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Corporate Citizenship

The World's Most Ethical Companies

Helen Coster, 03.22.10, 7:08 PM ET

The Ethisphere Institute, a New York City think tank, on Monday released its fourth annual list of the World's Most Ethical Companies. The listing, of companies with at least 100 employees and more than $50 million in annual revenue, gives its winners an opportunity to trumpet their do-gooding ways. It is not a ranking, so they are all equally winners.
To compile the data on which it bases the list, Ethisphere relies mostly on the honor system. Three thousand companies were nominated--or nominated themselves--to be considered. They each filled out a survey with items like, "Please describe your organization's projects and initiatives aimed at workforce sustainability and well-being."
"Depending on their responses, we might give them more points in that category," says Stefan Linssen, editor of Ethisphere Magazine. He adds that most companies tend to be "overwhelmingly honest."
Ethisphere evaluated the surveys and assigned the companies scores in seven different categories, including "Innovation that contributes to the public well-being" and "Executive leadership and tone from the top." It culled the list down to 200 or so and then cross-checked it against governance lists from GovernanceMetricsInternational, FTSE for Good and other organizations. Ethisphere nixed any company that's had significant legal trouble over the past five years. Companies that focus on alcohol, tobacco or firearms also got the boot.
The 100 companies that made the final cut include first-time recipients Ford Motor Company, Adobe Systems and Campbell Soup. Google, Starbucks, General Electric and 33 other companies have appeared on the list for all four of its years.
Ethisphere says the companies on this year's list have outperformed the Standard & Poor's 500 by delivering a 53% return to shareholders since 2005, significantly higher than the S&P, which has been down 4% in the same period. The list hasn't been a great predictor of future performance, though. Twenty-four companies dropped off it from last year, including Kellogg, which in April settled a Federal Trade Commission complaint that it had made false advertising claims. Another 2009 winner was Toyota, which in the past year has recalled 8.5 million cars due to sudden acceleration problems. "Toyota still has some good ethics and compliance programs," Linssen says, "but they haven't made it terribly clear what they will do to prevent this situation from happening again."
Ethisphere tries to be transparent about its own conflicts of interest. It discloses, in a "Media Responsibility Report," that 10% of the honorees have a "material economic relationship" with the organization. The think tank makes money by charging businesses for its Ethics Inside certification and to be members of subgroups like its Business Ethics Leadership Alliance. Marketers can also buy ads and advertorials in Ethisphere magazine and buy ads on the organization's Web site. "Every media company has conflicts of interest," says Alex Brigham, the director of the Ethisphere Institute. "Some publications charge substantial fees to be considered for their lists. That's a problem. What you end up having is pay to play." Companies don't currently pay to be considered for this list, although Ethisphere may change that in the future.
Ethics and corporate citizenship rankings have multiplied in recent years, and the lack of consistency between lists can cause confusion. In January Corporate Knights, a Canadian media company, published its list of the world's most sustainable companies. CRO magazine published its list of the 100 Best Corporate Citizens in early March.
"CRO magazine includes companies that we would immediately eliminate," Linssen says. However, CRO left out Google, citing its lack of transparency; Ethisphere included it on its "Most Ethical" list.
How much do these lists really matter, beyond corporate window-dressing? After Corporate Responsibility published its 100 Best Citizens list, a debate broke out in the online community Justmeans.com. There, Campbell Soup's vice president of corporate social responsibility and sustainability, Dave Stangis, sounded a very dubious note. He wrote that anyone who "looks to a single list to provide the output that every stakeholder wants will be looking far beyond the grave."