The Fifth Annual list of the best-managed U.S. firms.
By Peter Asmus
Click here to see the full list for 2004. [0]
"We have a slogan around here," says Robert W. Lane, chairman and CEO of Moline, Ill. - based Deere & Company. "‘No smoke, no mirrors, no tricks: just right down the middle ofthe field.’ That’s John Deere." It’s the kind of straight talk onewould expect from a Midwestern maker of farm machinery.And it’s the kind of straight dealing that characterizes the 100 Best Corporate Citizens when they’re at their very best. John Deere ranked No. 6 among the 100 Best this year. When told he had made the list, Lane responded: "It’s recognition like this that makes you want to get up in the morning."
If straight dealing is one aspect of good citizenship, environmental stewardship is another. Bringing the hydrogen economy to life is the aim of the new products division at Modine Manufacturing of Racine, Wisc. (No. 32), a 7,500-employee company, with annual auto parts sales in excess of $1 billion. According to Mark Baffa, director of fuel cell products, Modine’s heat and thermal mass transfer and management systems are helping accelerate the project of generating hydrogen for autos of the future. Fuel cells can not only "supplement our aging electricity grid," Baffa said, they have the potential to replace the polluting internal combustion engine.
Still another part of good citizenship is protecting the interests of minorities, as Rochester, N.Y.-based Eastman Kodak does with its leading-edge anti-discrimination policies toward gay, bisexual, and transgender employees. These policies have earned the company the rare distinction of receiving a perfect score from the Human Rights Campaign, an organization working to end sexual orientation discrimination. It’s no surprise Kodak -- ranked No. 58 overall -- tied for highest score in service to employees.
Service to a variety of stakeholders is the essence of good corporate citizenship. That’s what the 100 Best Corporate Citizens listing is about. While traditional measures of success focus on stockholder return, this list defines success more broadly. Using social ratings compiled by KLD Research & Analytics of Boston -- plus total return to shareholders -- our list ranks companies according to service to seven stakeholder groups: stockholders, community, minorities and women, employees, environment, non-U.S. stakeholders, and customers. Good corporate citizens serve all constituencies well. That’s the emerging definition of corporate success.
This year the 100 Best Corporate Citizens list celebrates its fifth anniversary, and we’re happy to note that 29 firms have placed on the list all five years -- among them Intel (No. 3), Avon Products (No.7), Herman Miller (No. 14), Timberland (No. 17), Cisco Systems (No. 19) Southwest Airlines (No. 22), AT&T (No. 43), Starbucks Coffee (No. 45), Merck (No. 48), and Medtronic (No. 57).
The most consistent performer has been Procter & Gamble. This enduring American icon -- in business in Cincinnati, Ohio since 1837 -- has placed in the top five all five years and this year ranked No.2. Hewlett-Packard has made the top 10 all five years and placed No. 8 this year.
One example of a five-year 100 Best firm is The St. Paul Companies, the 150-year-old liability and property Minnesota insurance firm, which climbed from No. 85 in 2000 to No. 4 this year. Another is Ecolab of St. Paul, Minn., which climbed from No. 29 in 2000 to No. 10 this year. Ecolab scored high in service to customers, in part because the firm has been quick to develop creative new products for unexpected modern hazards. "We ramped up quickly in response to the Anthrax scare with our Vortexx product, a fungicide, not to make a buck, but because it was the right thing to do," said Al Schuman, Ecolab CEO. "We also developed anti-microbial disinfectant products to address foot and mouth disease in livestock, and then yet another new product to combat SARS at the Toronto Airport."
This year we welcome 24 new firms to the list, among them Agilent Technologies, which skyrocketed into the No. 9 slot by virtue of its diversity practices and superior treatment of the community. Newcomer Trex Co. (No. 50), which manufactures building products from recycled wood and plastic wastes, brought in stellar return to shareholders. Other newcomers include Pixar (No. 36) and AFLAC (No. 72), as well as household names like Weight Watchers International, Inc. (No. 68), Kellogg (No. 82), and Pepsi Bottling Group (No. 95).
In terms of excellence within specific categories, Motorola (No. 24) was far ahead of its peers in service to customers -- thanks to its status as a pioneer in the field of bionics, where everyday products are inspired by the simplicity, efficiency, and beauty of nature. Bringing in top honors in service to overseas stakeholders were two firms: No. 1-ranked Fannie Mae and Green Mountain Coffee Roasters (No. 5). With farmer cooperatives in Peru, Mexico, and Sumatra, Green Mountain pays Fair Trade prices for coffee beans. Fannie Mae created a Native American Conventional Lending Initiative to help finance $75 million in loans on trust land for the Navajo Nation of Arizona, Oneida Nation of New York, and Menominee of Wisconsin.
No. 1 and No. 2 for 2004
That’s just one example of the policies that earned Fannie Mae the No. 1 spot for 2004. This firm is dedicated to "the American Dream business," helping Americans become home owners -- the reason for its unique chartering by Congress. The company buys mortgages from local lenders and repackages them for sale as securities. Fannie Mae’s dominant presence in the mortgage market enables it to play a critical role in keeping mortgage rates down. Yet its most visible impact is on helping those who traditionally have been underserved obtain home loans.
In 2003, more than $240 billion in home mortgages were financed for 1.6 million minority first-time homebuyers, an increase of 60 percent over the year prior. Most uniquely, a $10 million Fannie Mae partnership was established with an Islamic financial institution to open up southern California’s real estate market to Muslims. It accommodates Islamic Law’s ban on paying or collecting interest on debt, by negotiating monthly payments based on a property’s sale price and fair rental value instead of interest rate.
Fannie Mae tied for second highest score in service to minorities and women. And it’s little surprise. "How are we going to accomplish our goal of bringing home ownership to everyone if we don’t look like America ourselves?" asked Maria Johnson, who has been vice president for diversity, health and work-life at Fannie Mae since 1992.
Coming in No. 2 on the list this year was Procter & Gamble, which excelled in service to minorities and women, and to the community. The firm has donated to help disadvantaged youth in Vietnam, to combat childhood malnutrition in India, and to provide earthquake relief in Turkey. "Over 2 million children in developing countries die each year from water-borne diarrheal diseases," said P&G spokesperson Terry Loftus. "We have developed a technology that allows people in the developing world to clean and disinfect water in their homes at low cost."
P&G also makes deposits in nine minority-owned banks, has placed substantial insurance with four minority-owned insurance companies, and is an investor in venture-capital funds for minority businesses. "Diversity is a matter of ethics," said Loftus. And it’s also a "fundamental business strategy," since P&G offers over 300 brands in more than 80 countries. "Our success depends entirely on our ability to understand these diverse consumers’ needs," he said.
Firms Moving Up
The firm that climbed the most in a single year is Aetna, which rose from No. 83 last year to No. 28 this year. 3M rose impressively from No. 72 in 2001 to No. 20 this year. And Staples climbed from No. 87 to No. 47 in the past year.
One climbing firm worth admiring is Deere & Company, which rose to No. 6 this year from No. 73 in 2000. Its roots go back to 1837 when an enterprising blacksmith in Moline, Ill. forged a special plow made from a discarded saw blade. John Deere’s one-man blacksmith shop has grown into a global business that now sells agricultural, construction, and lawn care equipment in 160 countries.
As one example of its practices, John Deere recently decided to forgo selling prime real estate to a developer, instead donating $1.5 million in land and facilities to Western Illinois University, allowing the university to better serve the community, including Deere’s employees.
John Deere is a company that has no problem thinking in the long term. With 60 percent of its core manufacturing employees eligible to retire in six years, it has teamed up with community colleges and labor unions to recruit hundreds of workers -- seeking to instill "the DNA that has made this an outstanding company," said CEO Lane. "We stand upon the shoulders of the folks who worked here before us, many of them for 30 to 40 years."
Lane is proud that since 1975, the company’s lost-injury rates have dropped 94 percent, and that the company was named one of America’s Safest Companies in 2002.
Controversies
If safety is a stand-out feature of John Deere, it’s an issue that has activists concerned about Avon Products (No. 7). This firm is known for its three-day fundraising walks for breast cancer and its products bearing the "pink ribbon" associated with the disease. Yet activists cite concerns about how Avon distributes money from the walks, and say its products contain cancer-causing ingredients, like the phthalates in Avon nail varnishes.
That’s an example of the controversies that surround many firms on the 100 Best Corporate Citizens list. It raises an important point: this list is not a certification of flawlessness. Firms are evaluated carefully, and 16 firms were pulled this year because of significant controversies. But not every controversy warrants dropping a firm. All firms here were deemed worthy of being on the list, despite controversies -- some of which we mention here.
In 2003, a federal judge ruled that IBM (No. 12) had discriminated against older employees in converting to a cash-balance pension program. Washington Mutual (No. 29) has been accused of predatory lending. In December 2003, Eastman Kodak (No. 58) was targeted by the Citizen’s Environmental Coalition for air emissions and on-site hazardous waste incinerators. Both Timberland (No. 17) and Sara Lee (No. 87) have faced accusations of unhealthy working conditions at overseas factories.
The controversies don’t end there. But neither do the exemplary practices, which also could be cited at length. In the end, the 100 Best Corporate Citizens list aims to make a simple point: excellence in business is about more than profits for shareholders -- it’s about serving a variety of stakeholders well. To put it another way, it’s about having your good deeds outweigh your misdeeds. Judged against their peers among the nation’s largest public companies, these 100 companies have risen to the top. We think that’s worth applauding.
Published in Spring 2004 issue of Business Ethics Magazine. Peter Asmus is a freelance writer in Stinson Beach, Calif. (pthfind@earthlink.net [1])