100 Best Corporate Citizens 2000
A hopeful metamorphosis is under way in corporate America. Embracing goals beyond the traditional focus on earnings, the best companies are focusing on a host of social issues. They are, in short, serving not only stockholders, but other stakeholders as well. Any by stakeholders we mean those with a "stake" in the company: employees, customers, community members, and stockholders. As the performance of our 100 Best Corporate Citizens shows, serving this new community of stakeholders is just good business. One benefit, for example, is attracting and retaining employees. As Beth Sawi, chief administrative officer at Charles Schwab, puts it, employees come to Schwab "for something more than just the bottom line."
But Schwab’s bottom line is definitely healthy, and that allows its positive culture to thrive. This financial services firm headquartered in San Francisco, with $3.9 billion in 1999 revenue, is No. 8 on our list of the 100 Best Corporate Citizens, in part because of financial performance. In 1998 (the latest annual figures available when the analysis was done), total return to investors was an impressive 102 percent. That helped get the firm a rating of 5 — on a scale of 1 to 5 — in service to shareholders (ratings tracked performance from 1996 to 1998). But Schwab also scored high in service to employees, with a 4.33 score. Excellence in those two areas was the primary reason they scored high overall.
That’s typical of companies in this study. It looks at corporate service to four key stakeholders groups (stockholders, employees, customers, and community.) IBM (No. 1 on our list) was virtually alone in serving three groups well: stockholders, community, and employees. More typically, Hewlett-Packard (No. 2) excelled in serving two: community and employees. No company excelled in serving all four, although the top 25 performed at least average in serving all stakeholders.
This study is about good corporate citizenship. We define that as serving a variety of stakeholders well. To put numbers to these judgments, we used data from Kinder, Lydenberg, Domini & Company (KLD), a social research firm in Boston, which ranks service to stakeholders on a scale ranging from 1, a "major concern"; 3, which is "neutral"; to 5, a "major strength." (For more detail on methodology, see page 17.)
KLD’s research, supplemented by Business Ethics interviews, shows a changing corporate landscape. Corporations today simply cannot ignore the social issues in their communities; cannot ignore their employees, with the shortage of skilled staff; cannot neglect the changing needs of their customers; and of course cannot neglect stockholders.
Our study found a myriad of ways America’s best corporate citizens serve these stakeholders. While it’s difficult to make generalizations about how all of them operate, we can offer a handful of interesting approaches we’ve observed. Among them:
Having community-service programs be employee-driven, not executive-driven.
In measuring community service, the company ranking second highest is Polaroid, with a score of 4.83. (Whirlpool is No. 1 in community service.) This maker of film and other imaging products, headquartered in Cambridge, Mass., came in No. 37 overall, largely because of lackluster financial return. (In 1998, it lost $51 million on revenues of $1.8 billion.)
One thing innovative at this company is that employees make the decisions on charitable contributions. The Polaroid Foundation, which serves primarily Boston and New Bedford, Mass., has two committees — one for each community — staffed by employees who are overseen by professional staff. Donna Eidson, executive director of the foundation, has one vote like all other members.
The foundation’s focus is increasing self-sufficiency among the disadvantaged by building their skills. Eidson gives the example of a single mother who joined a foundation-supported program that helps Latina women assimilate. The woman had moved here from Guatemala twenty years earlier, but hadn’t learned English. One day, while working as a house cleaner, she accidentally bumped a button and computer went on. Not knowing how to turn it off, she waited four hours for the homeowner to arrive home and simply push a button to turn the computer off. She realized, if it were that easy to operate a computer, she could do it.
Today, the woman is fluent in English and proficient in computer skills, and this June she and her daughter will be receiving their high school diplomas. She has plans to become a paralegal aide.
"When you see her, you realize this woman with the right opportunities could have done anything she wanted to," Eidson said. "And yet if she had never learned to speak the language, it wouldn’t have happened."
If at Polaroid we see employee involvement in philanthropy, at IBM — the $6.3 billion Armonk, N.Y. computer firm — we see employee involvement in environmental issues. For example, the company gives cash awards to employees for innovative environmental ideas. In some instances, the company has purchased energy from renewable sources, like solar power, at higher rates than other sources.
We might note here that this study’s evaluation of community service combines two measures from KLD: community and environment. We considered these the dual aspects of community service.
Taking a rifle-shot rather than a shotgun approach to community service.
In tackling the amorphous area of "education," Hewlett-Packard’s three-year-old Diversity in Education Initiative has a pinpoint focus on math and science in four minority communities. This Palo Alto, Calif.-based computer company, with 1998 revenue of $42 billion, was No. 2 on our list. "Rather than work with just one segment of the school population, and watch that segment pass to the next level where there’s no program, we pick out a community where we can work with people from elementary to university level," said Roy Verley, director of corporate philanthropy.
The program provides hands-on science kits for elementary and middle-school children, and encourages them to pursue four years of math and science work in high school. There’s also the $1.2 million HP scholar program, now in its third year, which gives 40 high school seniors (ten from each community) $3,000 annual college scholarships. Each student is assigned a mentor, taught how to conduct a job search, and given a paid summer internship at HP.
Cathy Lipe, program manager for education relations in the government affairs department, feels HP is learning as much as the students. "We’re learning what it’s like to be going through the HP recruiting process and where we have barriers up to the poor," she said.
For Pitney Bowes (No. 12), a Stamford, Conn. Business equipment maker with revenues of $4.2 billion, the targeted commitment is to its own community. For nearly 30 years, local economic development has been a part of the firm’s corporate culture. Most fundamentally, the company decided to keep its headquarters in a deteriorating section of Stamford’s South End, and to work with grassroots organizations to improve the community. The company donated property near its headquarters for an affordable housing complex, and has participated in a down-payment assistance program for home ownership.
Pitney Bowes also supports the grassroots South End Neighborhood Revitalization Zone Initiative, which empowers community residents to make decisions about the neighborhood. "Because a lot of the people who live here are low-income," said Polly O’Brien, director of community affairs, "it’s not always easy for them to complain about property owners who don’t keep places clean or up to code." The program gives these people voice. "To us, it’s very easy to sit and write a check, but it doesn’t have the same impact for self-sufficiency as if you partner with people," said O’Brien. "It’s really their success."
Encouraging employees to express their individuality.
Melanie Jones, creative manager of public relations at Southwest Airlines (No. 14), said it best: "Individualism is cherished. People are going to work harder if they don’t have to be somebody they’re not, if they’re valued for who they are."
At this $4.1 billion, Dallas, Tex., domestic airline, the corporate culture has a lack of formality and a sense of humor. In making public announcements, for example, flight attendants and customer service agents are encouraged to incorporate humor.
Corporate procedures in general come from the rank and file. "Southwest is known for empowering its people to make the right decision, regardless of what the rules are," Jones said. At almost any meeting employees from ramp agents to vice presidents have an equal voice in ideas generated. One program that came from employee ideas, for example is the career development service group, which helps employees assess whether they’re on the right career path.
Charles Schwab (No. 8) helps new employees find their right path with a program called Wings, where entry-level employees are rotated to various parts of the company and can apply for jobs in the area they find most interesting. Schwab also offers a no-restrictions sabbatical program, allowing employees to pursue their dreams. For Chief Administrative Officer Beth Sawi, the dream was writing a book. She returned in August 1999 from a sabbatical in Florence, Italy, where she wrote Coming Up for Air: How to Build a Balanced Life in a Workaholic World. Every employee at Schwab performing at or above expectations is entitled to a four-week paid sabbatical after five years of service, or eight weeks after ten years.
In a slightly different approach to sabbaticals, Intel (No. 3) offers eight weeks for every seven years of employment. This Santa Clara, Calif., maker of Pentium microprocessors and other computer parts had $26.2 billion in revenue in 1998, and found an impressive $312 million to spend on employee training — including a retraining program that helps employees find new positions within the company.
Finding creative ways to relieve the pressures in employees’ lives.
One of the best companies at serving employees is Xerox (No. 6), the document processing products company in Stamford, Conn., which tied for the highest score in the employee category. (The other two highest were Hewlett-Packard and 3Com Corp.) Among the innovations at the $19.4 billion Xerox is a life-cycle assistance program which, in addition to standard benefits, offers a $10,000 lifetime amount employees can use for things like child care, first-time home buying, and health care for dependents.
UnumProvident in Portland, Maine, and Chattanooga, Tenn., ranked No. 27 overall, but was tied for fourth place in providing for employee stakeholders. Its business is disability insurance, which makes the company particularly focused on health and wellness. At most of its major locations, its has on-site fitness facilities, offering classes on topics from aerobics to spinning. Fitness professionals are also available for consultations. "If you’re experiencing any kind of physical difficulty at work, there’s a thorough analysis done not only of your work environment, but your health habits, your eating habits, and your exercise habits," said Catherine Hartnett, director of public relations and issues management. "They really look at the whole person."
Other companies take different approaches to relieving employee stress. Herman Miller (No. 5), the $1.7 billion Michigan furniture maker, takes the unusual step of payiing social workers to visit elderly relatives of employees and arrange services. To help employees ease into retirement, Procter & Gamble (No. 4) allows them to work reduced time schedules. This $38.1 billion household products company in Cincinnati, Ohio also allows all employees to take a personal leave of absence without pay, but with benefits, for three months.
Taking a team-based approach to developing products and servicing customers.
Tellabs (No. 7), a telecommunications equipment manufacturer in Lisle, Ill. With $2.3 bil. In 1999 revenue, came in first in serving customer stakeholders, with a score of 5. Given performance like that, it’s no accident Tellabs takes an approach to product development that involves all departments in the company. The process is called product realization and it uses "q-gates." This means a product must pass through a number of gates in development. Every product begins as a customer requirement, then passes through gates representing all departments involved in a project’s development: sales, customer service, design, manufacturing, quality control, training, and so forth. Sign-off is required at each gate before development can move to the next step, or gate.
Everything emanates from the customer. To keep the pulse of the market, Tellabs has an outside company survey customers periodically and provide a report card. Jim Lauretig, v.p. of strategic quality at Tellabs, notes that throughout the life-cycle of a product or service, the needs of the customer may change, so a company must continually adapt.
For Motorola, pleasing the customer means going the extra mile for quality products. It ranked No. 33 overall, but came in second in service to the customer, with a score of 4.67. This Schaumburg, Ill. Maker of cellular phones and electronic equipment, with $29.4 bil. In 1998 revenues, has had a quality management program since the 1980s, and has traditionally sought to reduce defects tenfold every two years. Its Six Sigma program, a quality improvement effort, aims for defect-free performance in all areas. Team leaders are trained to analyze processes and identify where defects can be reduced.
The focus on quality at Motorola extends to the environment as well. As part of the quality program, teams throughout the company evaluate ways to improve environmental performance. And all employees must attend a course called Protecting Our Environment.
Showing, in the end, that not even the best corporate citizens are perfect.
For all its strengths in the quality area, Motorola has lost a number of major contracts since 1995 du to service quality issues, according to a May 1998 Business Week article. For all its strengths in the area of employee relations and diversity, where the company scored an impressive 4.67, Motorola has not women among senior line executives (though it has two women on its board). Like others, this firm has both strengths and weaknesses in the same area.
And of course, being on the list is no guarantee of strength in all areas. Starbucks (No. 46) scored an admirable 4.5 in service to employees, but came in neutral, with a score of 3, in community service. That’s due in part to accusations from community groups — some of whom staged protests at store openings — that Starbucks undermines local businesses and destroys the uniqueness of neighborhoods. On the other hand, in 1998 Starbucks partnered with former pro basketball player Magic Johnson to develop stores in urban areas — where its shops may actually improve neighborhoods.
It’s also worth noting not all of Wall Street’s darlings made our list. For example, General Electric — Fortune’s No. 1 Most Admired Company — failed to make our top 100 because of very low ratings in community and customer areas. That partially due to the company’s role in widespread polychlorinated biphenyl (PCB) contamination in Pittsfield, Mass., and elsewhere.
Even our No. 1 company, IBM, with a 4.33 score in service to employees, is not without controversy. When the company announced changes in its pension plan last year, which would have cut pensions up to 40 percent for long-time employees, CEO Louis Gersner found himself confronted at the firm’s Austin plant in July with a plane circling overhead, dragging a banner that read, "Hey Lou, Thou Shalt Not Steal." The company later reversed itself, restoring many of the benefits that would have been lost. This list, after all, is not the 100 Perfect Corporate Citizens. It’s the 100 Best Corporate Citizens.
Article by Tom Klusmann. Statistical Analysis By Sandra Waddock & Samuel Grave. Social Data from Kinder, Lydenberg, Domini & Company.