On the minds of investors....

Barron’s World’s Most Respected Companies came out last week.  It is a highly coveted list for companies and must please CEOs and boards.  Barron’s lists are definitely worth following because the ratings are gathered from money managers, not consumers which seem to be the stakeholder of choice these days. Apple was number 1 this year which is not a great surprise.  Interestingly, the writer mentions that the problems Apple has faced with FoxConn appear to only be a distraction for now. As always, the ups and downs of company reputations are revealing, particularly among this money-centric set.  As much as I like the list, I like the write up more because there are usually interesting nuggets of information.  This year, these stood out:

·         Investors gave more thumbs ups to US based multi-nationals.  Barron’s says that this is because of the outperformance of domestic stocks in a year of global tumult and the outperformance of quality mega-cap shares as global growth expectations diminished.  Six of the top 10 are among the 30 members of the DJIA.  This was more pronounced than usual.  Even though the money manager sample is US based, Nestle managed to sneak into the top 10 which says a lot for that company’s prospects.

·         What drives perceptions of the world’s most respected companies among this select set? Strong management and sound business strategy top the list, followed by business ethics, product innovation and then financial performance.  In the past two weeks, it seems that I have had more conversations about Ethics and reputation than I usually do. I have been asked to define business ethics, trust and reputation and how they are interchangeable and need better defining.  And as you see below, ethics ranks #3 among money managers in their respect for companies.

 

Most Important Attributes of Companies They Respect

Strong management

24%

Sound business strategy

20

Ethical business practices

18

Competitive edge

17

Revenue and profit growth

 9

 

·         Russian and Chinese companies did not perform well in the rankings. Clearly there is a perception of “untrustworthiness,” says Barron’s.

·         They predict that the global healthcare companies might be due for a reputational upgrade.  Barron’s says that right now all the pharma companies are cast into one big “ugly” bucket of drug-patent expiration, reimbursement head winds and weak development pipelines.  “Funny, it would seem a forward-looking investor could make the case that aging populations in the developed world and growing medical spending among the emerging middle-class could boost these giants’ fortunes in the coming years.”

Ethical Leadership

Thankfully it is getting near the end of the year. No better time than now for Ethisphere to come out with its 2009 list of the most influential people in business ethics.  I thought I would look at how many chairmen and/or CEOs made the list during these past 12 months of dismal business scandals and economic news. Only six CEOs of Fortune 500 companies made the business ethics leadership list in 2009. This is a comedown from 2008’s list where nearly three times more CEOs were considered influential business ethics leaders.  A larger 16 Fortune 500 CEOs were included in 2008. No comparison and hey, no surprise.  This is an indicator of why CEO reputation has been so low and getting lower. The CEOs who made the 2009 list are below. Ranking*Name*Title*Company

6. Mike Duke – CEO, Walmart

15. Sharon Allen – Chairman, Deloitte

17. Jeff Immelt – CEO, General Electric

19. Herbert Fisk Johnson, III – Chairman & CEO, SC Johnson

26. William Ballhaus – CEO, DynCorp

63. Ed Breen – Chairman and CEO, Tyco

Former GE CEO Jack Welch made the list at #65. I did not include him above but it is worth noting what Ethisphere said about him for making the list: “Welch makes the list for admitting in an interview with Financial Times that his focus on ‘shareholder value’ was ‘the dumbest idea in the world.’” I wish I had remembered this quote for my recent posts on why CEOs matter. If you have been reading, you’ll know that I commented on the Wall Street Journal and Financial Times stories on the most worthy CEOs. (See previous posts) Their yardstick was financial performance. Point made.

Ethical Reputation

I should have mentioned that I received wonderful news that I am very proud of. I do not know if there is protocol for "tooting one's horn." But the greater part of this plug is for the work done by Ethisphere. The organization has been mentioned before on my blog when I described their new coalition BELA. Check it out because companies should consider being regularly audited on their ethical compliance to help restore trust in business. I was included in their 2008 Most Influential People in Business Ethics and part of the description as to why has to do with some of the topics I review on this blog. This made me quite happy in these mostly down times. A good start to the new year does not hurt. Thanks for reading.