Google challenges Internet censorship in China. It invests in solar power, electric cars, geothermal energy and the smart grid, and runs an array of programs to help its employees become more “green.” It’s consistently voted one of the best places to work. And it has an inspiring mission: to organize all of the world’s information.
Nor does Timberland, a pioneer in corporate responsibility, which monitors its global supply chain, provides employees with generous benefits including time off to volunteer and experiments with labels on its shoes and boots that disclose their social and environmental impact. General Electric, meanwhile, has won praise from environmental groups like the World Resources Council and Environmental Defense for its EcoMagination campaign, and it has led the battle for climate change legislation in Washington. But GE, too, didn’t make the cut.
Oil companies Hess Corp. (No. 10 on the list) , ExxonMobil (No. 51, which for years sought to delay action to deal with climate change, says Greenpeace), Occidental Petroleum (No. 26, accused of contaminating the Amazon) and Chevron (No. 56, targeted in a landmark class action suit for creating en environmental catastrophe in Ecuador).
The Southern Co. (No. 71), a coal-burning utility which led the fight against the administration’s climate change bill.
And the Newmont Mining Corp (No. 16)., whose gold mines in Nevada have been major sources of mercury pollution.
One last example. Whole Foods Market, which has done more to promote organic agriculture than any company in America, doesn’t make the list but Yum! Brands (No. 62) does. Yum!’s contributions to corporate responsibility include KFC, Pizza Hut and Taco Bell.
If nothing else, all this proves that it’s not easy to make a list of the 100 Best Corporate Citizens. In fact, it’s really hard. How do you compare HP (No. 1 on the list) with Kimberly-Clark (5), Wal-Mart (21), Nike (23), Green Mountain Coffee Roasters (39), Duke Energy (43), Citigroup (57) and Ford (88). They’re in disparate businesses, with different issues.
Simply deciding whether a single company is “good” or “bad”or somewhere in the middle involves a slew of value judgments. If you think nuclear energy will help solve the climate crisis, you’ll applaud the Southern Co. which is pushing new plants; if not, you’ll feel differently. Coca Cola (No. 8) has a great track record on water and packaging issues but the company’s core product is a sugary soft drink. Newmont Mining has an ugly history, but it’s working hard to clean up its act–how far should we look back when ranking citizenship? Merck (17) has evidently been forgiven for the Vioxx scandal, while Pfizer is in the penalty box after paying a record fine for illegal drug marketing last fall.
Still, while some debate is inevitable, this list strikes me as way off base. My initial reaction was to wonder whether the people in charge were unethical–the magazine that publishes the “100 Best” also runs a trade association of corporate responsibility officers and organizes conferences, and you could imagine its corporate backers getting an inside track–or merely inept. As it happens, CRO’s corporate friends seem to do well on the list, but that seems coincidental. The methodology for the 100 Best list is transparent, so there’s almost surely no funny business going on.
So what’s wrong? Essentially, the list takes a mechanistic approach that rewards structure and transparency — enacting policies, reporting and measuring data and publishing all of that on a website — at the expense of substance. Jay Whitehead, the magazine’s president and publisher, acknowledged as much when we spoke last week.
The list “heavily weights disclosure on the theory that sunlight cleans,” Whitehead says. Only with a corporate culture of disclosure and transparency can other people–customers, suppliers, partners, employees–to evaluate how well a company is performing, he says.
This explains some of the surprises on the list. Hess Corp.? “They go to extraordinary lengths to disclose,” Whitehead says. Google? “Google was way, way down at the bottom of the list,” he says. “Their slogan is ‘don’t be evil’ but their practice is ‘don’t be transparent.'” (That, by the way, has never been my experience with Google. While they are secretive about operational details, the company’s blog is often informative.)
But even allowing for the heavy weight given to transparency, the list has other problems. Here are a few that came up in my research, and I’m sure there are others:
Climate change: In this category, as well as in the overall ratings, Hess and paper-maker Kimberly Clark (No. 5 overall) rank well ahead of Johnson Controls (No. 22). This is nonsensical. Johnson Controls has been a leader for decades in the building-efficiency business, and it makes batteries for electric cars. Substantial chunks of its business are helping to solve problems caused by Hess and K-C.
Philanthropy: The list gives credit for donations from corporate foundations, but not for in-kind contributions by the company or for corporate decisions to match employee giving. Microsoft matches all employee donations dollar for dollar, and contributes $17 per hour for volunteer time, up to a total of $12,000 per U.S.-based employee per year. This is a great program, but it’s ignored by the list.
Corporate governance: Most shareholder advocates agree that it’s poor practice for one person to serve as both chairman of a company’s board and CEO. How do you supervise yourself? Mark Hurd of HP (No. 1) and Kendall Powell of General Mills (No. 3) serve as chairman and CEO, yet their firms get the highest rating possible in governance. The fact is, anyone who is serious about assessing corporate governance goes deep, analyzing executive compensation and the track records of individual directors, as the Corporate Library does.
Does this list matter? Surprisingly, some say it does. Several CSR execs told me their companies put a lot of time into checking the data. “We’ve had long discussions inside our company about the CRO,” a GE insider tells me. And, just as colleges try to game the U.S. News list, companies that understand the CRO list do their best to hit the right data points. Campbell Soup Co. moved from the 400s to No. 12 this year because Dave Stangis, the firm’s vice president of corporate responsibility, made sure the company did all it could to improve, he told me.
Whitehead would like people to think that the list has big impact. Announcing this year’s results, he said: “Company stakeholders from investors to customers to employees to regulators watch the 100 Best Corporate Citizens list closely, and are using it now more than ever to make important decisions. As a result, making the list is worth millions or even billions in increased shareholder and brand value.” [emphasis added]
All I can say is that anyone who uses this list to make an important decision ought not to be in a position to make important decisions.