April 29, 2002

Business Ethics' 100 Best Corporate Citizens Outperform S&P 500
by William Baue

An academic study concluded that Business Ethics' list of 100 Best Corporate Citizens generated better returns than the remaining companies on the S&P 500.

SocialFunds.com -- Last week, Business Ethics announced its third annual list of the 100 Best Corporate Citizens, which appears in the March/April 2002 Issue of the Minneapolis-based magazine. In addition to recognizing companies' corporate social responsibility (CSR) toward stakeholders that include the environment and the community, the list also ranks companies' service to shareowners, thus also factoring in financial performance. Interestingly, last year's list served as the basis for an academic study correlating better social and environmental performance with better financial performance.

The study shows that overall financial performance of the 2001 Business Ethics Best Citizen companies was significantly better than that of the remaining companies in the S&P 500 index, based on the 2001 Business Week ranking of total financial performance," said DePaul University Professor Curtis C. Verschoor in the January 2002 Strategic Finance magazine article announcing the study, which he conducted in collaboration with Assistant Professor Elizabeth A. Murphy. "The difference between the performance of the Best Citizens and the others was strikingly large," Professor Verschoor continued.

The DePaul study worked from total financial performance rankings conducted by Business Week magazine on the S&P 500 index. The ranking was based on eight statistical criteria, including total return, sales growth, and profit growth over the one-year and three-year periods, as well as net profit margins and return on equity. The Best Citizens scored ten percentile points higher than the mean ranking of the remainder of the S&P 500 companies.

“The DePaul University study offers evidence that good corporate citizenship is a superior form of management,” said Business Ethics Editor and Publisher Marjorie Kelly. “These top companies perform substantially better than their S&P 500 peers, in strictly financial terms. It simply makes sense: managing a company for one measure alone--shareholder value--is like flying a 747 solely for maximum speed. You can shake the plane apart in the process.”