Trust is a keystone to all good relationships— those between investor and the company in which the investment is placed, between creditors and the recipients of credit, between customers and businesses they patronize, employees and the workplace, suppliers and with whom they contract, and more.
Trust affects both our ability to engage in relationships and, in many cases, the cost of maintaining those relationships. Where there is a lack of trust, we substitute contracts, regulations, checks and balances, and intervention. Where there is substantial trust, on the other hand, we allow freedom to operate and to innovate. Trust is earned and can easily be lost. So, its importance cannot be overstated.
A list of the most trustworthy public companies in the United States was published this week, identifying organizations that have demonstrated through various measures to be worthy of trust from key parties in relationships with them. Through consideration of dozens of factors in five key areas of Financial Governance, Environmental, Social & Corporate Governance (ESG), Quality, Relative Risk, and Market-Implied Governance, more than 1,500 companies were assigned Trust Ratings from TGF Analytics -- the firm that produces this analysis -- and rank-ordered.
Among the largest 500 companies in the dataset, 53 earned A+ ratings, while among companies with a market capitalization below US$5 billion, 12 more were given the highest possible grade. Topping the list of large cap companies were:
- Best Buy Co Inc
- Intuit Inc
- Adobe Systems Inc
- The Home Depot Inc
- Nike Inc.
- Ross Stores Inc
- F5 Networks Inc
- Boeing Co
- Rockwell Automation Inc
- S&P Global Inc
And the top five with market caps below US$5 billion were
- Deckers Outdoor Corp
- Louisiana-Pacific Corp
- UniFirst Corp
- Usana Health Sciences Inc
- Texas Roadhouse Inc
Less than 5% of publicly traded companies earned an A+ Trust Rating from TGF Analytics. You can see the complete list of 65 companies by clicking here.
Market Performance of Identified Companies
A static portfolio of the most trustworthy public companies from September 1st, 2017 returned nearly 26%, almost 8% in excess of the broad market, and realized a Sharpe Ratio that was close to 40% higher. In contrast, an equally weighted portfolio of the least trustworthy public companies from that date experienced volatility that was 50% higher than the broad market and realized a Sharpe Ratio that was nearly 20% worse.
TGF Analytics stresses that it is not giving investment advice with these rankings but does provide unique risk insights on publicly traded companies via its methods and products. More information on TGF Trust Ratings can be found on the TGF Analytics website at https://tgfanalytics.com/trust-ratings.
David R. Koenig is the Founding Principal of TGF Analytics, a data analytics firm that assesses the trust in and governance of publicly traded companies as the Founding Principal of (b)right governance, an advisory firm to boards and c-level executives around the world. He is the author of Governance Reimagined: Organizational Design, Risk, and Value Creation (John Wiley & Sons, 2012), is a Research Fellow and member of the Executive Advisory Board of the Center for Corporate Performance at the IIT Stuart School of Business in Chicago, an editorial board member and special editor at the Journal of Risk Management in Financial Institutions, the founder of two global professional associations, and has decades of experience helping organizations to take risk better. He serves as a Governance Advisor to GoChain, a blockchain technology company.
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