Investing in Ethics

The world’s 100 most ethical companies


Ford, General Electric, and Pepsi are among the world's most ethical businesses, according to a new report from the Ethisphere Institute, a corporate governance think tank based in New York.

[See U.S. News's list of the Best Mutual Funds for 2010, and use our Mutual Fund Score to find the best investments for you.]

Companies that "go green" or divest from Sudan tend to get a lot of attention, but those that undertake more subtle efforts to promote transparency and strong corporate cultures often fly under the radar of socially responsible investors. With that in mind, Ethisphere has picked out 100 companies that do a superior job in the area of corporate governance.

To make the list, businesses not only need to have stringent policies in place to weed out corruption and waste, but they also need to actively encourage employees to follow them. "A company can have a hotline where an employee can raise concerns, but with a lot of companies, if the culture is not right, no one is going to use that hotline," says Alex Brigham, Ethisphere's executive director.

The vast majority of the companies on the list are based in the United States, where regulations concerning corporate ethics are relatively strong. Most of Ethisphere's picks are rather unobjectionable, but a casual glace at the list will still reveal a few surprises.

For instance, Nike, which has endured quite a bit of criticism in the past for condoning sweatshop labor, is among the 100 best. Brigham says that Nike has come a long way recently, but he concedes that its reputation for promoting abusive labor practices will haunt the company for years to come.

As a bonus, Ethisphere has found that stocks of publicly traded companies on its list have significantly outperformed the market over the past five years. For more on the link between investing and ethics, see U.S. News's list of 8 Great Socially Responsible Funds. Meanwhile, Ethisphere's full list is available here.