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At Least We Excel at Something

With the current financial circus pitching its big top at a foreclosed house near you, it's tough to pick out exceptionally awful companies among the detritus of publicly traded disasters.
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For one thing, what metrics —
we already talk the talk 'round here — do you use?

At The Consumerist,
how customers get the shaft is the preferred yardstick, and the determinant is
public input. Hence they host a series of contests, corporate death matches if
you will, pitting the likes of Ticketmaster against Wachovia (Ticketmaster wins
on our brackets), or Comcast vs. Menu Foods.

But a lot of companies have shown a remarkable ability to
weather customer outrage. How about outrage from investors? While it helps if
the investor has the surname Icahn, another 800-pound gorilla, California’s $235
billion Public Employees Pension Fund, has released its top 5, er, bottom 5,
companies today.

The eagerly anticipated “focus list of underperformers”
includes a couple of consumer names, such as Cheesecake Factory and La-Z-Boy,
as well as insurance broker Hilb Rogal & Hobbs, health care equipment
supplier Invacare, and homebuilder Standard Pacific.

What’s noteworthy about the CalPers list is that it goes beyond
stock performance, which any number of second-tier personal finance mags can dissect,
to assess corporate governance of both C-level execs and directors. For
example, the Cheesecake Factory is urged to adopt a “clawback” policy allowing
it to regain money its paid executives who are shown to have committed fraud or
submitted bogus performance data.

Besides the satisfaction of nailing the creeps, this matters
how? Well, according to CalPers: “Research shows that improved corporate
governance leads to performance gains, over time. Wilshire Associates studies
of the ‘CalPERS Effect’ of corporate governance have found that the stock
values of companies on the Focus List generally outperform the Standard &
Poor’s 500 Index later.” So pulling up your socks pays non-tax-advantaged dividends (although not everyone concurs).

Another metric is employee satisfaction. As our Amy Ramos
wrote a while back, “Professor Alex Edmans of the University of Pennsylvania’s
Wharton School of Business says stock performance and social responsibility
don’t have to be mutually exclusive, if the criterion the investor uses for
social responsibility is employee satisfaction. Edmans recently published
research in which he demonstrated that publicly traded companies on Fortune magazine’s annual “100 Best Companies to Work For” list  earned more
than twice the market return
from 1998 to 2005.”

We point this out because Standard Pacific made it to No. 85
on Fortune’s 2007 list.