Tuesday, October 23, 2007

Monsanto Named Top Corporate Citizen in Their Industry

CRO magazine has released a list of the 10 Best Corporate Citizens By Industry for the following sectors: Chemical, Energy, Financial, Media and Utilities (another list will be issued in November/December for additional industries). The list was limited to publicly traded corporations and the companies were evaluated in eight categories: Environment, Climate Change, Human Rights, Employee Relations, Corporate Governance, Lobbying, Philanthropy, and Financial.

According to the CRO web site, they used the following category definitions:

Environment. This category incorporates an evaluation of environmental disclosure (including sustainability reporting criteria), environmental policies (including management systems), and environmental performance (including toxic emissions).

Climate Change. This category considers climate-change disclosure (including reports to the Carbon Disclosure Project) and climate-change policies (including offsets and reduction goals).
Human Rights. We evaluated disclosure (including controversies within the company’s overseas operations), policy (including codes of conduct and performance goals), and exposure to countries of concern.

Employee Relations. We looked at unionization rates, employee benefits, and Equal Employment Opportunity Commission complaints.

Lobbying. Certain industries are more involved in lobbying than others, so comparing companies within industries was helpful. This category evaluated a size-adjusted, three-year lobbying total at the federal level. (Information came from www.opensecrets.org and the Center for Responsive Politics.)

Philanthropy. This category in the CRO ratings evaluated giving levels and policies (including employee-match programs).

Corporate Governance. Board independence was the standard used in this category. We evaluated whether the board majority was independent and whether key committees also were fully independent. If a board majority was not deemed independent, the corporation was not considered in the rankings. In addition, ratings covered board accountability and demographics (board tenure, age of directors, over-commitment of directors to multiple boards, and annual election of all directors).

Financial. Any evaluation of corporate citizenship must include a company’s ability to meet this most-basic corporate purpose. This category evaluated companies’ three-year total return. Companies without a three-year return to shareholders were not considered for the ranking. That’s because this list was intended as an evaluation of the citizenship efforts of large cap, publicly traded, U.S. companies, and a three-year history with shareholders was a prerequisite for consideration.

I question if these are valid measures of corporate citizenship. That is, is measuring lobbying a true refelction of corporate citizenship behaviors? Or is measuring the existence of policies related to the category but not measuring performance on the policies (except environmental/climate change performance) or adherance to the policies a true reflection of corporate citizenship behaviors? Furthermore, it seems a glaring omission that there was no category evaluating the social impact of a companies' actions, which, in some instances of the companies on the list, is enormous.

Therefore, it is worth noting that 3 (of the 5) "top" corporate citizens in their industry are targets of current and long-standing criticisms, protests, boycotts, and public campaigns because of their practices. Monsanto may have the largest number of protestors, boycotts, and campaigns of the "top" companies on the list. CRO states, “There may be some surprises for people on these lists, but the data speak for itself. Based on the data and categories included in these evaluations, this is an unbiased evaluation of corporate citizenship.”

How does one reconcile this enormous discrepancy? As CRO has already stated, the results are based upon the data and categories included in these evaluations. Perhaps a teaching point for Fuechsel's GIGO. But this is only my (nonobjective) opinion.

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