One innovative mutual fund chooses its holdings through a novel and unexpected criteria: It's stocked entirely with companies that treat their employees like gold.

Meet the Parnassus Workplace Report (PARWX) fund, which selects its holdings from among the nation's best employers. The fund believes that "happier employees make for better companies." So far, it's beaten the S&P 500 by a wide margin over the past three and five years.

The fund's employee-pleasing holdings include:

  • Qualcomm (Nasdaq: QCOM) offers stock options and generous 401(k) matching upon hiring workers, and organizes many activities for its staff, including kayaking and surfing lessons. The company makes its money cashing in on its many patents and technologies, mostly for the dynamic wireless device market. 
  • Intel (Nasdaq: INTC) is the king of chips, but it's not standing still. The silicon titan's rolling out solid-state drives to consumers and pushing into highly profitable high-performance computing products. Among other benefits, the company offers its employees eight-week-long paid sabbaticals every seven years.
  • IBM (NYSE: IBM) has long been a solid performer. As it pushes into more software offerings, its profit margins are likely to rise. Big Blue has already been generating a heck of a lot of value, sporting a return on equity north of 75% over the past 12 months. According to its Brightscope report, IBM's 401(k) plan offers employees very low fees, above-average investment choices, and "great" company matching.
  • Corning (NYSE: GLW): Corning's LCD glass business has been doing well, as consumers load up on new TVs, cell phones, gaming devices, electronic readers, computers, and more. Corning's 401(k) plan has very low fees and above-average company matching, earning a rating well above most of its peers'.

The Parnassus Workplace fund only holds roughly 34 different stocks. That can leave it more volatile than several-hundred-company-strong alternatives, but it also gives the fund more upside potential. Each winner wields more influence on the bottom line, undiluted by scores of lackluster performers. At 1.2%, the fund's expense ratio is a little higher than I'd prefer to see, but in fairness, the fund is relatively small. Gargantuan funds have fewer excuses for charging so much.

Companies that treat employees well clearly have a competitive edge in attracting and retaining talent. The possibility that such stellar employers could perform well for you makes the Parnassus Workplace Report worth a closer look. 

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