The World’s Most Admired Companies vs. the World’s Most Valuable Companies

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Each year, Fortune magazine puts out a ranking of the world’s most admired companies. Here are the top 10 from the most recent list:

  1. Apple
  2. Google
  3. Berkshire Hathaway
  4. Amazon.com
  5. Starbucks
  6. Walt Disney
  7. Southwest Airlines
  8. American Express
  9. General Electric
  10. Coca-Cola

An impressive list, to say the least. And perhaps no surprise that you likely recognize, and have interacted with most, if not every, firm on the list.

What I do find interesting, and gratifying, is how well these firms also rank in terms of overall market value.

Here is the ranking of the top 10 firms, based on market capitalization, as of the close of the financial markets today (9/4/2015):

  1. Apple
  2. Google
  3. Microsoft
  4. Berkshire Hathaway
  5. Exxon Mobil
  6. Wells Fargo
  7. Johnson & Johnson
  8. Facebook
  9. General Electric
  10. Amazon.com

When comparing the two lists, here are some things I noticed:

  • the two most admired firms, Apple and Google, are also the two highest ranked firms by market value
  • six firms are ranked in the top 10 on both lists
  • Johnson & Johnson just missed being listed in the top 10 of each ranking, coming in at number 11 on the most admired list

While I did not run any regression analysis to see how strong the relationship was between the two rankings, a quick glance certainly makes it seem as if there is a good deal of correlation between the two lists.

And while it is certainly possible that having a large market capitalization could cause a company to be more highly admired, my guess it that the relationship works the other way – being a highly admired company leads to having a higher market capitalization.

And to me that’s cause for celebration.

The hard work that these firms have adopted to earn the admiration and respect of their customers, employees, vendors, competitors, investors, and other stakeholders by doing business the right way seems to have paid off, at least as measured by the overall market value of these firms.

Perhaps this should not come as a surprise.

In a similar comparison, researchers looked at the overall stock performance of 18 publicly traded firms that were identified as the most “conscious” – based on characteristics such as their stated purpose, generosity of compensation, quality of customer service, investment in their communities, and impact on the environment.

The results indicated that over a 15-year period (1998-2013), these 18 stocks outperformed the S&P 500 index by a factor of 14 times!

So it seems that doing business the right way and treating people (customers, employees, vendors) with respect not only earns the admiration of these individuals, but leads to financial success as well.

Doing well by doing good, a powerful concept.

Published by

Jim Borden

Accounting Prof. at Villanova; happily married for 30+ years; father of 3 outstanding young men; vegan; interests: fitness, creativity, education, blogging, social media.

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