Slate's Will Evans warns that the "World's Most Ethical Companies" list issued by Ethisphere may have some validity and credibility issues.
The Ethisphere Insitute, which describes itself as"a leading international think-tank dedicated to the creation, advancement and sharing of best practices in business ethics, corporate social responsibility, anti-corruption and sustainability," is actually a for-profit company. The institute also lends itself credibility with an "advisory panel" of ethicists, yet several former members say they've had little if anything to do with it. Finally, the institute and an affiliated company sell services to and collect fees from some of the same companies Ethisphere extols.
Ethisphere is run by Alex Brigham, who also runs Corpedia, which helps corporations develop and review their ethics programs. The two organizations share office space and staff. Bingham is open with Evans about the potential conflicts of interest but insists that the two organizations are separate and that Corpedia has in fact lost business from companies that are angry at being left off the list or do so well they think they do not need any help.
The conflicts are one problem but the bigger problem is the challenge inherent in evaluating a company's ethics, especially based on self-reporting. Enron had an excellent code of ethics and its CEO made a superb speech about the importance of ethics -- just before the company's financial reports were revealed to be fabricated.
Similarly, in the Wall Street Journal Joann Lublin reports that companies concerned about the credibility of their compensation plans are getting certification from specialized consultants.
DuPont Co. has discovered a new formula for fending off shareholders who want a voice in how the chemical giant compensates its top bosses: Get an outside second opinion.
DuPont retained consultancy Soundboard Review Services LLC for a "fairness" judgment on how its directors set executive pay, according to a proxy statement filed by the company Friday. The advisory firm concluded those practices and processes are "sound," the proxy said. About a dozen other companies have recently hired the New York start-up to conduct similar reviews.
The DuPont review didn't cover the amount or type of pay afforded executives, however. And critics are concerned the DuPont board is just buying good marks. Still, it is part of a wider effort by directors and management to find fresh ways of offering shareholders more information to deflect rising public anger over sizable executive rewards.
Lublin did not find much enthusiasm from shareholders.
While investors hunger for a fuller picture of executive pay, an outside review "bought for a stamp of approval" becomes worthless, says Ann Yerger, executive director of the Council of Institutional Investors.
Nell Minow - Editor
