How To Spot a Really Good Company
Who would you rather do business with – a company that is good to its employees and customers, contributes positively to the communities in which it does business, and is a good steward of the planet – or a company less than worthy on one or more of these fronts? For most of us, the answer is clear. We'd rather do business with a good company, as opposed to one of the "bad guys."
Really good companies do three things well. They are good employers, good sellers, and good stewards of communities and the environment. In Good Company: Business Success in the Worthiness Era, we assign a grade of A to F to each of the Fortune 100 companies based on the Good Company Index™, and then relate companies' grades to their stock performance. It turns out the good guys substantially outperform the bad guys – an important piece of news for investors.
Here's how you can apply this system to the companies you do business with:
Good Employer Information.
Hands down, the best available source of information on this is Glassdoor. (Yes - I know this is their blog, but it's true nonetheless!) You might also look at the Fortune Best Companies to Work For list. This list's big limitation is that it's only a positive indicator – it doesn't tell you anything about the companies not on the list. And, of course, it only tells you about a relatively small number of companies. Nonetheless, it might contain some useful information for you.
Good Seller Rating.
The two best quantitative ratings on companies as sellers are wRatings and the American Customer Satisfaction Index. wRatings does require that you sign up – which is free – as a "consumer member." Doing so can provide you with a great deal of information not publicly available elsewhere. Accessing data from the American Customer Satisfaction Index does not require that you sign up, but information is available on fewer firms.
Good Steward Rating.
Assessing stewardship involves more component parts:
- From an environmental perspective, two great sources of information are the Dow Jones Sustainability Index and Newsweek's environmental ranking of the 500 largest corporations.
- When it comes to assessing how well a company does making positive contributions to the communities in which it operates, you have to roll up your sleeves and study their web site – and make an assessment if their contributions are the real deal or a PR spin.
- Then there's also what we think of as indicators of restraint – or the absence of greed: Does the company use tax havens? Does the CEO receive outlandish compensation? Does a high level of penalties or fines indicate that company cuts corners by breaking the rules and/or the law? Compiling this evidence requires some sleuthing. We have captured the majority of fines and penalties for the Fortune 100. If you want to investigate other companies, the best information is often available by searching official government sites like www.justice.gov, www.sec.gov, www.eeoc.gov, www.epa.gov, etc.
Compiling this information does take some work. But when you're looking for a job or trying to decide where to spend your money or invest your assets - this is the type of information that will help you make the right choices. And when you do business with good companies, it makes us all better off!
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