Employees are willing to invest themselves in the corporations for which they work and to put various aspects of their lives at risk. In certain industries this means risking their health and safety, in others it means investing time that they could otherwise share with their family, and in others it means investing intellectual capital and developing company-specific skills. By treating employees fairly, by investing in their personal health, safety, skills, and sense of self-worth, as well as by assuring a living wage and comfortable retirement, companies can go beyond their mere contractual relations with employees to create a positive work environment. We believe that corporations that treat their employees well should, in the long run, attain high levels of employee loyalty, high levels of productivity, and low levels of turnover — all potentially substantial contributors to profitability.
The following are the five major themes by which we assess the strength of corporations’ relationships with their employee partners. While other issues are also important in this regard, these five are those which we believe we can most meaningfully and consistently assess.
Continuous Improvement in Health and Safety
The health and safety of employees are among the primary obligations of employers. Commitments to perfection in workplace safety, proactive programs to improve physical fitness, and assistance to employees in dealing with personal or family problems are all investments that corporations can make in their workforce that are not only the right thing to do, but will increase worker productivity and loyalty. Cost cutting in these areas, we believe, can be a shortsighted approach to management and impose on society costs that companies have a legal and moral obligation to bear.
We therefore seek companies that have made substantial investments in health and safety programs that produce strong results. Conversely, we view with concern those that have a pattern of neglect, particularly those where neglect has resulted in fatalities or regulatory sanctions.
Fair and Just Compensation and Benefit Programs
Appropriate levels of compensation and benefits are a foundation upon which the relationship between corporate management and the average employee is built. Abuses of this relationship damage not only executives’ credibility with workers, but undermine stockowners’ trust in management and, more broadly, the public’s trust in business itself. By contrast, companies that take steps to assure gender equity in pay, appropriate commitments to the financial well-being of their retirees, and a management bonus system that rewards implementation of social and environmental policies as well as financial goals build their credibility with their stakeholders and align their companies’ reward systems with larger societal goals.
We understand that numerous complications can arise in these areas and focus our evaluations on the cases of most extreme abuse or notable success. On both the positive and negative sides we consider how a company handles these issues as a strong indicator — and indeed determinant — of corporate culture.
Commitments to Diversity in the Workplace
We believe that in a global economy diversity in the workforce is one of the hallmarks of a well-managed corporation. Definitions of diversity can include diversity related to gender, ethnicity or race, age, sexual orientation, disability, economic or class background, religion, and political opinion. Corporations benefit from a diverse workforce because they can better capitalize on the capabilities of the full spectrum of their employees; can better understand the needs and desires of the full range of their current and prospective customers; can better anticipate new societal trends and emerging issues; can better foster understanding, mutual respect, and cooperation among their workforce; and can better recruit from the widest possible pool of talent. A diverse workforce, particularly among positions of authority, can indicate a corporate culture based on merit and open to new ideas and perspectives.
We therefore look for companies that have substantial representation of women and minorities among management-level positions, in particular among their senior line executives; companies that have created a notably open work environment for minority groups — for example, for gay and lesbian employees; and companies with strong programs for training on sexual harassment and respect for diversity. Conversely, we view with concern companies that have a record of diversity-related controversies and regulatory sanctions, including those related to sexual harassment and discrimination.
Empowerment and Investments in Training
In addition to the compensation and benefits employees are entitled to through employment contracts, companies can, and should, commit to investing in their workforce through employee involvement programs, skills training, support for general education, sharing in the financial success of the firm, and other programs that enrich employees’ lives and empower them in the workforce. A company where employees work only to the letter of their legal obligations, without passion, commitment, or creativity, is a company that will struggle in the marketplace. It is through such investments that companies align employees’ sense of personal growth and satisfaction with the growth and success of the firm, in a relationship equally beneficial to both parties.
In this regard, we look for companies that share their financial success through profit sharing, stock option plans, employee stock ownership, employee suggestion plans, or other forms of employee involvement and empowerment. In addition, we look for firms that invest substantially in employee training and skills development, provide substantial tuition reimbursement for education, and generally foster a culture of self-realization and growth.
Solidarity with Unionized Workforce
The acceptance of unions as a positive force in the workplace and the government protection for their activities that emerged through a series of hard-fought battles throughout the 20th century have made a major contribution to the stability of the capitalist system and addressed many of its worst abuses. The rights to freely associate and form or join a union of one’s choice and to bargain collectively for the terms of one’s employment are among the core conventions of the International Labor Organization and are recognized as fundamental human rights. Healthy and vital unions play a crucial role in addressing the imbalances in power that often arise between corporate management and workers in their struggle for fair working conditions. Without unions, the possibilities for long-term equal partnerships between management and labor would be vastly diminished.
Managing union relations, however, is a difficult task. Antagonistic relations between unions and management can spiral downward out of control to the detriment of both parties, whereas independent but tough relations can be useful in confronting many of the challenges that businesses inevitably face. Moreover, overly aggressive efforts by management to stop drives to unionize non-union employees can lead to protracted battles that cause more harm than good for all parties.
We therefore seek to identify companies where management and unions work respectfully with each other in balancing the appropriate needs of both constituencies. We understand that negotiations between management and unions must necessarily be hard-fought at times, but view with great concern situations where relationships have deteriorated into fundamental mistrust and disrespect.