13 Companies That May Be Riskier Than You Think

via Business Insider:

Looking at a balance sheet only gets you so far.

These days many investors are recognizing the importance of environmental, social and governance (ESG) risks, which includes things like oil spills, lawsuits, and corporate instability. This is broadly known as sustainable investing.

Investors prefer companies with high ESG ratings for moral reasons but also because the stocks of highly rated companies tend to outperform, according to a study by Deutsche Bank.

Stock exchanges too face increasing calls to enforce ESG standards, according to the FT.

Governance research firm GMI Ratings has published a list of companies with low grades for ESG. GMI comes up with these scores based on 120 risk factors, including workplace safety violations, regulatory investigations, and bad corporate structure. From this list, we picked out 17 big names.

 

Wal-Mart

3/100 overall score

23/100 governance score

92/100 environmental score

1/100 social score: Wal-Mart has a low score due to investigations into bribery; numerous workplace safety violations in the past two years; failure to endorse international labor policies; and use of sweatshops in the past three years.

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All data and commentary comes from GMI RatingsESG ratings include the following:

Governance – GMI is the leading source of governance research, covering key areas such as board accountability and effectiveness, executive pay, firm ownership and control and takeover defenses.

Environmental – GMI environmental research, provided in part through a relationship with Trucost, focuses on the environmental impacts of specific companies as well as how companies manage and report on such impacts. Key metrics of critical importance include issues such as climate change risks and disclosure; environmental reporting; board‐level governance; supply chain risk and monitoring; and environmental management systems.

Social – GMI provides key social metrics most relevant to identify how companies manage and report on their social impacts and target areas of risk. Key metrics of critical importance include vendor standards, employee relations, bribery and corruption, diversity and political contributions.

Altria Group

Altria Group

AP Photo/Diane Bondareff

2/100 overall score

13/100 governance score: Altria has a low score due to unusually high CEO pay without performance targets; discretionary incentive pay; combined CEO/chair; related party transactions; inadequate audit and compensation committees; and overboarded directors.

92/100 environmental score

1/100 social score: Altria has a low score due to investigations and lawsuits regarding “light” cigarettes and related cases; failure to endorse international labor recommendations; and numerous workplace safety violations.

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All data and commentary comes from GMI Ratings. Check out GMI’s methodology.

Wells Fargo & Company

Wells Fargo & Company

Justin Sullivan/Getty Images

2/100 overall score

15/100 governance score: Wells Fargo has a low score due to unusually high CEO compensation without performance targets; a combined CEO/chair; related party transactions; overboarded directors; non-independent audit and compensation committees; discretionary incentive pay; and more.

89/100 environmental score

1/100 social score: Wells Fargo has a low score due to a regulatory investigation into discrimination against minority borrowers; investigation into corruption and anti-competitive behavior; failure to endorse international labor policies; and numerous workplace safety violations.

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All data and commentary comes from GMI Ratings. Check out GMI’s methodology.

Pfizer

Pfizer

2/100 overall score

3/100 governance score: Pfizer has a low score for unusually high CEO compensation; a significant vote against pay practices; discretionary incentive pay; overboarded directors; combined CEO/chair; non-independent audit and compensation committees; overboarded directors; ignoring a majority vote on a shareholder proposal in the past three years; and more.

94/100 environmental score

2/100 social score: Pfizer has a low score due to regulatory investigation into certain drugs.

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All data and commentary comes from GMI Ratings. Check out GMI’s methodology.

The Bank of New York Mellon Corporation

The Bank of New York Mellon Corporation

Daniel Goodman / Business Insider

2/100 overall score

2/100 governance score: BNY Mellon has a low score due to unusually high CEO pay with no performance targets; a significant vote against pay practices; combined CEO/chair; inadequate audit committee; overboarded directors; an ignored vote on shareholder proposal; discretionary pay incentive; and other more.

94/100 environmental score

1/100 social score: BNY Mello has a low score due to regulatory investigations into financial crisis fallout; failure to endorse international labor policies; and numerous workplace safety violations. 

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All data and commentary comes from GMI Ratings. Check out GMI’s methodology.

Oracle

Oracle

Associated Press

2/100 overall score

11/100 governance score: Oracle has a low score due to unusually high CEO pay with no performance targets; related party transactions; an entrenched board; overboarded directors; and more.

56/100 environmental score

2/100 social score: Oracle has a low score due to regulatory investigations into foreign corrupt practices; failure to endorse international labor recommendations; and numerous workplace safety violations.

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All data and commentary comes from GMI Ratings. Check out GMI’s methodology.

Discovery Communications

1/100 overall score

1/100 governance score: Discovery has a low score due to concerns over ownership and control, director independence, and executive remuneration—”three crucial areas where the standards of governance at Discovery
Communications are so seriously flawed as to potentially undermine the potential for long-term success,” according to a special GMI report.

49/100 environmental score

61/100 social score

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All data and commentary comes from GMI Ratings. Check out GMI’s methodology.

Reynolds American, Inc

1/100 overall score

2/100 governance score: Reynolds has a low score due to related party transactions; non-independent audit committee; overboarded directors; golden parachutes; excessive CEO pay without performance targets; and more.

95/100 environmental score

1/100 social score: Reynolds has a low score due to investigations and lawsuits regarding the dangers of cigarettes; failure to endorse international labor conventions; and more.

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All data and commentary comes from GMI Ratings. Check out GMI’s methodology.

News Corp

1/100 overall score

1/100 governance score: News Corp has a low score due to overboarded directors; combined CEO/chair; unusually high CEO compensation without pay performance targets; and more.

92/100 environmental score

4/100 social score: News Corp has a low score due to regulatory investigation into phone hacking and other ethical concerns.

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All data and commentary comes from GMI Ratings. Check out GMI’s methodology.

Chesapeake Energy Corporation

Chesapeake Energy Corporation

1/100 overall score

3/100 governance score: Chesapeake has a low score due to overboarded directors; ignoring majority vote on a shareholder proposal; golden parachutes; the ability to remove directors without cause; discretionary incentives; and more.

1/100 environmental score: Chesapeake has a low score due to CO2, Water, and Waste disclosure practices significantly worse than its peers; and failure to adopt alternative energy practices that would lower its future environmental impacts.

67/100 social score

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All data and commentary comes from GMI Ratings. Check out GMI’s methodology.

Skechers USA Inc

1/100 overall score

2/100 governance score: Skechers has a low score due to combined CEO/chair; related party transactions;
non-independent audit committee; non-independent competition committee; unusually high CEO compensation with no performance targets; and more.

66/100 environmental score

1/100 social score: Skechers has a low score due to regulatory investigations into “Shape-Ups”; having no female directors; lacking a formal policy for reporting its campaign contributions and other political activities; lacking a formal policy regarding workplace safety.

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All data and commentary comes from GMI Ratings. Check out GMI’s methodology.

Monsanto

1/100 overall score

24/100 governance score

1/100 environmental score: Monsanto has a low score due to a regulatory investigation into damage caused to people living near a chemical plant; not linking pay to environmental performance; having a waste intensity ratio significantly higher than its sector peers; allegedly causing serious environmental damage in the last three years; not adopting alternative energy practices that would lower its future environmental impacts.

2/100 social score: Monsanto has a low score due to an investigation for anti-competitive behavior; not endorsing international labor conventions; and more.

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All data and commentary comes from GMI Ratings. Check out GMI’s methodology.

Transocean Limited

Transocean Limited

Transocean

1/100 overall score

54/100 governance score

1/100 environmental score: Transocean has a low score due to investigations into its role in oil spills in Brazil and the Gulf of Mexico; not adopting alternative energy practices that would lower its future environmental impacts; water intensity impact disclosure practices significantly worse than its sector peers.

4/100 social score: Transocean has a low score due to regulatory investigations into negative social impacts; having no female directors on its board.

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All data and commentary comes from GMI Ratings. Check out GMI’s methodology.

 

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