April 27th Release of Business Ethics
100 Best Corporate Citizens

By: Graham Sinclair, Product Manager, Research         

         In April 2006, Business Ethics magazine will release its seventh annual survey of the "100 Best Corporate Citizens" a ranking of leading ethical performers publicly listed in the US. Using data provided by KLD, the 100 Best Corporate Citizens list is designed to recognize firms that excel at maintaining a business strategy that emphasizes social and governance integrity.

         The list, which will be published at the end of April, will feature some familiar names in corporate social responsibility along with some surprises. KLD has supported the Business Ethics 100 Corporate Citizens since 1999 and shares its mission of educating and empowering investors and business leaders on the merits of a sustainable business strategy.       

And the winner is?

         While the actual list will not be available until the end of April, the focus on issues like climate change, human rights and corporate governance has led to dramatic increases in the level of information on corporate performance and to a more granular assessment, according to KLD analysts. “With better quality information, we are able to drive better analysis,” says Andrew Brengle, senior research analyst and head of KLD’s environment team.

         The change in top 100 lists from 2005 to 2006 is substantial, with over 30 companies appearing for the first time. Technology companies account for over a quarter of the total, with Finance (14%) and Producer Manufacturing (9%) the next highest proportion.

Economic Sector dispersion

Source: KLD BE100 Project/KLD Research & Analytics, Inc. 2006, Factset Research Systems Built with financial and ESG ratings

          To compile the list, Business Ethics ranks firms based on how well they perform in eight stakeholder-service categories: shareholders, community, governance, diversity, employees, environment, human rights, and product. The scores draw on both financial information and measures of corporate social performance. The financial component is based upon annualized 3-year shareholder return. Environmental, social and governance [ESG] performance ratings are based upon KLD’s SOCRATES database of US company analysis.

         The Business Ethics 100 Best Corporate Citizens list was developed by Business Ethics magazine editor Marjorie Kelly and Professors Samuel P. Graves and Sandra Waddock at Boston College’s Carroll School of Management along with Senior Research Fellows at the respected Center for Corporate Citizenship. It has gained national recognition as an indicator of best practices in the area of corporate social responsibility and has become the basis for numerous academic articles on governance and ethics of US companies.

         Among CEO’s, the Business Ethics 100 Best Corporate Citizens list is regarded as the third most influential corporate ranking, behind Fortune magazine’s “Most Admired Companies” and “100 Best Companies to Work For,” according to a PRWeek/Burson-Marsteller CEO Survey.

         KLD rates the broadest universe of companies for ESG factors by any rating firm, using a methodology honed since 1988. The experienced KLD analyst team has spent approximately 5,000 hours each year vetting data from companies in the Russell 1000, S&P 500 and Domini 400 and analyzing KLD analyst interviews with companies on their Environmental, Social or Governance (ESG) performance.

Eligibility For The 100 Best Corporate Citizen List

         Company eligibility for the Business Ethics list is determined by membership on the Russell 1000, S&P 500, and DS 400 indexes. Companies are selected using a scoring system developed by Business Ethics.

         It is KLD’s hope that the Business Ethics 100 Best Corporate Citizens release in late April 2006 spurs greater corporate investigation of what makes some firms better than others. A recent research paper identified companies that are newly listed as good citizens and concluded that companies in the top 100 but outside the S&P 500 “can provide considerable positive returns to investors.”

         To learn how your company is rated by KLD, you may email Camille Aylmer at BusinessEthics100@kld.com.