Every week, or so it seems, another company is implicated in some manner of illegal or unethical activity. Though the global credit crunch put bankers squarely in the legal crosshairs, questionable business practices are hardly the sole domain of the moneychangers. Think Enron, WorldCom and Arthur Andersen — and consider the devastating impact of their misdeeds on shareholders and employees.
But there’s a happier side to the corruption story as well, and the New York-based Ethisphere Research Institute is pleased to tell you about it. Recognizing that merely mouthing ethical slogans is meaningless, the institute looks for companies that put their high-minded words into action. And with good reason: What employee hasn’t had the disheartening experience of laboring for a company that plasters pithy slogans on its walls about doing right by customers and workers, only to leave those values far behind when competitive push came to shove?
Ethisphere scours the corporate universe for businesses that walk the talk, and each year compiles a list of what it calls the World’s Most Ethical Companies (WME). In 2012, the list included 145 businesses from 48 industries (including five banks) and 22 countries.
Notably, 101 of those corporations are domiciled in the United States. You can access the honor roll by clicking on “Rankings and Ratings” from the banner across the top of the homepage.
Though multi-billion dollar corporations with tens of thousands of employees rarely are ethically blameless, the institute says that striving for that goal is what matters most. If legal or ethical concerns do arise, WME companies eschew stonewalling or a PR campaign in favor of a substantive and transparent response.
According to its website, “Ethisphere uniquely recognizes that even companies with less than perfect historical corporate citizenship operating records need to have their successes celebrated along the way if they decide to conscientiously improve their ethics, compliance and community practices.”
As an investor, of course, you’ll want to know whether businesses that aspire to ethical conduct do more than merely soothe the consciences of their shareholders. It appears they do. Shares of the 159 companies in the 2011 WME Index returned an average of about 42 percent since 2007, compared with just 10 percent for the S&P 500.
Though the time frame is limited, an outperformance of that magnitude shouldn’t be dismissed out of hand. Investors wanting to feel good about the money they make from their portfolios might consider Ethisphere’s WME Companies list as a starting point for additional research.
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