Film Noir has long been one of my most favorite film genres. From its beginning in the early ‘40s to the end of its run in the late ‘50s; I found it a fascinating study of the light located in the shadows which was a prime shooting style. Inspired by, if not influenced by, German Expressionism, the visual effects of shooting through half-closed blinds or filming in darkened rooms or outdoors at night helped create an atmosphere at the darkness of the human heart.

They were largely seen as “B” movies but that did not speak to their quality, only their funding in the old Hollywood studio system then in its heyday. It also meant there was less studio control and more creative freedom by the film makers and most especially the cinematographers. It also meant less oversight from the Breen Office which provided censorship back in those days. I was reminded of my love of the Film Noir genre while listening to this week’s podcast of Unspooled, where hosts Paul Scheer and Amy Nicholson are reviewing the American Film Institute’s Top 100 greatest films of American cinema. This week it is Double Indemnity, hence today’s homage to Film Noir. 

The darkness in Film Noir stands in direct contrast to the light of day transparency found in this year’s World’s Most Ethical (WME) company honorees. Each year Ethisphere names companies which meet its rigorous standards. As noted in a Press Release announcing WME award winners for 2018, “Since 2007, Ethisphere has honored those companies who recognize their critical role to influence and drive positive change in the business community and societies around the world and work to maximize their impact wherever possible.” This lengthy period for the WME has created a very large body of information which Ethisphere can data mine for insights into what makes companies more ethical. One of the most interesting insights for me is that companies on the WME are generally more profitable than average companies listed in the Standard & Poor (S&P) 500.

The Press Release stated, “Ethisphere’s notion that financial value and ethics are inexorably tied together has been borne out through long-term tracking of how the stock prices of publicly traded honorees compare to the U.S. Large Cap Index. The research found that listed World’s Most Ethical Companies outperformed the large cap sector over five years by 10.72 percent and over three years by 4.88 percent. Ethisphere refers to this as the Ethics Premium.” The following appears on Ethisphere’s WME 2018 website:

I recently had the opportunity to visit with Erica Salmon Byrne, Executive Vice President (EVP) and Executive Director of Business Ethics Leadership Alliance, at Ethisphere. (The full interview with Erica will post Monday 27thAugust on Episode 397 of the FCPA Compliance Report.) During this interview we discussed this financial bump that companies with superior ethics and compliance programs seem to enjoy. Ethisphere calls it the “three-year ethics premium”. Byrne said that what Ethisphere has been able to demonstrate in the 11-year period of WME, is that in spite of various variations in the stock market, publicly traded companies routinely outperform the biggest global benchmarks. This is true with whatever index Ethisphere has used including the S&P 500, the Metropolitan Stock Exchange of India (MSEI) global index or other indexes.

Byrne stated, “Ethisphere tracks the stock performance for WME companies and while it has varied, what we see here is a correlation. There’s a correlation between companies that do well financially and companies that are on the WME list. There is a correlation incidentally, between companies that do well financially and companies that are very diverse as we see in some of the work that the UN initiatives on race and gender diversity has shown that financial performance component as well.”

Byrne noted that companies that wind up on the WME list “are companies with good strong ethics compliance programs to companies with good governance practices. They are companies that give back to their communities and care about their employees. They are companies that have strong cultures.” Byrne believes all of this leads to lower turnover which is significant indicator of the ethical culture of an organization. Moreover, as “hiring is expensive and hiring the wrong person is even more expensive, if a company can hold onto people and help them do their best work, the company is going to be a better position the long-term.” Finally, “if a company has a culture where people feel like their opinions matter and they can raise their hand if they have a concern, they can participate in the growth of the company” and Byrne believes “they are more likely to stick around.”

In its research report, entitled “Leading Practices and Trends from the 2018 World’s Most Ethical Companies”, Ethisphere stated, “Our own research demonstrates this principle in clear terms. When the stock performance of the WMEC honorees is tracked against a US large cap index, our honorees outperform the market by 4.88 percent, a bonus we call the “Ethics Premium.” No matter which data you find most compelling or which leaders you listen to, the results are clear and undeniable: Companies that commit to values and practices that advance employees, society, communities, and investors outperform their peers—today and tomorrow.” There are those who still question whether anti-corruption laws such as the Foreign Corrupt Practices Act (FCPA) are effective, finding the fact there are still scofflaws who violate the FCPA as prima facieevidence it is ineffective.

However such response fails to take into account how the FCPA has driven ethics and compliance into the mainstream of corporate America. The 2018 WME once again shows the financial impact of having a robust ethics and compliance program. It fosters a more efficient and profitable company. Nonetheless, companies are not simply more efficient because of internal controls around compliance. The 2018 WME evidence shows that companies that invest in their employees as assets and have robust institutional justice leading to a safe and healthy speak up culture are more likely to have better financial results.

I do not think that final result is too surprising and not even controversial. But once again Ethisphere uses the data generated in the 10 years+ of awarding the WME to confirm that good compliance and ethics is good for business.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2018

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