Firms ranked on ethical behavior

Internal Auditor, June, 2005 by D. Salierno

ENGINE MANUFACTURER Cummins Inc. topped Business Ethics Magazine's annual survey of the "100 Best Corporate Citizens," a ranking of leading ethical performers on the Russell 1000 Index of publicly listed U.S. companies. The survey, published in the magazine's Spring 2005 edition, has gained national recognition as an indicator of best practices in the area of corporate social responsibility.

Cited as a world leader in emissions reductions, Columbus, Ind.-based Cummins has made the "100 Best" list for the past six years. Green Mountain Coffee Roasters Inc. of Waterbury, Vt., received the second-highest rating, hailed as "a pioneer in helping struggling coffee growers by paying them fair trade prices." Property casualty insurers St. Paul Travelers Companies was ranked third in recognition of its community service.

"What distinguishes the 100 best corporate citizens from their peers is a commitment to higher standards," said Marjorie Kelly, editor of the magazine. "The list represents ... those [companies] that perform to a higher standard in serving a variety of stakeholders with excellence and integrity."

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The survey is based on a database maintained by KLD Research & Analytics, a Boston-based social research firm. Researchers ranked companies in eight different categories: total return to stockholders, community, governance, diversity, employees, environment, human rights, and product. Each firm then received an overall score based on its cumulative rankings in these areas.

Governance was rated for the first time this year. Companies scored negatively for accounting restatements or excessive chief executive officer (CEO) pay and positively for paying CEOs less than US $500,000 per year.

Five of the top 10 companies--Cummins, St. Paul Travelers, Intel Corp., Hewlett-Packard, and Procter & Gamble--have appeared on the list every year since its inception in 2000. Two of these companies, Hewlett-Packard and Procter & Gamble, have been ranked in the top 10 six years in a row.

Xerox Inc. returned to this year's list after a five-year absence. After recovering from accounting scandals that led to a fine and settlement with the U.S. Securities and Exchange Commission, Xerox was cited by the survey for excellence in areas such as community and diversity. Last year's No. 1-ranked company, Fannie Mae, was removed from the 2005 list due to investigations surrounding accounting irregularities at the government-chartered home-mortgage lender.

For more details on the survey, visit the publication's Web site at www.business-ethics.com.