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These Companies Are Chasing $835 Billion

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Companies that want to maximize shareholder value need to maximize their revenue -- and that means not leaving money on the table. According to estimates, the American LGBT (lesbian, gay, bisexual and transgender) market is worth close to $835 billion. To help LGBT consumers sort the gay-friendly companies from those that are less so, the Human Rights Campaign issues an annual "Corporate Equality Index" that rates hundreds of companies and publicizes their findings.

As investors (as well as consumers), it's instructive to see which companies are taking steps to appeal to as broad a consumer base as possible. The Equality Index results for 2012 were recently released.

For starters, 148 fewer companies received perfect scores this year than last year -- only 190 of them. That sounds terrible, but it's largely due to the CEI toughening up its standards. The index considers factors such as equal health-care coverage for all employees, equal employment opportunity policies, non-discrimination policies covering sexual orientation and gender identification, corporate philanthropy, and more. For context, in 2002, the index's first year, just 13 companies got top marks.

The top 10
Among the 20 largest companies in the Fortune 500, 10 received scores of 100:

  • Chevron
  • Bank of America (NYSE: BAC  )
  • AT&T
  • Ford (NYSE: F  )
  • JPMorgan Chase
  • Hewlett-Packard (NYSE: HPQ  )
  • Citigroup (NYSE: C  )
  • Cardinal Health
  • Wells Fargo
  • IBM

Among the biggest companies with less stunning numbers were General Electric (NYSE: GE  ) and Wal-Mart, each scoring 60. ExxonMobil earned the booby prize, with a score of -25. Among companies improving their showing was Office Depot, boosting its score from 45 last year to a perfect 100 this year. Among many new initiatives, the company extended equal health-care benefits to transgender employees and formed an employee group to examine LGBT issues.

What specific things are some of these companies doing? Well, Bank of America recently announced plans to reimburse gay employees for the extra costs they incur when they're taxed on the value of health insurance the bank provides for their domestic partners. Hewlett-Packard has the oldest identified LGBT employee resource group. Ford pledged $250,000 toward building an LGBT community center in Ferndale, Michigan.

Outing themselves
In general, companies have been improving over time on the various index criteria. For example, back in 2002, 60% of companies surveyed demonstrated a public commitment to the LGBT community. Today it's 81%, with many doing so recently by proclaiming their support for marriage equality in New York state. Such companies included Alcoa (NYSE: AA  ) , Google, McGraw-Hill, and Xerox (NYSE: XRX  ) . Other methods include marketing and recruiting efforts and philanthropic support.

International influence
Both President Obama and Secretary of State Hillary Clinton recently expressed support for LGBT rights at home and abroad, and the Corporate Equality Index highlights one avenue to greater LGBT rights abroad: U.S. corporations. Consider that about 66% of rated employers -- hundreds of companies -- have operations outside America's borders. Over time, more and more of them will likely institute LGBT-friendly policies for all their employees, including in some nations where homosexuality is criminal or not very legally protected.

In the meantime, while LGBT support may earn some companies demerits from some customers in LGBT-unfriendly nations, it will also quietly earn the business of those customers seeking progressive businesses.

Increased diversity, increased performance?
The overall trend toward greater LGBT acceptance should be welcome to investors chasing high-performing companies that can deliver great results. Companies earning high marks from the HRC index are likely to curry the favor of gay consumers, who make up more than 6% of the population, according to various estimates.

As the financial incentives of greater equality become clearer, it's likely that next year, many more companies will have made the necessary changes to earn perfect scores. As long as score disparities are large, the high-scoring companies will enjoy a competitive advantage.

Looking for promising investments? Here are "5 Stocks With Explosive Potential" and "4 Stocks as Cheap as They've Ever Been."

Longtime Fool contributor Selena Maranjian owns shares of Ford, but she holds no other position in any company mentioned. Click here to see her holdings and a short bio. The Motley Fool owns shares of Wells Fargo, JPMorgan Chase, Ford, Bank of America, Google, Citigroup, Wal-Mart, and IBM, as well as having created a covered strangle position on Wells Fargo. Motley Fool newsletter services have recommended buying shares of Google, Chevron, Wal-Mart, and Ford, as well as creating a diagonal call position in Wal-Mart. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (5) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 13, 2011, at 3:53 PM, 123spot wrote:

    Excellent info for my watch list/ scorecard. Thanks, Selena. Is anyone aware of incentives for universities to strive to make such list? Spot

  • Report this Comment On December 13, 2011, at 6:14 PM, LoserInvestor wrote:

    This is almost as stupid as the companies who "embrace diversity" which always means "someone of a different skin color," as if that is true diversity.

    Not to mention White people are like 10% of the world's population where-as Asians are 2/3rds and Blacks are like 20%.

  • Report this Comment On December 13, 2011, at 7:45 PM, TMFSelena wrote:

    There's a difference between putting people with different skin colors on a poster and treating all your employees fairly and making them feel heard and respected and comfortable. And it's generally good business to do so, to keep employees happy and attract more good workers (whatever their skin color or orientation or whatever). It's not just LGBT employees who support fairness and equality.

  • Report this Comment On December 14, 2011, at 2:54 AM, MichaelDSimms wrote:

    So are the LGBT going to boycott oil from Exxon?

    What a joke.

  • Report this Comment On December 19, 2011, at 12:54 PM, 123spot wrote:

    No, but I will keep adding to my CVX I bought after reading this list (and evaluating the fundamentals, etc.). I'm also going to push against WMT and GE (my biggest holdings) now that I am aware they are lagging. Spot

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