• Engaged Company Stock Index portfolio outperforms S&P 500 by 25.6 points in 4 ½ years
• 25 Companies win 2017 People-Centric Awards, including 12 repeats from 2015
A hypothetical ETF (Exchange Traded Fund) that has outperformed the S&P 500 by 25.6% in its four and one half years has completed its periodic review and added 21 companies to the 47-company portfolio, while removing a similar number. The ETF was created to demonstrate over time the financial impact of engaging customers, employees and communities.
This year’s 25 top-rated companies on a related scoring system were named winners of the 2017 People-Centric Awards. The companies are:
- Boston Scientific
- Capital One
- Cognizant Technology Solutions
- Goldman Sachs
- Johnson & Johnson
- Lockheed Martin
- Rockwell Automation
- Sempra Energy
- Southwest Airlines
The broader Engaged Company Stock Index (ECSI) is based on the Good Company Index, created by McBassi & Co., a New York City-based people-focused analytics firm that established the index to enable investors and other stakeholders to identify public companies that embrace human capital. The Good Company Index draws from 11 different sources of data to rate approximately 300 of the largest public companies on their levels of employee, customer and community engagement. This strategic focus on engaging everyone who touches an organization is known as Enterprise Engagement.
The Engaged Company Stock Index was commissioned by the Enterprise Engagement Alliance with the support of sponsors EGR International and C.A. Short to demonstrate the impact of Enterprise Engagement business practices over time. If someone had invested $10,000 in the ECSI on Oct. 1, 2012, it would be worth $20,560 on March 31, 2017, including dividends. That same amount invested in the S&P 500 would have yielded $18,000, meaning that the ECSI has outperformed the index by 25.6 percentage points, considered high by any objective standards.
The People-Centric list is a subset of the ECSI and is based primarily on Glassdoor.com overall scores (which rate companies as employers), and American Customer Satisfaction Index scores (which rate companies as sellers).
According to Dan McMurrer, Chief Analyst for McBassi and co-manager of the portfolio, the additions and deletions (made on roughly an annual basis) are always driven by two factors:
One, a company's scores have the greatest impact on the various elements that go into the Good Company Index, on which the Engaged Company Stock Index (ECSI) is based.
The second factor, he says, “is an effort to have a mix of companies across industries, with the goal of ensuring that industry representation is within 50% of the S&P 500 industry weights, so there’s plenty of flexibility while still ensuring that the portfolio doesn’t end up too far overweighted or underweighted in a given industry.”
McBassi’s broader Good Company portfolio incorporates a number of other elements in scoring companies, including multiple elements of being a good steward of the community and the environment – including environmental policies, obeying laws and regulations, restraint (political accountability, reasonable CEO pay and tax policies), etc.
Among the most notable companies are those that have been People-Centric Award Winners in both of the last two years (late 2015 and early 2017). Those companies have done an excellent job of maintaining high scores. “We think our standards are tough,” says McMurrer. “It’s hard to stay near the top. On the Good Company list, for example, we’ve seen more and more companies having problems with penalties/fines (i.e., not fully obeying laws/regulations) and using offshore tax havens.”
On the other hand, he says, “It’s interesting to see that those changes have been largely offset in recent years by companies doing a better job of earning high marks from their employees. So there are plenty of companies with high scores as employers on Glassdoor, but the 12 companies named People-Centric Award Winners in both 2015 and 2017 really stand out in that regard. Clorox and Southwest Airlines, for example, have two of the four highest Glassdoor scores among all the Fortune 500 companies with at least 20 employee ratings.”
Overall, McMurrer says portfolio turnover was very similar to turnover in previous years. A full 52% of the People-Centric Award Winners are new, while 42% of the ECSI portfolio companies are new.