100 Best 2009 Methodology & Penalty Box

On Oct. 30, 2008, 27 practitioners—corporate members of the CRO Association—gathered in Chicago to openly debate the methodology for the 10th Annual 100 Best Corporate Citizens List®. Everyone emerged a little unhappy. In other words, it was an ideal outcome.

Data Category
# of ’09 Data Points 2008 Weighting % 2009 Weighting %
Environment 165 16.5 19.5
Climate Change 60 16.5 16.5
Human Rights 37 13.0 16.0
Employee Relations 61 13.0 19.5
Philanthropy 11 (7 in 2008) 13.0 9.0
Financial 1 13.0 12.5
Governance 8 (10 in 2008) 13.0 7.0
Lobbying 0 (10 in 2008) 2.0 0
Totals 343 (354 in 2008) 100.0% 100.0%

The changes in methodology for the 2009 100 Best Corporate Citizens List® reflect 5 major developments in the corporate responsibility field:

  • The continued primacy of environment and climate change in importance among stakeholders, which in 2009 together represent 36 percent of the rating.
  • The increasing understanding that engaging in “lobbying” activities has a neutral impact on a company’s ranking, since lobbying can have a constructive corporate citizenship effect.
  • The increased understanding that employee relations and human rights are more important than ever in today’s two-faced labor market which features both prevalent layoffs and the rapidly-rising importance of engaging top in-house talent and supply chain resources as a surviving company’s primary competitive advantages.
  • The mechanics of good governance are no longer a major differentiator among companies and have become “table stakes.”
  • “Checkbook philanthropy,” where companies contribute only cash, is a thing of the past, with in-kind product, service and expertise donations represent well more than 60 percent of today’s corporate contributions.

The numbers behind the 2009 list, like the 2008 list, were gathered and computed by IW Financial, the Portland, Maine, financial analysis firm which serves the ESG (Environment, Social, Governance) investment community. Mark Bateman is IW’s research director, with a pedigree dating back to the early days of the Global Reporting Initiative. Bateman acknowledges the impact on the trends on the 2009 list.

“This year’s list methodology continues to emphasize transparency and public disclosure in its
evaluations,” Bateman said. “While there is some improvement among the better companies on things like environmental disclosure, the real story is the 12 percent increase in the number of companies with measurable environmental disclosure. In 2008, the basis for this Best 100 List, we had 322 companies with measurable environmental disclosure, but only 286 in 2007.”

Bateman also welcomes the involvement of the CRO community in actively shaping the list methodology. “CRO’s decision to be transparent in its methodology, and in the rankings of companies within each category, gives readers additional tools to do their own evaluations of these 100 companies,” Bateman said, noting that helping everyone understand what the list ranking criteria are has the effect of accelerating corporate behavioral change at many levels. “That is the power of transparency,” he said.

Corporate Responsibility Director Susan Arnot Heaney of No. 18 Avon, a participant in the methodology-shaping process, is also a fan of cracking open the list’s “black box,” because the methods can now be explained to stakeholders everywhere. As an open process, the list is now more “meaningful to both
internal and external stakeholders…from the executive committee to the workers in our manufacturing plans and for our Avon Sales Representatives, which is especially important in these challenging economic times. [Openness] also helps inspire the many associates who work so hard on the programs and initiatives that are behind the 100 Best ranking. In addition, as a publicly traded company, the 100 Best Corporate Citizens List® can help spotlight Avon to certain segments of the investment community.”

The 2010 100 Best Corporate Citizens List® methodology is already being re-shaped by the methodology committee of the CRO Association. Vince Albergato, VP of membership for the group, said “Since November, 2008, we have had over 40 companies inquire about contributing input to the next list, and this committee structure gives a formal, public channel to those who want to invest some effort into the process.” The 2010 methodology will be established by the Committee in late Summer 2009 and published in CRO magazine prior to deployment in calculating the list companies. Albergato welcomes members and others who have questions to email him at valbergato@crossingmedia.com.

CRO magazine publisher Jay Whitehead is also excited about the potential to extend the publicly available data-based rankings to several other categories of ratings. The first extension will be in Spring 2009 when CRO magazine ranks the corporate responsibility profiles of publicly traded business process outsourcing companies. “These so-called BPO firms, which serve as corporate HR, IT and accounting back-offices of big companies,” said Whitehead, “have suffered from negative impact of the Satyam revenue-fraud scandal, which is India’s equivalent of Enron. In this case, CRO’s ratings can be a positive-change agent by showing those firms transparent enough to trust with your HR, IT or finance functions, and which ones to avoid.”

Explanation of categories from 2008 methodology

Penalty Box

In 2008, CRO introduced the Penalty Box for companies who made the 100 Best List mathematically, but have experienced large regulator-imposed fines or admitted guilt for a responsibility-related infraction. Last year’s list featured 8 companies in the Box, three of which came back in a big way to finish in the 2009 top 10. This year we only have three sitting in the Box, all of which will once again be eligible for the List in 3 years, in 2012. Please note that the list of each company’s infraction below fails to include pending lawsuits against the companies, since an ongoing suit falls short of an actual fine or admission of guilt.

Aetna
Aetna has recently agreed to pay $20 million over the next five years for allegations that the company and other patrons used a manipulated database system, “Igenex,” that diverted funds from doctors and hospitals. Aetna has agreed to pay $20 million over five years and the additional $60,000 back to the state of New York for the reimbursement of the investigation.

American Express
American Express' subsidiary, American Express International Bank, agreed to pay $65 million in anti-money laundering fines in 2007. The allegations resulted from an investigation that many accounts were used to launder drug money mostly based in Miami.

McKesson
The company was fined $13.5 million by the federal government after suits were filed from six U.S. attorney’s offices claiming McKesson filled hundreds of suspicious online prescriptions for the painkiller Vicodin. McKesson operates pharmaceutical distribution facilities, which are required to report suspicious sales of controlled substance pharmaceuticals under the Controlled Substances Act. The Act provides for a civil penalty of up to $10,000 for each violation of the reporting requirement.

Posted March 20, 2009 in 100 Best