As those of you who follow Vanno know, we try and track all the non-financial aspects of company reputation - how companies treat their customers, employees, communities, the environment and society in general.     How – or even whether – this correlates to financial performance is a profoundly important question at many levels.    

In this post, we’ll take a look at the 2009 Business Week 50 - a sample of companies that is clearly on the leading edge of the financial performance distribution.    The Business Week criteria cover such well-known financial metrics as profitability, sales growth and total returns over one and three year periods, and the 2009 list includes household names as well as lesser-known cogs in the industrial machine.   But how do these companies fare when it comes to things like job satisfaction, customer service, product safety and origin, human rights, corporate governance, charitable giving, diversity, sustainability and clean energy?  

First the data.   In the graph, you can see the 2009 Business Week 50 companies along with their Business Week rank (1-50) and their overall Vanno reputation rank (out of 5800+ companies) as of March 29 2009.  The ranks are shown on a logarithmic scale for clarity.  

The graph suggests that the non-financial reputations of the Business Week 50 - at least according to Vanno – significantly lag their financial performance.  Only two companies – Starbucks and Nike – rank in the top 50 in both lists.   But before we jump to conclusions about the correlation (or lack thereof) between financial performance and non-financial reputation, let’s look under the hood of this particular comparison a little more closely.

First, it’s important to recognize the extreme nature of the sample that the Business Week 50 represents.   These are not average companies from a financial perspective, so a possible characteristic measured across a much larger population of companies – e.g. a tendency for socially responsible companies to slightly outperform - may well not appear in this sample.   

Second, the facts that a) the Vanno Index has no data on three companies (CF, Diamond and Manitowoc) in the Business Week 50, and b) the Vanno rank of some of those lesser-known to the general public are based on a sub-critical mass of user input speak against quantitative comparison of the two rankings at a company-by-company level.   The trend clearly seems significant, however, as it is supported by the Vanno ranks for companies like Apple, Procter & Gamble, Google,  Verizon, PepsiCo, Coca Cola, Amazon and Best Buy, whose scores are based on Vanno user input with significant statistical weight.

So what can we conclude?    Like many other company stakeholders, we’re still looking for clear evidence that a good non-financial reputation has a positive influence on financial performance.  One thing we can say from this comparison, however, is that if such a correlation exists for the overall population of companies, it certainly isn’t manifest in this sample of best performers.