Good, Better, Best Corporate Citizens

For anyone who has even a passing interest in identifying ethical -- or socially responsible -- companies to invest in, a list of such stocks can be interesting reading indeed. Business Ethicsmagazine recently released its list of the "100 Best Corporate Citizens," which not only piqued my interest but also inspired contemplation of the criteria by which some of us weigh corporate "ethics" or "social responsibility."

The top 10 fascinated me. I was curious to see which companies stacked up on top, and I was surprised because they didn't include some of the "usual suspects" (I would have thought Motley Fool Stock Advisor recommendations Starbucks or Whole Foods Market would be shoo-ins for the top of the heap, but they clocked in at Nos. 17 and 47, respectively). Business Ethics' No. 1 best corporate citizen was Green Mountain Coffee Roasters (Nasdaq: GMCR  ) . Even if you're more familiar with it than I am, you know it by no means commands the brand cache that Starbucks does.

Footwear provider Timberland (NYSE: TBL  ) may not be too surprising in the No. 6 slot, but the rest of the list is monopolized by tech-centric names that one might not have expected. Think Hewlett-Packard (NYSE: HPQ  ) , Advanced Micro Devices (NYSE: AMD  ) , Motorola (NYSE: MOT  ) , Dell (Nasdaq: DELL  ) , and Agilent rounding out the top of the list.

Business Ethics' list of 100 companies that are the "best corporate citizens" were culled from a pool of 1,000 companies using various criteria to formulate the rankings. Therefore, for those of us who may be mulling the concept of socially responsible investing, it certainly does serve some food for thought.

More than just granola
Green Mountain Coffee Roasters and Timberland shared some innovations that made them stand out in the ethical landscape. According to the Business Ethics' article, Green Mountain selects a few employees each year to quite literally take into the field, exposing them to the down-to-earth realities of coffee-growing cooperatives in Mexico (leading to employees' newfound care to "never spill another bean again"). It doesn't hurt that Green Mountain is also active in environmental and other socially responsible investing (SRI) realms. The company created a coffee dedicated to supporting the Rainforest Alliance and is described as a pioneer in the fair trade movement. Charitable donations that help support services like a sanitation system and a micro-lending facility in Mexico are other elements that surely helped jettison the company to the top of the list.

Timberland may seem like an old-school brand of outdoorsy footwear, but it's got some hippie street cred, too. I found the innovation Business Ethics cited rather fascinating -- "nutrition labels" for its shoes. These labels fend off the risks inherent in some manufacturers' association with sweatshop labor, since these labels reveal to consumers where the products were made, how they were made, and their impact on the environment and communities where manufacture took place.

Beyond those two companies, the top 10 list, as you've already seen, is burgeoning with tech companies. (Indeed, the No. 2 entry, Hewlett-Packard, has been in the top 10 all seven years the list has been generated.) Although some of these stocks haven't exactly outperformed the market lately, their scores in other areas Business Ethics and its partner KLD tracked apparently made up for it (and of course, that gives investors who want to invest in good corporate citizens and gain a return on their investments -- by no means an unreasonable goal -- even more food for thought).

Dell jumped from No. 71 to ninth place on the list, and Texas Instruments performed a similar long-shot leap to No. 10 from No. 50. Cisco, Advanced Micro Devices, and Salesforce.com were all newcomers. Business Ethics pointed out that the technology industry is arguably a very socially responsible one, given its tendency for high scoring in environmental concern, community involvement, and employee relations.

I most certainly can't argue that many of the companies that came out on the top of the heap are solid companies, and again, both Green Mountain and Timberland appear to be pretty innovative on the "corporate citizen" front. On the other hand, if I had weighed my own criteria, my personal list might have looked different.

To thine own self be true
My own surprise at the results brought to mind the subjectivity that can often come into play with SRI in general. For example, last year, one well-known SRI fund, Pax World, "reluctantly" divested itself of Starbucks shares because of its liqueur partnership with Fortune Brands' Jim Beam. I couldn't help but note at the time that an association with a liqueur didn't exactly make Starbucks "irresponsible" -- not in my book, anyway.

At any rate, Business Ethics' surprising top 10 brings to mind that very idea -- that divergent sets of criteria can alter the idea of what an ethical, socially responsible business is -- and it may be hard to agree on the matter. Indeed, if you go to the Social Investment Forum, a trade association dedicated to SRI, it defines the concept as "integrating personal values and societal concerns with investment decisions." As in the Starbucks liqueur example, what's deemed ethical by Pax World Funds isn't necessarily right for you or me, depending on our own points of view about alcohol and the way we invest our money.

However, taking a look at such lists -- and weighing one's own values and goals and conducting independent research -- can most definitely give investors a lot of ideas in this area.

That said, given my own surprise at some of the rankings, I plan to write a follow-up exploring the criteria that different organizations use to determine corporate citizenship. After all, after some of the big corporate scandals in recent years, it's clear that good business ethics make for good business, period. And given that point of view, I think it's quite likely that more and more investors will take into consideration some of these criteria when they're trying to research the best possible companies to invest in.

Socially responsible giving
The Motley Fool's Foolanthropy committee strives to do this very thing when determining which charities will be selected to receive our annual campaign's support. With the help of our readers who nominate charities, we conduct due diligence to find which organizations we think are the most efficient at what they do and the most beneficial to society. In 2005, we selected Heifer International, the Humane Society of Louisiana, Mercy Corps, Doctors Without Borders, and DonorsChoose.

In 2006, Foolanthropy will be sponsored by Hilton Family Hotels and its "Be Hospitable" campaign. Together with the Foolish community, we hope that Foolanthropy 2006, which begins taking nominations and donations in the fall, will be a list of the top 5 "socially responsible charities."

David Gardner has recommended Whole Foods Market, Dell, and Starbucks toMotley Fool Stock Advisorsubscribers.To find out what other companies David and his brother Tom have recommended to investors, click here for a 30-day free trial.

Alyce Lomax owns shares of Starbucks, but of none of the other companies mentioned. The Fool has a socially responsible disclosure policy.


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