For over a decade, Ethisphere has annually been recognizing companies on the World’s Most Ethical Companies list. Year after year, we’ve found that publicly traded companies on that list consistently outperform the markets, with firms in last year’s edition outperforming the S&P 500 by 3.3 percent. What’s the cause?
The debate continues. Do these companies have more engaged and productive employees? Lower recruitment costs because of lower turnover? An easier time attracting and retaining customers because they are trustworthy business partners? More resources to grow their business because they are not paying fines and legal fees? All of the above? Whatever your view on causation, the correlation is clear: businesses with strong governance practices, better ethics and compliance programs, more committed cultures and a broad engagement with their communities have better business outcomes and higher shareholder returns. For investors, this is good news, especially as intangibles like reputation become a greater piece of a company’s valuation.
There is increasing interest in long-term sustainable investing; as of the end of last year, one out of every five dollars under professional management in the US was invested according to socially responsible investment criteria.
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