Facebook Leads Companies With This Secret Weapon
Mar 15th 2013 2:55PM
Updated Mar 15th 2013 3:02PM
Many traders might scoff at pondering measures of happiness as well as cold, hard numbers in investing. However, we're not all traders; some of us are long-term investors. Increasing numbers of us know about a secret weapon to success: trying to find windows to envision what really makes companies tick (or deteriorate).
For example, whether the real, flesh-and-blood human beings who work at the companies you invest in are happy and well treated should be weighed in investment decisions. If they're not happy, you shouldn't be, either. In fact, you should question whether these stocks belong in your portfolio at all. Companies that fail on this measure ultimately don't have bright futures.
Employees "Like" Facebook
Fortunately for investors, the last decade has made it a lot easier to find out how real people feel about their daily experiences with well-known publicly traded companies.
The Internet has opened up more avenues through which consumers can sound off about their customer service or opinions about specific companies. Similarly, it's an excellent vehicle to spread the straight dope from corporations' employees, too.
Glassdoor is one of the Web-based services seeking to enlighten the world about what people really think about the companies they work for. Today, Glassdoor released its list of the 50 highest-rated CEOs of 2013, based on the employee data it culls.
Over the course of its history, Facebook has been a magnet of controversy. Not only do Facebook users tend to get bent out of shape about technological changes and privacy issues, but Facebook's hyped IPO left a lot to be desired in many ways.
Regardless, Facebook employees have clicked a collective thumbs-up "Like" for founder and CEO Mark Zuckerberg. He topped Glassdoor's list, with a whopping 99% approval rating. His rating increased 14% from this time last year.
In a fascinating twist, Zuckerberg knocked Apple's Tim Cook out of the No. 1 slot since last year's report. Cook's approval rating has fallen to 93% from 97%, dropping him into the 18th spot on the list.
Speaking of Apple, last month Amazon.com vaulted over Apple and took the top spot as the company American consumers trust the most, according to the 2013 Harris Poll Reputation Quotient. When it comes to Glassdoor's data, Amazon's leader Jeff Bezos enjoyed a huge rating increase over the last year, jumping 13% to a 93% approval rating. Look out, Cook.
In my last column, I addressed the lack of female leadership in corporate America, and sadly enough, the only female executive who made Glassdoor's list this year was Sharon Turney, who runs Limited Brands' Victoria's Secret unit. She had an 82% approval rating, placing her at No. 42 on the list.
Last year, Hewlett-Packard's Meg Whitman was the sole female chief executive on the list; this year, she's disappeared from the list altogether.
Morale: an intangible but invaluable asset
If you're an investor who has followed investment philosophies such as stakeholder value capitalism or "conscious capitalism," which take many more groups into account than simply shareholders, you know the arguments for good employee treatment. If not, you can read about why such strong foundations boost value for shareholders and everybody else here and here.
In a nutshell, though, happy employees help create happy customers, and these are the lifeblood of any company. Employees who feel well treated and loyal -- and attribute these feelings to the leadership of their companies' chief executives -- are more likely to be positive assets for the company. Not only will they work harder, but they'll likely evangelize about how great their companies are. That's better than any expensive marketing a corporation could create.
Meanwhile, worker opinion is more important than ever given debates about runaway CEO pay. Leaders' compensation doesn't happen in a vacuum, and employees do notice how they're treated compared to top brass.
Management guru Peter Drucker once said that when the CEO-to-worker pay ratio exceeds 20-to-1, employee morale is hurt. Last year, AFL-CIO data found the CEO-to-worker pay ratio was 380-to-1, compared to just 42-to-1 in 1980. Many companies are fighting the SEC's efforts to mandate individual companies' public disclosure of their own CEO-to-worker pay ratios.
Windows into the best companies... and the best investments
The Glassdoor data isn't the only game in town when it comes to weighing such factors. For example, Forbes releases its list of Best Companies to Work For list every year. Recently, Motley Fool analysts released our own list of The 25 Best Companies in America, which weighs a variety of factors including employee treatment.
This is one example of how investors have more means than ever to take a long-term view of companies, and more information than ever before to really understand such important factors that just a few decades ago would have been laborious to unearth (if not impossible).
Forward-thinking, long-term investing assesses far more than stock prices and tickers. More important factors include strong business foundations and management that can build great companies that enrich us all for decades. If workers aren't happy, shareholders ultimately won't be, either.
Check back at Fool.com for more of Alyce Lomax's columns on environmental, social, and governance issues.
The article Facebook Leads Companies With This Secret Weapon originally appeared on Fool.com.Alyce Lomax has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Apple, and Facebook. The Motley Fool owns shares of Amazon.com, Apple, and Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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