Don’t we all want to like and respect our employer? To be treated fairly by companies we do business with? To see companies acting as good stewards of the environment and society?
Sure we do. But only relatively recently have people begun to demand that companies excel in those areas and to pay less attention to those that don’t. That people are growing more insightful in this respect, and that companies interested in long-term survival have little choice but to take notice and hone their games accordingly, are the central themes of the new book Good Company, from Berrett-Koehler Publishers. (Click here for some prepublication commentary on its contents.)
The book’s co-author, Laurie Bassi, a labor economist, human-capital consultant, and part-time registered investment adviser, is an old hand at documenting the value companies get from people-related spending. Ten years ago, she created a fund populated with stocks of companies known to invest more heavily than normal in their human capital. Since that time, the fund has beaten the proverbial pants off the S&P 500.
In the new book, the authors take a different approach to rating companies’ quality as an employer. At the same time, they rate companies — to be precise, the 94 publicly held ones in the Fortune 1000 — on their performance as sellers and as stewards. Each is given a letter grade for how “good” they are overall. The grading is strict: only one company, Disney, got an A, and one other, FedEx, scored an A-. On the other end of the scale, 16 companies were hit with a D+ or worse (see chart below).
The authors sought data that ideally had five characteristics: reflective of their concepts of good employer/seller/steward; reliable and of high quality; available for a large number of companies; timely; and publicly available. In practice they used the best available data, as what could be found generally did not meet all five criteria.
To arrive at employer ratings, they settled on using the Fortune list of best places to work and employee ratings of their companies on Glassdoor.com (the latter, according to Bassi, is the single most powerful correlate to company stock prices the authors could find). To assess companies as sellers, they used customer evaluations of each firm’s quality, pricing fairness, and trust, provided by research firm wRatings.
Stewardship performance was more difficult to appraise. Ratings of companies’ environmental performance derived from the Dow Jones Sustainability Index and Newsweek‘s ranking of America’s largest corporations. For contributions to society, the authors created their own database by systematically collecting information from company websites and inviting companies to provide further information. Other measures were used to evaluate “restraint,” defined as the degree to which a company fits comfortably into its own community rather than seeks only to maximize its own well-being. Finally, the stewardship rating factored in government-imposed penalties and fines.
The point system reflected in the chart below has assorted components. To cite one, companies in the top octile of employee ratings on Glassdoor.com were given two positive points, while those in lower octiles received fewer (or negative) points.
And now, with an imaginary drum roll, let’s see how “good” America’s largest public companies are.