The 5 Best Companies in America: You Won't Know Most of Them

Cummins - Bloomberg News/Tom Strickland
Tom Strickland, Bloomberg News via Getty Images
There are dozens of ways to evaluate and measure the success of a company -- from customer service to employee satisfaction to profits, payouts, peer rankings, and more.

From an investor's perspective, however, the measures that traditionally receive the most acclaim are rapid earnings growth and a rising stock price.

Too bad this approach to analysis is severely flawed.

Had you based your investing decisions on rapid earnings growth and rising share prices, there would have been no question that Countrywide fit the bill to a T. The nation's largest mortgage lender certainly delighted its shareholders with huge profits from 2003 to 2006. Alas, the company drove itself into bankruptcy by mistreating its employees, homeowners, and mortgage investors -- three key stakeholders in its core business.

On a more mundane level, anyone who's ever had to deal with a surly checkout clerk can tell you that failing to look after employees and customers can result in lost future business for a retailer.

Of, For, and By the People

A lot of people are involved in a company's success -- or failure. As professor Ed Freeman of the Darden School of Business at the University of Virginia puts it, "Business is about how customers, suppliers, employees, financiers, communities, and managers interact and create value." Several studies suggest that companies that focus on multiple stakeholders tend to achieve better financial performance over the long term.

So which companies have got the mix right? Which ones are able to benefit all stakeholders?

The Best Company in America Is ... What?

For the past several months The Motley Fool has been compiling data and analyzing more than 1,700 public companies to discover the 25 best public companies in America, measured by their success in serving investors, customers, employees, and the world at large.

Some of the names will be familiar to you. Costco earns a spot, as does Aflac, Intel, Whole Foods, Coach, and Starbucks. But there are many you may not have heard of -- and as an investor, that's a shame.

Here are the five that rose to the top of the list. You can get more details on how we made the rankings, and link out to the entire top 25 list from the last slide in our gallery.

The Motley Fool recommends Apple, Cisco Systems, Cummins, and Teradata. The Motley Fool owns shares of Apple, Cummins, General Electric Company, and Northrop Grumman. Try any of our newsletter services free for 30 days.

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Apart from investors/stockholders there has been a Great Plague cast over American industries, a plague known as the Jack Welch Method. Jack Welch, former Chairman of GE, seemed like a business genius during his heyday at the helm. GE thrived -- and so did Welch--- but at the terrible psychological and financial cost to lower-level GE employees and employees of other businesses who copied his ruthless method. It was Welch, more than any other, who brought into widespread use the employee rank-in-grade system. For example, each part of the company would do a formal evaluation of each person in his work title to create a ranked list. Here is Henry. He is the most valuable Senior Muckety Muck at our sit e in Pittsfield. Then there is Oliver, our most valuable Senior Muckety Muck in London, etc. Some group of managers would then be charged with merging these lists from distant sites containing names of people they don't even know. Nevertheless, they will come up with a ranked list of Senior Muckety Mucks for a given year. Then Welch directed that the bottom 10% of the people on this list be fired -- every year.. He ruled by fear. This method almost completely assures that the company will eject people as they pass through the promotion system and, more significantly, as they grow older. Each time an employee is promoted, he becomes ranked in a more competitive peer group. Eventually, a lot of them will be fired as a natural consequence of this evil system. It is an effective way of committing age discrimination in your workforce without seeming to be so evil as you really are. To the top brass, this system will always seem to work well, after all, it is working to move THEMSELVES up the ladder. The system has rocketed the "boy wonders" to the top in a hurry.

To make things even worse, Welch wrote management books evangelizing about this evil method. The method commits one of the most basic fallacies in economics and business, the fallacy of composition. A business method works for one group of people, but once it becomes widespread, it becomes a national plague. It is good for a few people to save money, but if everybody does so, then the economy will halt. At one point during Welch's reign of terror, one of his sites had an average employee age of less than 30.

Now, because of Welch's books and because of his influence in boardrooms all over America, his method has been adopted by many big names in corporate America. Exxon has a similar system, so does Goldman Sachs, Dow and many, many others. It looks rational until you put away the microscope and look at a wide-angle view.

Does it strike anybody as odd that those corporations firing the bottom 5 or 10 per cent, if they had to re-hire all of their victims, would bring our national unemployment statistics back to normal?

Thank you, Jack Welch. You took good care of yourself before you retired, didn't you?

March 25 2013 at 5:54 AM Report abuse +1 rate up rate down Reply

I am a 62 year old retired nursed, who due to family commitment, BILLS, etc Never had the
opportunity to invest, but now I am in a better spot. Can you sent me some inform information
from this article. How can I start some trade, with Cummins, Costco, Whole Foods, and
Couch. Can I start with $50- $100 dollars?
Thank you,
Ann Ellis

March 23 2013 at 10:49 PM Report abuse rate up rate down Reply

Im not sure about Colgate Palmolive I think they test on animals can someone check on

March 23 2013 at 2:37 PM Report abuse rate up rate down Reply
2 replies to Stacie's comment

yea just test on humans,duh. It's a animal or maybe you could donate your children

March 23 2013 at 10:20 PM Report abuse -1 rate up rate down Reply

Yes, Cogate Palmolive do perform horrific tests on animals, therefore should not be included on this list.

March 24 2013 at 9:59 AM Report abuse rate up rate down Reply
1 reply to etinamax's comment

If your exclusion criteria for purchasing shares or (more importantly) medications and some foodstuffs include testing on animals you must enjoy colds, fevers, infections, and just about any malady for which there are preventive or curative measures. I hope you have terrific genes and never have a sick day in your life.

March 24 2013 at 6:07 PM Report abuse rate up rate down