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March 28, 2001
Procter & Gamble Heads List of 100 Best Corporate Citizens

Business Ethics magazine recently published their annual rankings of the companies that best serve a diverse group of stakeholders.

For individual social investors, evaluating a company's overall social performance can be a daunting task. But they can get a good head start with the latest issue of Business Ethics magazine, which contains its new list of "The 100 Best Corporate Citizens." The top five companies this year were Procter & Gamble (ticker: PG), Hewlett-Packard (HWP), Fannie Mae (FNM), Motorola (MOT), and IBM (IBM). IBM was last year's number one.

"This list makes tangible what has been a theoretical paradigm," said Marjorie Kelly, Editor and Publisher of Business Ethics. "A broad variety of material with amorphous qualities has been translated into a relatively small set of numbers that is easier to grasp and digest."

This year companies were evaluated in seven stakeholder areas, up from last year's four. The areas are community relations, diversity, employee relations, service to global stakeholders, service to customers, environmental performance and stock performance.

Kelly said compiling the list was a collaborative effort. Business Ethics, a Minneapolis-based publication that promotes corporate social responsibility, worked together with KLD, Inc., a Boston-based corporate social research firm, and Sandra Waddock and Samuel Graves of Boston College's Carroll School of Management.

The six non-financial categories are social measures regularly measured by KLD. The "100 Best" was compiled using KLD's data on 650 companies, the same data that is used for the Domini 400 Social Index. Each company's final ranking in a given area is based on three-year averages of data for 1997-1999. Longer term averages were used to avoid one-year blips in performance.

Due to the adding of three new stakeholder areas, the list substantially changed compared to last year. This year saw 31 newcomers, including Freddie Mac (FRE), Corning (GLW) and Apple (AAPL). Wal-Mart (WMT), Coca-Cola (KO), and Anheuser-Busch (BUD) were among those that got bumped off.

Moving up to number one from four last year, Procter & Gamble's best category was service to international stakeholders. It tied for the highest score with four other companies, State Street Corporation (STT), HB Fuller (FULL), Avon Products (AVP), and Starbucks (SBUX).

The consumer giant's lowest score was for environmental performance, which was below average. According to the World Wildlife Fund, P&G is the world's fifth largest buyer of wood products, but has not yet committed to using sustainably harvested wood certified by the Forest Stewardship Council. P&G has also been a target of animal rights activists regarding the testing of products on animals.

Motorola was the only other top five company to score the highest in one category. It excelled at serving customers, tying Tellabs (TLAB) for the top spot. Dell Computer Corporation (DELL) turned in the best financial performance, Computer Associates (CA) had the most diversity in terms of minorities and women, and furniture maker Herman Miller (MLHR) scored the highest in employee relations. The St. Paul Companies (SPC), Minnesota-based insurance company, had the best community relations, and Gillette (G) was found to be the most friendly to the environment.

"A growing number of companies take pride in being included in the rankings, with many sending out press releases to advertise the fact," said Kelly. "Our intention with the list has been to motivate companies to implement tangible change on the inside. I hope we are getting to that point," she added.

While no company has perfect social performance, Business Ethics "100 Best" list illustrates some of the potential to which companies can aspire. Being perceived as socially responsible offers companies such benefits as increased customer loyalty and attractiveness as an employer. If companies begin to compete for inclusion on the list, it will be a win for them and their stakeholders.


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