Newspaper article St Louis Post-Dispatch (MO)

Nice Firms Finish like Nice Guys Being Friendly to Employees Reaps No Reward on Wall Street

Newspaper article St Louis Post-Dispatch (MO)

Nice Firms Finish like Nice Guys Being Friendly to Employees Reaps No Reward on Wall Street

Article excerpt

It was the sort of photo op that sets off snickers up and down Wall Street. In a glad-handing visit this month to a factory at Northridge, Calif., President Bill Clinton lauded Harman International as an example of "how a cutting-edge company can do well while doing right by its people."

A nice-guy company. One that retrains employees so there's something else for them to do if a job becomes obsolete. An American inspiration.

Until you look at its stock price and realize that - on Wall Street, anyway - nice-guy companies frequently finish last.

In a price comparison for the year to date, the Dow Jones industrial average was up 10 percent while Harman was down 5 percent. A two-year view also looks bleak for shares of the maker of JBL audio components: While the Dow gained 44 percent since March 1994, Harman had a 22 percent gain.

Harman isn't the only nice-guy company whose stock price has trailed the average public company. In the three years since Doubleday published its latest edition of "The 100 Best Companies to Work for in America," stock in the public companies that made it to the book's coveted top-10 list have risen 30 percent on average. That's just less than half the 61 percent gain in the S&P 500 in the same time period.

(St. Louis' two representatives on the "best companies" list are among the underperformers. Anheuser-Busch's stock is up only 13 percent since the beginning of 1993, while A.G. Edwards' stock is up 32 percent.)

Wall Street has voted loudly and clearly in recent years about the way public company managers ought to behave in a competitive international marketplace. Lay people off and reap the reward of sparkling stock rallies.

Does the paternalistic approach ever work?

Spot checks of recent short-term stock trends show nice-guy companies get creamed. Indeed, Jerry Dodson, president of the Parnassus Fund, says the sad fact is, "It doesn't matter if you're a saint or a sinner" when it comes to stock price movement. …

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