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Nice Companies Finish First

Matt Palmquist

Matt Palmquist is a freelance business journalist based in Oakland, Calif.

 

Bottom Line: Firms that make an effort to be responsible are rewarded more than those that seek only to make money.

Which organizational values guide the strategies and philosophies of the most admired firms in the world? Financial growth ranks surprisingly low and is never such organizations’ predominant focus, according to a new study. Instead, corporate social responsibility (CSR) emerges as the foundation of leading companies’ corporate blueprints.

The authors analyzed the core values espoused by the 34 firms that made Fortune’s list of the 50 most admired companies for each of the last five years. The list is based on an annual survey of more than 15,000 analysts, directors, and executives. Fortune ranks the world’s largest companies—those with annual revenues of US$10 billion or more—according to nine attributes that speak to reputation, including the level of innovation, personnel management, and the quality of products and services.

In most cases, firms’ core value statements are easily located on their websites. On average, companies in the sample defined about six core tenets, suggesting that business models should be founded on a few essential, easily understandable principles. These values drive a firm’s direction, mission, and vision, the authors note, and can provide stability in times of organizational change or transition. In this way, corporate values represent a source of uniqueness for leading companies; they can’t be fabricated or imported but must be carefully cultivated by top managers.

For example, Marriott International emphasizes five pillars: one dedicated to customers (“embrace the change”), one to employees (“put people first”), one to the pursuit of excellence, two to CSR (“act with integrity” and “serve our world”), and none to financial growth.

Although CSR was never the only core orientation declared by any company in the study, it shows up more than any other focus in firms’ value statements. Clearly, these leading companies have come to see CSR as a tactical necessity and are sensitive to lapses in their business practices that could alienate the public and cause a costly backlash.

Leading companies have come to see CSR as a tactical necessity.

Paradoxically, economic growth was the value least mentioned and emphasized. Companies certainly have to make money. But even though all of the world’s most admired companies turned a hefty profit, none placed this fairly narrow goal above the broader, deeper pledge to produce sustainable value for its community and stakeholders.

Recent financial scandals, privacy breaches, and environmental disasters have heightened the focus of analysts, the media, and shareholders on companies’ core values—and how they shape firms’ responses to vital issues that influence their businesses.

“Thus,” the authors conclude, “contrary to the objections of those who consider CSR both useless and detrimental because it distracts companies from their primary goal of profit maximization, our analysis confirmed the strict relation between high revenues, global admiration, and social responsibility.”

Source: “An Analysis of the Organizational Core Values of the World’s Most Admired Companies,” by Maria Assunta Barchiesi and Agostino La Bella (both from the University of Rome Tor Vergata), Knowledge and Process Management, July/Sept. 2014, vol. 21, no. 3

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Nice Companies Finish First