Does Corporate Equality Make a Difference on the Bottom Line?

In an interview last month, Chick-Fil-A CEO Dan Cathy came out of the corporate closet and pronounced his company only supportive of heterosexual family values. When asked about Chick-Fil-A's support of the biblical definition of the family unit, his response was simple: "Guilty as charged."

Proponents and critics alike filled the streets and Internet with respective cries of support and outrage. Amid citywide embargoes and the Mike Huckabee-inspired "Chick-Fil-A Appreciation Day," the ultimate impact of Cathy's statements on Chick-Fil-A's bottom line is anybody's guess. Thankfully for investors, corporate equality isn't as an ambiguous value for public companies as one might think, and it has an intriguing correlation among the country's largest corporations.

Return on (LGBT) equity
For 10 years, the Human Rights Campaign has published an annual Corporate Equality Index (CEI). This index examines each Fortune 500 company's equal employment policy, employee benefits package, LGBT competency, public engagement, and responsible citizenship to assign it a CEI score ranging from zero to 100.

Along with its CEI score, the Human Rights Campaign also publishes a company's Fortune 500 ranking to assess whether any correlation might exist between corporate success and equality. The answer: appears to be "yes." Here's a look at the raw data:

Source: Author, data from Human Rights Campaign.

The trend line shows a definite pattern, but I went ahead and clumped companies into "Fortune 100" clusters for a cleaner picture:

Source: Author, data from Human Rights Campaign.

From the graph above, it's clear that the answer is still "yes." While the top 100 companies averaged a 73 on the CEI, the tail-end Fortune 401-500 managed a miserly 28.

If all the perfect scoring companies were combined into one corporation, its Fortune 500 ranking would be 138. Zero-scoring companies, on the other hand, would trail by nearly two hundred companies at 328.

Top scorers come in all sizes from all sectors. The smallest companies to receive a perfect score are Northern Trust, Charles Schwab, and Starwood Hotels.

Representatives from the "Fortune 10" include Chevron (NYSE: CVX), Ford (NYSE: F), and Bank of America (NYSE: BAC). Chevron was the first energy company to offer domestic partner benefits, and Ford hosts an employee intranet for LGBT questions and concerns.

Sectors like finance that rely on recruitment to outsmart competitors have an extra incentive to offer inclusive work environments. Bank of America was an early adopter of transgender benefits, offering full equality to all prospective employees. Earlier this year, a Bank of America executive openly opposed its home state's ban on gay marriage, stating that North Carolina Amendment One would serve as a "direct challenge to [our] ability to compete nationally for jobs and economic growth."

Only six Fortune 100 companies received a CEI score of zero or less:

Source: Author, data from Human Rights Campaign.

ExxonMobil's negative score is attainable only through a combined absence of any proactive equality measures, as well as a "large-scale official or public anti-LGBT blemish on their recent records." Since its 1999 merger, ExxonMobil shareholders have repeatedly voted against including "sexual orientation" in the company's anti-discrimination policy. In 2008, nearly 40% of shareholders voted for the amendment, but this year's resolution was supported by only 20% of voters.

Pride for profit?
I tried out a variety of techniques to examine the stock performance of CEI top- and bottom-scorers, but the volatility of both Fortune 500 ranking and annual CEI scores makes direct analysis difficult. Generally speaking, however, Fortune 500 companies are long-term profitable investments and increasingly equitable organizations. A decade ago, only 5% of Fortune 500 corporations included gender identity in their non-discrimination policies. Now, 400 of the Fortune 500 include this phrase in their policy.

Introducing gay-friendly initiatives will not skyrocket corporations' quarterly profits, and rejecting LGBT employee policies won't end in overnight bankruptcy. However, the Human Rights Campaign's 500 company sampling provides inarguable support for the value of corporate diversity.

Openness and acceptance serve as signals that companies are willing to look beyond societal norms and recognize worth and opportunity where others do not. Corporate equality won't instantly create corporate equity, but it does embody a values system that can separate great companies from good ones.

As one of the Corporate Equality Index's shining stars, Bank of America has recently seen its fair share of market volatility. To understand the larger context of this bank's ups and downs, Motley Fool Analyst Anand Chokkavelu has prepared a premium report outlining Bank of America's upcoming opportunities and risks. It comes with a full year of updates, so be sure to pick up your copy today!