William Cox’s small, Madrid-based consulting firm, Management & Excellence, rates a business’s reputation based on 300 criteria ranging from litigation history to treatment of employees. These corporate responsibility grades, says Cox, a London School of Economics Ph.D., are “more objective than credit ratings. Ethics involves human behavior, so it’s slower to change and has better predictability value.” Cox believes that ethics is good business -- for him and for the corporations he audits -- “because it impacts financial performance, and investors want to know where they stand.”
Citigroup, no stranger to controversy, gets a rating of B. That’s a composite of what M&E defines as ethical performance, ethical risk and financial performance over the past five years. Citi’s equity research conflicts were a relatively minor blip that was offset, in effect, by total profits and other business lines, says Cox. Because those scandals are unlikely to recur, M&E gives the banking giant a solid B for its prospective performance over the next three years. (A is best, and D worst. Lucky for some, there are no F’s on this rating scale.)
Cox, who spent 16 years as a marketing consultant to major European companies before co-founding M&E in 2000, has issued ratings on more than 30 top corporations gratis to herald M&E’s entry into the U.S. market. A 47-year-old American who “just happened to end up” in Spain, Cox isn’t bothered by long-distance assignments: Most of M&E’s business has been in Latin America; it’s rated Mexico’s Pemex and Telmex, among others, and is working to expand an alliance with Brazilian credit agency SR Rating.
Cox acknowledges that deeply unethical behavior is virtually impossible to detect: “We might not have caught Enron. A lot of what it did was under wraps. It might have gotten a C.”
