Exclusive: Ethical companies spread open approach: survey

BOSTON Tue Mar 15, 2011 4:59pm EDT

General Electric Chief Executive Officer Jeffrey Immelt speaks at a news conference in New York, in this October 21, 2009 file photo.R EUTERS/Mike Segar/Files

General Electric Chief Executive Officer Jeffrey Immelt speaks at a news conference in New York, in this October 21, 2009 file photo.R EUTERS/Mike Segar/Files

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BOSTON (Reuters) - Companies that embraced the spirit of full disclosure -- breaking bad news to their customers or investors promptly -- stood out on a 2011 ranking of the world's most ethical companies.

That type of candor is important in a world that has been rocked by financial crisis and where investors are now watching the biggest U.S. insider-trading trial in years.

The Ethisphere Institute, a New York-based think tank, on Tuesday released its fifth annual ranking of the world's most ethical large companies, which it expanded this year to 110 entries, which stand out for having strong policies on ethics and enforcing them.

The list includes some of the world's largest companies, including General Electric Co (GE.N), Statoil (STL.OL) of Norway and Swiss Reinsurance Co Ltd RUKN.VX.

TELL THE TRUTH

U.S. insurer Aflac Ltd (AFL.N), on the list for five years straight, said its strong approach to ethics includes alerting investors to problems quickly.

"Bad news does not improve with age. The faster you get out anything bad, the better off you are. There is a tendency, I think, in corporate America and in our personal lives to say, 'This will go away, let's not deal with it,'" said Daniel Amos, chief executive of the Columbus, Georgia-based company. "I have generally found it is better to go ahead and get it out in front of people and if it goes away, so be it. Don't try to wait or it just grows and gets bigger as time goes on."

During the financial crisis, Aflac confronted a crisis of confidence in its debt by posting details of all its outstanding bonds on its website for investors to pursue, Amos said.

Not all sectors of corporate America have embraced that open approach, said Alex Brigham, executive director of the Ethisphere Institute, noting the list includes big insurers and foreign banks, but no Wall Street investment banks.

"What we see, particularly within the financial sector, is just an increased trend of transparency, better explanations to customers and to employees. Aflac is a harbinger of that," Brigham said. "Will that sweep through Wall Street? That remains to be seen."

GROWING GEOGRAPHIC SCOPE

The list also included more non-U.S. companies than in years past, including Natura Cosmeticos (NATU3.SA) of Brazil and the Housing Development Finance Corp (HDFC.BO) of India. In total, 38 percent of the companies to make the list this year came from outside the United States, up from 21 percent in 2010.

As businesses in the developed and emerging worlds become more dependent on each other, managers in developing markets are adopting the tighter ethical rules of U.S. and Western European companies, Brigham said.

In addition to upholding companies' ethics standards, these changes are making it easier for Western businesses to compete in emerging markets, said Bill Marriott, chief executive of U.S. hotel operator Marriott International Inc MAR.N

"There are these 'facilitative payments,' I guess they call them, where you have a general manager of a hotel and they tell him, 'You want your trash picked up at Friday at 8 a.m.? We want a little extra.' We don't do it. We just say no," Marriott said. "When we go outside the United States, I think people are accepting the fact that we don't do this. If you have accepted something, then you know that you are dealing with someone who won't put up with it, then it goes away."

(Reporting by Scott Malone, editing by Dave Zimmerman)

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