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Business Black List: Which Companies Break the Rules?

In this age of foreclosure crises and the idea that some companies are just “too big to fail,” “corporate” and “greed” have become virtual synonyms. The focus on bad business has become so intense over the past few years that Corporate Responsibility magazine (CR), which publishes the “100 Best Corporate Citizens List” every year, has now begun to also print a “Black List” of the least responsible companies.

What Is Corporate Responsibility?
According to CR’s Dirk Olin and Mark Bateman, the thirty corporations that made the Black List scored especially low in terms of transparency vis-à-vis the public. The list is based on the principles not only that “what gets measured gets managed,” but also that “what gets reported gets measured,” and that Adam Smith’s metaphorical, invisible hand relied on perfect, comprehensive information.

Each company on the list is one for whom “zero points of relevant data can be found to compare its transparency to that of its colleagues on the Russell 1000 list of large-cap firms,” referring to the Russell 1000 Index, which ranks the largest U.S. securities based on market capital and current index membership. In other words, it’s not what the corporations do that earns them a place on the Black List; it’s what they tell us about what they do. To Olin and Bateman, it amounts to the same thing. “If the behavior of companies matters to the public,” they write, “then access to information about their behavior matters, too.

In some areas, company disclosures are mandated by law. For example, the U.S. Securities and Exchange Commission requires that all corporations disclose whether stock options are available to the company’s CEO, and whether the CEO exercises those options. The Environmental Protection Agency and the Occupational Safety and Health Administration require disclosures about disposal policies, labor policies, and workplace safety, and house this information in government databases. But company reporting on these issues usually covers one facility or event-specific issues, and the databases involved are not well designed to support corporate-level summaries, according to Olin and Bateman. In addition, very little of this information ever gets out to the public.

Olin and Bateman also make the point that opacity works against a corporation’s bottom line. In the “age of transparency,” consumers just won’t accept not knowing key information about employment and environmental protection policies. The average three-year returns on shareholder value for twenty-eight of the thirty corporations on the Black List is -7.378 percent, compared with a +2.374 percent return for the 2010 100 Best companies and -5.4 percent for the entire Russell 1000.

The List
Twenty-three of the thirty companies on the Black List are U.S. corporations, some of them household names.

  • Abercrombie & Fitch Co. (ANF), with a whopping -19.04 three-year total return percent. CR doesn’t include this information on its list, but Abercrombie has also lost points in the public eye following a class-action lawsuit alleging discrimination in the company’s hiring practices.
  • Fidelity National Financial Inc. (FNF) also has pretty low returns: -11.93 percent. Maybe that’s because Americans have a hard time trusting an insurance provider that’s not an information provider.
  • Lorillard Inc. (LO) has bigger fish to fry than telling customers about its environmental practices. The company manufactures several tobacco brands, including Newport and Kent. Interestingly, CR’s Black List doesn’t even provide the corporation’s returns.
  • Scientific Games Corporation (SGMS) has the lowest returns of any U.S. company on the Black List: -21.63 percent. The company, which makes and distributes lottery systems and tickets, proves that not everyone is a winner.
  • Weight Watchers International Inc. (WTW) is losing points with investors, too, with -15.89 percent returns. Perhaps the company should focus more on spreading information than on just how to cut calories.

Most of the other U.S. corporations on the Black List are financial and insurance firms and medical-equipment providers. The seven international companies are all based in either the UK or eastern Europe and are financial corporations or media-production companies.

What Have They Got to Hide?
Thanks to reality television and 24/7 tweets and Facebook status updates, even private citizens don’t have privacy. If we have to disclose everything from our 4 a.m. cravings for Chunky Monkey ice cream to the fact that we really, really like Dio, then why can’t major corporations publish key details about their executive packages, labor practices, and environmental policies? The public wants to know, so keeping mum in the information age will get your company blacklisted.