I’ve always been ambivalent about Fortune Magazine’s “most admired companies list” and other corporate reputation scorecards.
Even when polling thousands of people, these lists are still little more than insider popularity contests reflecting the bias of personal agendas, connections to the companies in question and mass media exposure.
The resulting rankings are at best arbitrary, especially for those companies crowded together in the middle of the listings. Is Kellogg’s reputation really less worthy than General Mills because it “scored” .27 lower in Fortune’s anonymous opinion poll?
More importantly, these rankings usually offer no correlation to the impact – good or bad – that a company’s supposed reputation has on its day-to-day business. We are left to assume that an “admired” company would of course do better than one that isn’t.
Not so fast, glad paws.
A new study finds that over the last 23 years, the stocks of companies whose scores put them in the bottom half of Fortune’s reputation rankings performed better than the “most admired” companies.
The investor blog CXO Advisory writes: “Relative returns of the stocks of admired and despised companies vary considerably from year to year and even from decade to decade... But during 1996–2006, the mean annualized return of the most despised is 9.2% higher than that of the most admired.”
The research was conducted by Deniz Anginer at University of Michigan, Kenneth Fisher of Fisher Investments, and Meir Statman at Santa Clara University. You can download their entire paper here.
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