Employee Happiness and Investor Returns: Do Correlations Exist?
For all the purported similarities between the financial markets and the world of sports, there is one stark difference. In the world of sports, when a team accomplishes a lofty objective such as winning a Super Bowl or World Series, it is often the players that get most of the credit. That is not to say coaches, managers and crew chiefs get no credit, but the reality is the players enjoy most of the ensuing rewards for a job well done.
In finance, the reverse is true. Rare is the financial media or analyst report that comes along lauding a company's employees when the shares rocket higher. It is the management team, often times just the CEO, that is on the receiving end of all the praise.
Even though it is the CEO or CFO that gets to be on CNBC, interviewed by Bloomberg and assorted other spoils of C-level accomplishment, a company and its shares can only perform well if most of the employees are on board with whatever the corporate plan may be. Said another way, employee happiness is not the first thing analysts and investors look at when evaluating a stock's merits, but there might just be some correlation between staff and investor satisfaction.
In an effort to see if there is any remote correlation between employee happiness and solid returns to investors, research was conducted on the career web site Glassdoor.com. Benzinga pulled four large-cap companies for this article – one each from the S&P 500's two largest sectors – technology and financials. The next two companies were pulled from other significant S&P 500 sector weights, those being consumer staples and energy. What popped up may surprise investors.
Apple (NASDAQ: AAPL) The highest overall rating a company can receive on Glassdoor is five stars, so Apple's overall score of 3.9 stars is impressive. Keep in mind, reviews on Glassdoor are posted unanimously by staffers of the reviewed firms, but it appears Apple employees are pretty content.
That is probably not surprising given that some Apple workers have been made quite wealthy through stock options. Still, nearly 550 of those posting on Glassdoor said they are very satisfied working at Apple and 82 percent have recommended the company to job-seeking friends.
CEO Tim Cook scores highly with his minions, receiving an approval rating of 95 percent. That alone is impressive considering the remarkable legacy left behind by the late Steve Jobs. The stock has tumbled recently, but is still up nearly 30 percent this year.
Apache (NYSE: APA) The independent oil and gas producer garners 3.9 stars on Glassdoor and that is good for a better rating than rivals such as Exxon Mobil (NYSE: XOM), Chevron (NYSE: CVX) and Anadarko Petroleum (NYSE: APC).
Granted, Apahce only has 16 reviews on Glassdoor, but if that sample set is reflective of most employees, most folks like working at Apache as the company earns four-star ratings for culture and values, compensation and benefits, work/life balance and senior leadership. Speaking of senior leadership, 100 percent of those reviewing Apache on Glassdoor approve of CEO Steve Farris.
The sticking point here is that, along with most of the energy sector, Apahce has faltered this year with the stock off 12.5 percent.
Goldman Sachs (NYSE: GS) Goldman Sachs, the largest U.S. investment bank, must truly employ a lot of capitalists because the company's compensation and benefits score is "just" four stars. The overall rating is 3.8 stars. Controversial CEO Lloyd Blankfein has a 92 percent approval rating.
Actually, that is not surprising. Goldman staffers that have received shares as part of their compensation in recent years should be happy because the stock is up 41 percent this year.
General Mills (NYSE: GIS) General Mills being on this list is not a surprise because the company frequently appears on a variety of best places to work lists. It would appear that those lists are accurate in their assessment of Big G because the company earns a Glassdoor score of 4.1 stars.
Not only that, but 91 percent of the company's staff that offered reviews on the career site say they would recommend the firm to a friend. Additionally, CEO Ken Powell has a 97 percent approval rating.
As this is a low-beta consumer staples stock that investors typically buy and hold for long time frames, measuring the stock's performance over a longer horizon than year-to-date makes sense. Powell became CEO in September 2007. Since then, the stock has jumped more than 40 percent and the dividend has been raised seven times.
© 2014 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.