2011 WORLD’S MOST ETHICAL COMPANIES

The World’s Most Ethical Companies designation from Ethisphere.com recognizes companies that truly go beyond making statements about doing business “ethically” and translate those words into action. WME honorees demonstrate real and sustained ethical leadership within their industries, putting into real business practice the Institute’s credo of “Good. Smart. Business. Profit.”

There is no set number of companies that make the list each year. Rather, the World’s Most Ethical Company designation is awarded to those companies that have leading ethics and compliance programs, particularly as compared to their industry peers. This year, there are 110 World’s Most Ethical Companies. Of these companies, 36 are new to the list in 2011 and 26 companies dropped off from the 2010 list. These “drop offs” generally occurred because of litigation and ethics violations, as well as increased competition from within their industry.

IT CAN PAY TO BE ETHICAL

Investing in ethics is beneficial for any company, even in a recession. The below graph compares the “WME Index,” or all publicly traded 2011 World’s Most Ethical Company honorees, against the S&P 500 since the initial World’s Most Ethical Companies recognition from 2007.

Top ethical companies in S&P 500 from 2007-2011, total return was around 45%

Companies in S&P500 not making Ethical list:  2007-2011 total return was around 10%

So the most ethical companies produced returns 4 and a half times greater!

2011 WORLD’S MOST ETHICAL COMPANY SELECTION PROCESS:

1. The Methodology

A methodology committee of leading attorneys, professors, government officials and organization leaders, assisted Ethisphere in creating the scoring methodology for the World’s Most Ethical Companies awards.

2. Candidate Selection

Over the course of the year, companies across the world submitted their applications to become 2011 World’s Most Ethical Companies. Based on these applications, as well as information Ethisphere gathered throughout the year, a list of semi-finalists was created.

3. In-Depth Analysis

At this stage, semi-finalist companies were notified and given an in-depth survey questionnaire to fill out regarding their ethics and compliance program, governance and corporate responsibility.

4. Further Refinement

Ethisphere then conducted data analysis on hundreds of companies based on their responses to the survey, as well as documents and information researched and requested by Ethisphere to confirm survey responses. Every company was then given an EQ score based on the results of the survey and measured against seven distinct categories. These categories were Corporate Citizenship and Responsibility; Corporate Governance; Innovation that Contributes to the Public Well Being; Industry leadership; Executive Leadership and Tone from the Top; Legal, Regulatory and Reputation Track Record; and Internal Systems and Ethics/Compliance Program.

5. The Winners…

The highest EQ scores for each industry became this year’s 2011 World’s Most Ethical Companies.

You can find more in-depth information on the methodology for 2011’s World’s Most Ethical Companies here.

I wanted to highlight ten of the companies in “Our Proud to Own” pool that made the List:

Aerospace:

1. Rockwell Collins, Inc. (COL) – Rockwell Collins develops communications and aviation electronics for commercial and military customers worldwide. Core competencies include communications, navigation, automated flight control, displays, simulation and training, integrated electronics, and information management systems. The firm sells to governments, airlines, original-equipment manufacturers, and other commercial customers while providing follow-on services and support for many of its products.

Automotive:

2. Johnson Controls (JCI) –  Johnson Controls operates three businesses. The building efficiency segment is a $14.9 billion group that provides controls and services for HVAC systems. The automotive experience segment is a $20.1 billion business that primarily sells seats in addition to interior products, such as cockpit systems and other electronics. The power solutions unit is a $5.9 billion business that makes batteries for passenger vehicles, trucks, and other applications.

Chemicals:

3. Echolab (ECL) – As the global leader in the cleaning and sanitation industry, Ecolab provides products that help its hospitality, food-service, health-care, and industrial customers do laundry, wash dishes, kill pests, and fix appliances when they break. With unmatched scale, a solid razor-and-blade business model, and a dedicated salesforce, Ecolab’s competitive advantages are firmly in place.

Consumer Products:

4. Colgate-Palmolive (CL) – Colgate-Palmolive is one of the world’s largest consumer product companies. In addition to its namesake toothpaste and detergents, the firm manufactures shampoos, shower gels, deodorants, and shaving products. It also owns specialty pet food maker Hill’s, which sells its products through veterinarians and specialty pet retailers. Colgate products are sold around the world; about three fourths of sales come from outside the United States.

Energy:

5. Encana (ECA) –  Encana Corp, based in Calgary, Alberta, engages in the exploration and production of natural gas in the United States and Canada. At the end of 2010, the company reported proved reserves of 13.9 trillion cubic feet of natural gas equivalent, based on forecast prices and costs. Daily production averaged approximately 3.5 billion cubic feet of natural gas equivalent in the third quarter of 2011 at a ratio of 96% gas to 4% liquids.

Insurance:

6. Aflac (AFL) – Aflac offers supplemental health insurance and life insurance in the two largest insurance markets in the world, the U.S. and Japan. In addition to its cancer policies, the company has broadened its product offerings to include accident, disability, and long-term care insurance. It markets its products through independent distributors, selling most of its policies directly to consumers at their places of work.

Industrials:

7. Deere & Co. (DE) – Deere designs and manufactures agricultural, landscaping, construction, and forestry equipment. The firm typically finances a large portion of its equipment sales through its Deere Credit subsidiary. Founded in 1837 by John Deere, the company now employs more than 50,000 people around the world.

8. Caterpillar (CAT) – Caterpillar is the world’s largest manufacturer of heavy construction machinery such as bulldozers, excavators, and loaders and equipment for surface and underground mines. The firm also produces engines for its own off-highway vehicles and others’ machines. Cat supports its machinery and engine revenue with a financial services arm, a logistics business, and remanufacturing service work.

Telecom:

9. Singapore Telecom (SGAPY) – Singapore Telecommunications Limited is engaged in operation and provision of telecommunication systems and services, and investment holding. The main services and products provided by both Singapore and Australia are mobile communications, and data.

Business Services:

10. Accenture PLC CAN (ACN): Based out of Dublin, Ireland, Accenture is a leading provider of consulting, technology services, and outsourcing solutions to a global client base. It serves 96 of the Fortune Global 100 and more than three quarters of the Fortune Global 500. Accenture’s business is organized within five operating groups: communications and high tech, financial services, products, resources, and health and public services. It employs more than 220,000 people spread over 50-plus countries.

There you have it!  Want some help building a “proud to own” portfolio?  Check out http://www.faithbasedinvestor.com.