CSRHub Blog Research on ESG metrics and comments on sustainability best practice

HBR’s Top Performing CEOs List - Financial Results and Sustainability—A Complex Relationship

[fa icon="calendar'] Oct 26, 2016 8:00:00 AM / by Bahar Gidwani


The Harvard Business Review (HBR) recently published its 2016 list of the world’s top 100 CEOs.  As in the past, HBR’s staff looked at the financial and ESG (environment, social, governance) performance of the CEOs of 1,200 large companies.  They used a measure of financial performance developed by a team of Harvard academics for 80% of their score.  The remaining 20% came from averaging two overall measures of corporate sustainability performance, including CSRHub.

HBR has been publishing this list since 2010 and CEOs apparently intently study their “rank” and any year-to-year changes.  The list originally included only measures of financial return.  In 2015, HBR started including ESG performance, such as those CSRHub gathers and reports.

Is there a connection between a CEO’s financial performance measure and the corporate social responsibility (CSR) or ESG performance of the CEO’s company?  Those of us who care about sustainability would expect (hope?) the answer is “Yes.”  Unfortunately, details we uncovered during this year’s rating process say that the answer is probably “Maybe” or “It depends.”


Are the Top 100 Different From The Rest?

CSRHub rates the perceived ESG performance of 16,550 companies in 133 countries.  We have full ratings on 1,180 of the 1,200 companies that HBR studied.  The table below compares the average performance for the top companies against the rest of the list, for community, employee, environment, and governance issues.  (HBR included 104 companies in its Top 100 list, due to a number of ties.)


Comparison of the CSRHub Corporate Social Responsibility Rankings for HBR Top 100 Companies and Those Not Chosen

Comparison of the CSRHub Corporate Social Responsibility Rankings for HBR Top 100 Companies and Those Not Chosen


As you can see, the top companies had only slightly better perceived sustainability performance than the rest of the companies.  When we adjust for the different number of companies in each of the two groups, there is a significant (P<0.02) difference only in the Community area.

This suggests that the best CEOs out of this sample of companies pay a bit more attention to issues associated with the sustainability of their Products, have good Philanthropy programs, and care about Human Rights and their Supply Chains.  But, they don’t seem to pay significantly more attention than other CEOs to issues relating to Employees, the Environment, or to their corporate Governance.  And, they still rank in their community efforts below the average of the other 15,000+ companies we track.


Are the Top 50 Financial Performers Better Than the Next 50?

What about the “best of the best?”  If we divide the HBR Top 100 into two groups by their HBR financial performance scores, would the top financial performers have better or worse social performance than the bottom group?

The table below shows the answer to this question.  It is probably an answer that many sustainability professionals will not want to hear.  The top financial performers had much worse perceived sustainability performance than those with somewhat worse financial performance.

Comparison of the CSRHub Corporate Social Responsibility Rankings for Top 50 Companies and the next 54 Companies as Ranked By Their HBR Financial Performance Score


Comparison of the CSRHub Corporate Social Responsibility Rankings for Top 50 Companies and the next 54 Companies as Ranked By Their HBR Financial Performance Score


These results are good evidence that some CEOs may emphasize good shareholder returns (high profit margins, high turnover of assets, strong stock performance, etc.) rather than good social performance (good community relations, happy employees, a clean environment, etc.).  Of course, the HBR study focuses only on very large, publicly-traded companies and there are only 104 companies where we have full data.  But, there is virtually no probability—P < 0.000001—that the top 50 do not trail the next 54 on both overall ratings and on all four categories of social responsibility.


Does It Make Sense to Combine Financial With Social?

The table above illustrates why HBR decided to integrate social issues into their ranking.  Using a single financial scale wasn’t teasing out the best CEO performance.  Using only social measures wasn’t doing it either.  Instead, HBR integrated the two measures in a balanced way that resulted in the surprising result shown below.

Comparison of the CSRHub Corporate Social Responsibility Rankings for Top 10 Companies and the next 94 Companies, as Ranked by their Overall HBR Score


Comparison of the CSRHub Corporate Social Responsibility Rankings for Top 10 Companies and the next 94 Companies, as Ranked by their Overall HBR Score


The financial scores within the Top 100 are pretty similar.  By using a social performance signal to differentiate among these financially similar performers and create an Overall HBR Score, HBR was able to pick a top group that had both good financial returns and strong sustainability performance.  This shows it is possible to both “do well” and “do good.”  Thanks to HBR, CEOs who manage this difficult balance have a shot at getting the recognition they deserve.


Bahar GidwaniBahar Gidwani is CEO and Co-founder of CSRHub.  He has built and run large technology-based businesses for many years. Bahar holds a CFA, worked on Wall Street with Kidder, Peabody, and with McKinsey & Co. Bahar has consulted to a number of major companies and currently serves on the board of several software and Web companies. He has an MBA from Harvard Business School and an undergraduate degree in physics and astronomy. He plays bridge, races sailboats, and is based in New York City.


CSRHub provides access to the world’s largest corporate social responsibility and sustainability ratings and information.  It covers over 16,000 companies from 135 industries in 132 countries. By aggregating and normalizing the information from 461 data sources, CSRHub has created a broad, consistent rating system and a searchable database that links millions of rating elements back to their source. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices, and seek ways to improve corporate sustainability performance.


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Join CSRHub’s Cynthia Figge at the Global Conflict Minerals Symposium!

[fa icon="calendar'] Aug 15, 2013 9:00:20 AM / by Cynthia Figge

CSRHub COO and Co-founder Cynthia Figge will be speaking at the Conflict Minerals Symposium on August 21-22, 2013 in Los Angeles, CA.

The Global Conflict Minerals Symposium event will provide a forum for senior corporateConflict Minerals Symposium and compliance executives, key regulatory officials, academia and ethics officers, legal professionals, sustainability/CSR experts and industry leaders to share their practical experience, insights and global vision relative to meeting the traceability and due diligence requirements of Section 1502 of the Dodd-Frank Wall Street Reform Act. The symposium is hosted by Conflict Minerals Consortium.

Cynthia is lending her expertise to the Linking Conflict Minerals to other forms of Compliance (REACH/RoHS, Human Rights) session.

The breakout session includes:

Register for the Symposium Now and Save!

Mention Cynthia Figge’s name during registration, and receive a complimentary training pass ($295 value) for the Conflict Minerals Compliance Program Training! Learn more.


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Do Companies Lead Countries Towards Social Development?

[fa icon="calendar'] Sep 17, 2010 8:10:25 AM / by Bahar Gidwani

The United Nations Development Program (UNDP) has been publishing an independent Human Development Report (HDR) for almost twenty years.  Its associated Human Development Index (HDI) is well-respected, broad (182 countries), and widely read (they translate it into a dozen languages).  In contrast, our CSRHUB ratings system has just recently launched and is not nearly as well known.  While we cover more companies (more than 5,500) and countries (66) than any other source of corporate social responsibility information, we can’t claim the same level of authority or readership as the HDI.

Further, our ratings describe company behavior—the HDI talks about countries.  Should there be a connection between these two data sets?  One could hypothesize either that countries with a good HDI score produce socially positive companies or that socially positive companies help foster a business climate in their countries that addresses human development.  Either way, we could see a correlation between our average Community rating (which contains information about community development, philanthropy, human rights, supply chain issues, and product quality) and the HDI.

We only have enough data to match up 52 of the 66 countries we cover, with the HDI information.  Still, a 50+ point data set should be enough to reveal if there is a meaningful relationship between two sets of data.  When we graph our 0 to 100 country score against the HDI’s 0.0 to 1.0 range, we see only a 3% correlation.  This suggests they may be no relationship between company behavior and country norms.

UN HDI and CSRHUB Community Ratings Correlation Notice the cluster of data points to the right and the long tail of points that stretches to the left?  Most of the points on the right (with good HDI values) are for developed economies.  The tail to the left includes smaller, less developed countries.  Many of the less-developed countries have only a few major publicly-traded companies.  The social standards set within these major companies may not be representative of the general level of social performance of companies in those countries.

If we remove countries where we have a small number (fewer than 20) of companies and exclude the still-developing economies of India and South Africa, we find a much stronger (27%) relationship between our community rating and the HDI.

UN HDI and CSRHUB Community Ratings Developed The connection between these data sets is still not perfect.  For instance, our top three countries on the Community score within this set are France, the Netherlands, and the UK.  The top HDI scores for this set of countries are for Australia, Norway, and Canada.  We need to have more data points over a longer baseline (our site has only been up for about six months) before we can claim to have proven a relationship.  Still, it is encouraging to see signs of a connection between companies and their countries.

What about that tail of developing and smaller companies?  The Community scores in our system were generally better than the formula from the developed-company correlation would predict.  This suggests that the top companies in these countries have standards for their social performance that exceed what we might otherwise expect.  Perhaps this is due to these companies being exposed to pressure from overseas customers and investors, to perform better on human issues?  Many of these companies are listed on foreign stock exchanges and some have already started producing CSR reports.  (50% of the companies we cover in South Africa have done CSR reports, but only 10% of those in India.)

If companies follow the standards of their country—and improve as their countries improve—we should see the gap between the HDI score and our score close up, over time.  If countries follow the example set by their leading companies, we might see company scores continue to improve and the HDI/CSRHUB Community score gap stay the same.  We will try to revisit this analysis a year from now, and see how things have changed.

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