A number of companies out there think that a good CSR program consists only of a soapbox and a bullhorn. Unfortunately for them, just being loud doesn’t equate with being ethical. Likewise, simply dropping a cool $100 million into clever marketing and public relations doesn’t make a company ethical, either.

The World’s Most Ethical Companies are the ones that go above and beyond legal minimums, bring about innovative new ideas to expand the public well being, work on reducing their carbon footprint rather than contributing to green washing and won’t be found next to the words “Billion Dollar Fine” in newspaper headlines any time in the near future. These are the companies that stand out among the competition in their industry.

So if that’s what it takes to become one of the World’s Most Ethical Companies, perhaps a good question to ask is, what does it take to be eliminated from consideration for the World’s Most Ethical? The obvious answers involve bribery, discrimination, fraud or any number of other illegal activities. The conditions of supplier factories must be taken into account too, as well as the company’s stance on the environment. Product liability is a factor as well.

Of course, no business is perfect. Every large corporation gets sued or experiences a crisis. The World’s Most Ethical Companies are the businesses that respond not with a PR campaign, but with real action, such as complete transparency for the public and significant effort given to fixing the core problem.

With the help of our methodology panelists, our researchers looked at company history as far back as five years. Products that clearly don’t benefit the public’s best interest pulled down a company’s ranking. Because most large corporations take on lawsuits in five years’ time, we looked at the nature and history of each case and the nature and history of the plaintiff, as well as the effect of the issue in question. We noted if a major case was brought about by a disgruntled ex-employee or generally lacked significant merit.

At the same time, we took note of issues and lawsuits that didn’t hit the largest media outlets. And, because of those little-heard cases, a few of the 2007 winners fell off the list this year. Some fell off because newcomers stood out this year, and others dropped because they got caught up in some unpleasant business since last year’s rankings. You can read more about our methodology below to get a breakdown of how we scored each company.

All of the 2008 World’s Most Ethical Companies are standouts in their industries. These companies up the ante for what it takes to be an ethical leader and force their competitors to follow suit or fall behind.

The World’s Most Ethical Companies use ethical leadership as a purposeful method to drive profits. Finally, each of these companies embodies the true spirit of Ethisphere’s credo: Good. Smart. Business. Profit. We salute them and encourage you to do so as well.

Methodology

01 The Starting Line
We began by bringing together a group of expert attorneys, professors, government officials and organization leaders concerned with ethical and honest business practices to create a methodology panel. The panel assisted us in creating the scoring methodology for the World’s Most Ethical Companies awards.

02 Candidate Selection
Over the course of the year, Ethisphere contacted thousands of companies worldwide about the awards to gather information and create a pool of candidates.

03 Making Contact
Semi-finalist companies were then notified and given an in-depth survey questionnaire to fill out regarding their ethics and compliance program, governance and corporate responsibility. To see a copy of the questionnaire, head over to www.ethisphere.com.

04 Crunching Numbers
Ethisphere then conducted data analysis on hundreds of companies based on their responses to the survey, as well as documents and information researched and requested by Ethisphere to confirm survey responses. Every company was then given an EQ score (read more about Ethisphere’s Ethics Quotient on page 80, or see more about that at www.ethisphere.com/EQ) based on the results of the survey and measured against seven distinct categories. These categories are Corporate Citizenship and responsibility; Corporate governance; Innovation that Contributes to the Public Well Being; Industry leadership; Executive leadership and Tone from the Top; legal, regulatory and reputation Track record; and Internal Systems and Ethics/Compliance Program.

05 The Final Stretch
The highest EQ scores for each industry became finalists and were then notified and interviewed by Ethisphere analysts.

06 And the Winners Are…
Finally, 2008 World’s Most Ethical Companies were announced on June 3rd, 2008 at the Forbes-Ethisphere Ethical Leadership Forum in New York City’s Rainbow Room.

You can find more in-depth information on the methodology for 2008’s World’s Most Ethical Companies at www.ethisphere.com/worlds-most-ethical-companies-methodology.

Ranking

Ethical leadership can and should be profitable. through recognizing companies that pursue an ethical leadership model, the Ethisphere Institute both rewards such behavior and motivates winners and other companies to strive for future recognition.

SPOTLIGHT ON SELECTED WINNERS

What goes on behind the scenes of a company to make it one of the World’s Most Ethical Companies? We spoke with a number of individuals directly responsible for the ethical direction of their company. Following are some excerpts from our conversations:

Mark Burns
Global Compliance & Ethics Coordinator
UPS

Mark Burns, the global compliance & ethics coordinator at UPS, reveals that his company uses ethics as a business strategy. “At UPS, we consider being a good corporate citizen a key ingredient that enables us to be a successful company,” Burns says. “In fact, it is part of our overall corporate strategy.”

With over 100 years of business under its belt, UPS has become the world’s largest package delivery company, operating in more than 200 countries and territories worldwide. Mark points out that UPS is “a global company with many different cultures. Although languages and cultures around the world may be different, we do not change our ethical standards at UPS.” To keep up with the worldwide operations, his ethics program must be ready for international demands. “Our ethics program is global in nature,” he says. “We provide ethics and code of conduct materials in 12 languages, ensuring that our employees understand and adopt ethics policies. Our culture also reinforces written policies. Managers are expected to be role models with their subordinates and their performance and career is judged accordingly.”

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Andrew Hinton
Chief Compliance Officer
Google

 

Google hasn’t even celebrated its 10th birthday yet, and it’s already one of the most influential companies in the technology industry. From the beginning, however, Google has been dedicated to conducting business responsibly and reducing our impact on the environment. The most prominent example is Google.org, the company’s philanthropic arm, which is committed to using the power of information and technology to address some of the world’s most challenging problems: Climate change, poverty, disasters and disease. As of January 2008, the organization had already committed over $75 million in investments and grants around the world.Google encourages its staff to become involved in these efforts at all levels and routinely communicates the importance of ethics and compliance to its employees. Additionally, Google is working with a group of other companies, NGOs and academics to help develop a global code of conduct for how to deal with governments that suppress free expression and privacy. As Andy Hinton, Google’s global ethics & compliance officer, puts it, “World class technology is only the tip of the iceberg at Google. Google wants to change the world for the better in very fundamental ways. That’s part of what makes us a ‘different’ kind of company.”

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David Frishkorn
Director of Business Ethics & Compliance
XeroxSpeaking with David Frishkorn, Director of Business Ethics & Compliance at Xerox, reveals a unique approach that Xerox employs in their ethics program. Many companies will place a strong emphasis on tone from the top, and stop there. Frishkorn prefers a different approach. “When everyone focuses on tone from the top, you can have somebody standing there, yelling and shouting, but if they’re not respected, or if the message isn’t properly received, or if the environment is one that is contrary to what the words from the top are, it’s not going to be effective,” says Frishkorn. “The real test of the tone from the top is that it’s received well and that the employees commit to the program.” To that end, Frishkorn says that Xerox helps employees get involved in the ethics program through a basic monthly survey that asks simple questions such as, “Do you think it’s an ethical environment?”, “Do you know about the helpline?” and “Would you call the helpline?” These fundamental questions help the compliance team get an accurate reading of the corporate environment. “There is ample opportunity and space in that survey for people to write in comments, and that’s where we actually get a lot of the ‘good’ data,” Frishkorn says. “So when something monumental happens that is either good or bad from the employees’ perspective, relative to the ethics at Xerox, we can pick up on that pretty quick in the write-in comments.”

 

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David Landau
Chief Compliance Officer
StarbucksStarbucks isn’t just a household name when it comes to coffee, but it’s also synonymous for outstanding CSR practices. David Landau, the company’s chief compliance officer, notes that Starbucks has a long history of ethical leadership. “Starbucks was founded upon notions that all people should be treated with respect and dignity, that diversity is to be respected and embraced,” explains Landau. He notes that these principles are instilled in employees at every level, from barista to the board. “Even during times of transition, Starbucks partners are focused on doing what’s right by each other, customers, farmers, vendors and shareholders; and we are driven by our mission statement and guiding principles.”Landau points out that a successful ethics program is one that “provides key, clear policies and expectations, and is also flexible enough to move with the business. It adapts to support and promote appropriate decisions and outcomes in an ever-changing and complex business environment.”So, what part of Starbucks’ ethics program is Landau most proud of? The way that it enhances everyday life at the company. “Our program supports and promotes an amazing corporate culture,” he says. “Our business ethics and compliance program is truly global and has helped not only Starbucks partners, but business partners as well, to operationalize the company’s values and guiding principles. We’re proud that partners regularly show their trust by contacting us to share concerns or broach questions.”

 

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Dan Amos
CEO
AflacDan Amos, CEO of Aflac, joined the company in 1973, and during his tenure the company has grown into an international powerhouse in the insurance industry. Amos inherited a company that was founded on ethical principles, like many of the World’s Most Ethical Companies. “This company was founded with the premise that if you take care of your employees, they will take care of the company. This principle has proven true for more than 50 years as Aflac has grown from a small family business to a Fortune 500 company,” says Amos.One of the aspects that helps the company continue to thrive is Amos’ transparent leadership. “As a public company there is a responsibility to tell people what is happening regardless of whether the news is particularly good or bad,” Amos admits. “At Aflac, it is our custom to tell the people what we are doing and why we are doing it to limit any surprises in the future. As a publicly traded company, our actions impact the lives of shareholders and since they own our company, they have a right to know what lies ahead.” This isn’t just rhetoric—Amos can regularly be heard around the office telling employees, “Bad news does not improve with age.”Amos notes that Aflac’s ethics program isn’t just intended for upper levels of management. Rather, an ethical culture is taught from the top down. “Our ethics program is company-wide,” says Amos. “It extends from the call center worker to the IT technician to the board room. You cannot work at Aflac without having taken an online course on ethics and privacy and every employee receives constant reminders of the Aflac way of doing business, which is to treat customers, stakeholders and colleagues with respect and dignity. We are proud that our program impacts all who enter our doors and that it is embraced by our employees.”

 

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Shunichi Nakagawa
Executive Vice President,
Legal and Compliance-Global
Global Corporate Communications
Global Information Systems
KaoWhat began as a soap company in the late 19th century, Kao Corporation has since become a leading international manufacturer of cosmetics. Based in Tokyo, Japan, the company has operations in Europe, North America, Asia, the Middle East and Australia.Shunichi Nakagawa, the executive vice president in charge of legal and compliance for Kao, told us that the company was founded with the concept of integrity. “One of our key values written in Kao Way, ‘Integrity’ has been long shared among employees since the foundation of the company, 120 years ago,” Nakagawa told us. “We have Kao’s Business Conduct Guidelines as a code of conduct in our daily activity.” This concept is spread through all employees. “Kao Way and Kao’s Business Conduct Guidelines are introduced and communicated to the employees of the whole group. Programs for ethics and compliance trainings are conducted by various means like internal seminars, intranet, etc. to the employees,” he said.“With this corporate culture, ethics and compliance programs are thoroughly carried out to the employees and each employee fully understands the importance of ‘Integrity.’ This makes Kao stand out among its peers and it is what we are most proud of.”

 

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Thank You

The World’s Most Ethical Companies Methodology Committee is comprised of leading attorneys and government officials, professors and organization leaders who care about ethical and honest business practices.

Ethisphere would like to thank the following individuals for their invaluable assistance in creating the methodology for 2008’s World’s Most Ethical Companies ranking.

COMMITTEE CHAIR: ALEX BRIGHAM Executive Director The Ethisphere Institute	DAVID LOGAN Co-founder and Executive Director The Corporate Citizenship Company
GEORGE W. ASH Partner Foley & Lardner, LLP	CHRIS MACDONALD, PHD President Canadian Society for the Study of Practical Ethics
STEVE CHURCHWELL Partner DLA Piper US LLP	TRACI MELVIN Deputy Director Ethics Bethesda, MD
CHRIS DERI Head CSR/Sustainability Practice Edelman	BRIAN MORIARTY Associate Director for Communications Business Roundtable Institute for Corporate Ethics
JOHN DIENHART, PHD Director Northwest Ethics Network, Seattle University	DR. JAMES O’TOOLE Professor Daniels College of Business, University of Denver
THOMAS DONALDSON Professor The Wharton School, University of Pennsylvania	KAREN PAUL Professor Florida International University
SEAN GIlBERT Technical Director The Global Reporting Initiative	RAMA VELAMURI Associate Professor China Europe International Business School
JENNY KIM Senior Associate Miller & Chevalier Chartered	MARTIN WEINSTEIN Partner Willkie Farr & Gallagher
BEVERLY KRACHER Professor Creighton University	ANDREW WEISSMANN Partner Jenner & Block LLP
MARC LE MENESTREl Professor of Management and Ethics UPF and INSEAD	ALEXANDRA WRAGE President TRACE International

Note: The methodology committee is only involved in reviewing and commenting on WME’s Methodology and is not involved in selecting companies.

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