practice of identifying and grooming high-potential managers

from within. “CEOs come from within and stay a long time,” she says. These annual systems of evaluating high potentials, also seen at Johnson

& Johnson, IBM and other top public companies, are essential to building in durability for the company as a whole. “If you know that your future is well

planned out and you are part of that planning, it certainly is going to be a sustaining factor,” Kier concludes.

Second comes the successful amalgamation of the best of family run or Private managed Companies and its listed counterparts. Michael E. Werner,

president and CEO of the North American division of Taiwan-based Globe Union Group, a $700 million a year, publicly traded maker of plumbing

equipment, argues that the companies with the best shot at longevity manage to combine the best family values with the realities of having at least some

shares traded publicly.

“I’m a firm believer that if a senior-management team thinks about the future and about stewardship, almost doing it with a servant type of mentality, the

company will prosper for a long time,” says Werner. “The best case is when you can couple that with the high-performance expectations of a public

company. We want to combine the best of both worlds. In a public company, you can’t become complacent because you’ve always got people looking over

your shoulder challenging you.”

Third and perhaps the most crucial factor is to remember the true nature of an organization. Arie de Geus, the father of scenario planning when he was

the coordinator of planning for the Royal Dutch/ Shell Group, posits that it is because they focus on more than just the economic activity of producing

goods and services. Specifically, he says that those that fail to endure "...forget that their organization’s true nature is that of a community of humans". A

company is a legal fiction; any organization is a collective of people and the internal challenge is aligning interests. The external perspective requires a

sound understanding of an ever-changing world. The Shell researchers looked at companies that were older than Shell (founded in the 1890s), that were

at least as important in their respective industries and that had weathered some profound changes in the world around them. From 40 such companies

they narrowed the list down to 27 that were studied in detail.

From this list, they found 4 key factors to corporate longevity:

Being sensitive to their environment: They kept their corporate radar attuned to subtle, and not so subtle, changes going on around them. This is

all the more impressive given the lack of communications technology that was available for the greater part of these companies' lives.

Having internal cohesiveness and a strong sense of identity: No matter the diversification or spread, employees and suppliers alike felt they were

all part of one entity. There was a sense of belonging to the organisation and being able to identify with its achievements. Career advancement and

progression was from within and management's concern was for the health of the institution as a whole. In this way, the leaders, acted as trustees or

custodians rather than simply managers.

Tolerance: It seemed the long-lived companies avoided exercising centralised control. Note that the management-speak word 'decentralised' was a

twentieth century invention. The companies were tolerant of activity at the margin, such as outliers and experiments that stretched the

thinking. Today, we would classify this third horizon activity as buying options for the future.

Conservative financing: Frugality and the avoidance of risk were paramount. Having cash in the bank not only de-risked the enterprises but gave

them flexibility and an ability to act independently of what others might have been forced into doing. The options referred to above could be funded

from within and pursued with patience.

No doubt there were, in each company's case, many more factors that contributed to their longevity. One such factor which comes to mind is emphasis on

innovation and reinvention. Take Berkshire Hathaway, which began as a textile mill in Rhode Island. In fact, the world's oldest limited liability

corporation, the Finnish paper and pulp manufacturer Stora Enso, first started out as a copper mining company in 1288. Innovation in general is not

always easy, however, especially for publicly listed companies that must balance the concerns of capital markets and shareholders, who demand quarterly

profits and who are not necessarily interested in decades-long research projects.

When to Die

Yet even if a company can innovate and conditions do remain favourable, immortality does have its downsides. For instance, there is no real proof that age

makes a company any more profitable than younger companies. On the contrary, evidence from the stock market actually suggests that age could be a

hindrance. Of the 74 or so companies that have stayed in the S&P 500 for more than 40 years, only a dozen or so have managed to beat the average,

according to a study by consultancy McKinsey. In fact, if the S&P 500 were made up of only the companies that were part of the index in 1957, overall

performance would have been some 20% worse.

Conclusion

There is accumulating evidence that corporations fail because the prevailing thinking and language of management are too narrowly based on the

prevailing thinking and language of economics. To put it another way: Companies die because their managers focus on the economic activity of producing

goods and services and they forget that their organizations' true nature is that of a community of humans. The legal establishment, business educators,

and the financial community all join them in this mistake.

Longevity seems to have anything to do with a company's material assets, its particular industry or product line, or its country of origin. Indeed, the 40- to

50-year life expectancy seems to be equally valid in countries as wide apart as the United States, Europe, and Japan, and in industries ranging from

manufacturing to retailing to financial services to agriculture to energy.

These Companies have paid dividends for over 100 years

These companies have managed to pay distributions through two world wars, the cold war, several oil price shocks and countless recessions. Their

strong business models have helped them to consistently find new ways to increase sales, pass on cost increases to consumers and gain market share

that has resulted in higher profits and dividends over the past century.

1) International Business Machines Corporation- The Company has raised dividends for 18 years in a row, and has consistently paid them since

1913.

2) Exxon Mobil Corporation- This dividend champion has raised dividends for 31 years in a row, and has consistently paid them since 1911.

3) The Bank of Nova Scotia - The Company has paid dividends since 1892, maintained its distributions during the crisis of 2007 -2009 and has

been boosting them again over the past few years.

4) Edison International- The Company has raised dividends for 11 years in a row, and has consistently paid them since 1910.

An honorable mention goes to Kellogg, which has paid dividends for almost 90 years in a row, and has a listing of all the payments since 1925. Kellogg

has also raised dividends for 9 years in a row.

Century Old Indian Companies

Two World Wars, the Great Depression, India's independence struggle, the Hindu rate of growth, the licence-permit raj, controls on foreign exchange and

expansion, and the reforms of the 1990s: a handful of Indian companies have seen it all, and adapted along the way to do well. India has around three

dozen century-old companies that are listed and still actively traded. Some of them are:

Bennett , Coleman & Co.

Britannia

Century Textile & Industries

CESC

Dabur

The Global 100 Most Sustainable Corporations

Innovest Strategic Value Advisors has pulled together a list of 100

stalwart companies poised to survive past all others. These are the

companies that stand the best chance to still be around in the year 2109.

Company Name Country Sector

Acciona SA Spain Construction

Accor France Consumer Goods

Adidas AG Germany Consumer Goods

Advanced Micro Devices USA Computers/Electronics

Aeon Company Limited Japan Retail

Air France-KLM France Transportation

Alcoa Inc USA Extractives

Amazon.com Inc USA Retail

Atlantia Italy Transportation

Atlas Copco AB Sweden Industrials/Capital Goods

BASF SE Germany Chemicals

Baxter International Inc USA Health Care

BG Group PLC UK Oil & Gas

BHP Billiton PLC UK Extractives

Godrej & Boyce

ITC

Shalimar Paints

Kirloskar Brothers

Tata Steel

TVS

Indian Hotels

British Land Company PLC UK Real Estate

British Sky Broadcasting Group PLC UK Media

Cable & Wireless PLC UK Telecom & IT

Cairn Energy PLC UK Oil & Gas

Centrica PLC UK Utilities

Coca Cola Company USA Consumer Goods

Credit Agricole SA France Banks

Daikin Industries Limited Japan Construction

Dell Inc USA Computers/Electronics

Deutsche Boerse AG Germany Diversified Financials

Dexus Property Group Australia Real Estate

Diageo PLC UK Consumer Goods

East Japan Railway Company Japan Transportation

Eastman Kodak Company USA Consumer Goods

Encana Corp. Canada Oil & Gas

Ericsson Telephone AB Sweden Computers/Electronics

FPL Group Inc USA Utilities

Fresenius Medical Care AG Germany Health Care

Geberit Switzerla

nd

Construction

Ericsson Telephone AB Sweden Computers/Electronics

FPL Group Inc USA Utilities

Fresenius Medical Care AG Germany Health Care

Geberit Switzerland Construction

Genzyme Corp. USA Health Care

Glaxosmithkline PLC UK Health Care

Goldman Sachs Group Inc USA Diversified Financials

Groupe Danone France Consumer Goods

H & M Hennes & Mauritz AB Sweden Retail

Hewlett-Packard Company USA Computers/Electronics

Hochtief AG Germany Construction

Honda Motor Company Limited Japan Industrials/Capital

Goods

Iberdrola SA Spain Utilities

Inditex SA Spain Retail

Intel Corp. USA Computers/Electronics

Kesko OYJ Finland Retail

Kuraray Company Limited Japan Chemicals

Lafarge SA France Construction

Land Securities Group PLC UK Real Estate

Lend Lease Corp. Limited Australia Real Estate

London Stock Exchange Group

PLC

UK Diversified Financials

Lonmin PLC UK Extractives

L’Oreal France Consumer Goods

Michelin France Industrials/Capital

Goods

Mitsubishi Heavy Industries

Limited

Japan Industrials/Capital

Goods

Muenchener Rueckversicherung

AG

Germany Insurance

Neste Oil OYJ Finland Oil & Gas

Nike Inc USA Consumer Goods

Nippon Yusen KK Japan Transportation

Nokia Corporation Finland Computers/Electronics

Novo Nordisk A/S Denmark Health Care

Novozymes A/S Denmark Chemicals

NTT Data Corp. Japan Telecom & IT

NTT Docomo Inc Japan Telecom & IT

Panasonic Corporation Japan Consumer Goods

PG & E Corp. USA Utilities

Pinnacle West Capital Corp. USA Utilities

Procter & Gamble Company USA Consumer Goods

Prologis USA Real Estate

Prudential PLC UK Insurance

Reed Elsevier PLC UK Media

Ricoh Company Limited Japan Computers/Electronics

Roche Holdings Limited Switzerland Health Care

Royal Bank Of Canada Canada Banks

Sainsbury (J) PLC UK Retail

Saint Gobain France Construction

Saipem Italy Oil & Gas

SAP AG Germany Telecom & IT

SCA AB Sweden Extractives

Scania AB Sweden Industrials/Capital

Goods

Sekisui Chemical Company Ltd Japan Real Estate

Sims Group Limited Australia Extractives

Smith & Nephew PLC UK Health Care

Sompo Japan Insurance Japan Insurance

State Street Corp. USA Diversified Financials

Statoilhydro ASA Norway Oil & Gas

Stora Enso OYJ Finland Extractives

Swiss Reinsurance Company Switzerland Insurance

Telus Corp. Canada Telecom & IT

TNT NV Netherlands Transportation

The Capita Group PLC UK Business Services

The Walt Disney Company USA Media

TNT NV Netherlands Transportation

Toppan Printing Company Limited Japan Business Services

Toronto-Dominion Bank Canada Banks

Toyota Motor Corp. Japan Industrials/Capital Goods

Transcanada Corp. Canada Utilities

Unilever PLC UK Consumer Goods

United Technologies Corp. USA Transportation

Vestas Windsystems A/S Denmark Computers/Electronics

Wartsila OYJ Finland Industrials/Capital Goods

Whitbread PLC UK Consumer Goods

About Investeurs Consulting Private Limited

For a good business, finance is as crucial as vision, management and

product. Intuitively then Business Finance plays a vital role in the business

prosperity. We, at Investeurs Consulting Pvt. Ltd understand and

appreciate the vitality of this discipline and the responsibility that comes

with it.

As Business Finance Consultants we realize that finance is an enabler that

contributes significantly towards realizing your business goals. We bring to

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Team Chronicle

Akanksha Srivastava akanksha@investeurs.com

Nidhi Gogia nidhi@investeurs.com

Harpreet Kaur harpreet@investeurs.com

Disclaimer: Investeurs Chronicles is prepared by Research & Analysis Team of Investeurs Consulting Private Limited to provide the recipient with relevant information pertaining to the world economy. The

information contained in the document is based on the releases made by various newspaper & publications; hence, we are not responsible for any inaccuracies in the information provided.