Saturday, March 27, 2010

World's most ethical companies

The 2010 list of world's most ethical (WME) companies prepared by Ethisphere Institute is now out. Ethisphere Institute, a U S based organisation describes itself as "a leading international think-tank dedicated to the creation, advancement and sharing of best practices in business ethics, corporate social responsibility, anti-corruption and sustainability". Be that as it may, this is an America-centric institute. The 2010 list of WME companies includes 79 American companies out of a total of 100. (The companies are not ranked; it is in a way correct because one is either ethical or not and there is no halfway house in ethical behaviour).

The parameters used for inclusion in the list are 1)integrity track records and reputation, 2)internal system and ethics / compliance programme, 3)industry leadership in setting standards, 4)executive leadership and tone from the top, 5)corporate governance, 6)corporate citizenship and responsibility and 7)innovation that contributes to public well-being.

The qualifying attributes for inclusion are employee strength of atleast 100 and annual turnover of minimum $50 mn or equivalent.

Some of the companies in the 2010 list are Thomson Reuters and Time-Warner in media, publishing and entertainment, Astra Zeneca and Novo Nordisk in pharma, Pepsico in food and beverages, Google and Zappos in internet. The omissions are glaring and perhaps deserved.

The institute claims that it pays to be ethical because the WME list (needless to say the list varies from year to year, but there is bound to be some stickiness as ethical behaviour is thankfully not a fly-by-night phenomenon) has consistently out-performed S&P 500 and FTSE 100 every year from 2005 to 2010.

The institute encouragingly reports that "the WME designation recognises companies that truly go beyond making statements about doing business 'ethically' and translate those words into action". Ethisphere Institute's credo is "Good. Smart. Business. Profit." It should be ethical for the institute to cast its net more globally for preparing the WME list.

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