Is there a correlation between great place to work and stock performance?
Reading Glassdoor’s 2023 Best Places to Work in early January 2024 got me thinking. Surely, great places to work should instil a better-than-market-average culture, which should yield better-than-average results? Better-than-average results over time would deliver consistent productivity and hopefully continue to spark evolving R&D and innovation. If they don’t, is there any value in being categorized as a great place to work? Finally, all this great productivity (better than market average) should yield consistent YOY growth, and if they are a public firm, wouldn’t their stocks perform well?
Wanting to find out on my own, I proceeded to unpick Glassdoor’s (US) lists to see if my hypothesis held any substance. Going back six years to 2018, I weeded out the private companies from the list and subsequently started tabulating the historical stock data for all the 53 public companies, first at the close on 4 January 2018 and then on 29 December 2023.
The data yielded interesting results.
Some of the companies on the list were quite familiar — Adobe, Apple, Meta, Google, Hubspot, Nvidia, Procter & Gamble, Salesforce, SAP, Hilton, Accenture, United Airlines, Hyatt, Cisco, Shell, and Starbucks, to name a few. I was surprised to learn that Lululemon, T-Mobile, Southwest Airlines, Boston Scientific, and Adidas were classified as great places to work.
Importantly, a $1,000 invested across the 53 companies would have netted $2,243.19, which accounts to +124.31% growth in 6 years!
The best preforming stock from the list was Nvidia — with a whopping +837.21%! This was followed by Eli Lilly and Company (+657.43%), Lululemon — which was listed on 26 January 2018 (+550.39%), HubSpot (+545.13%), and Apple (+370.73%).
Overall,
one company delivered returns in excess of +800% range
one company delivered returns in +600s% range
two companies delivered returns in +500s% range
three companies delivered returns in +300s% range
three companies delivered returns in +200s% range
eleven companies delivered returns in +100s% range
nine companies delivered returns between +50s% and +96s%
nine companies delivered returns between +30s% and +49s%
Only nine out of the 53 public companies delivered negative returns: Progressive Leasing (-7.62%), Walt Disney Company (-17.01%), Delta Air Lines (-23.03%), Forrester (-37.81%), United Airlines (-40.43%), 3M (-42.51%), Kronos Incorporated (-47.01%), Southwest Airlines (-52.08%), and UKG — a Kronos Worldwide stock, part of the UKG group (-62.41%).
Within the same time frame, the NASDAQ Composite returned 92.2%, the S&P500 returned 78.4%, and the Dow Jones Industrial Average returned 52.5%.
Therefore, a $1,000 invested across these benchmarks would have yielded:
$1,922 with the NASDAQ Composite
$1,784 with the S&P500
$1,525 with the Dow Jones Industrial Average
Honourable mention: £1,000 with the FTSE100 would have yielded a grand total of £1,006 — a profit of £6 after 6 years
Clearly, the US Glassdoor Best Places to Work 2018 outperformed all the benchmarks, with the closest competitor, the NASDAQ Composite outpaced by 32.11%.
My rudimentary calculations aside, a quick Google search made it clear I wasn’t the first to think there could be a correlation between ‘Best Places to Work’ and market performance. The University of Oxford’s Wellbeing Research Centre published a report in June 2023 finding that an investment in the top 100 US workplaces ranked by employee wellbeing would have returned 20% more than the same investment in the S&P 500 or Dow Jones since 2021.
The ‘Great Place To Work’ organisation, which touts itself as a global authority on workplace culture, also found a correlation between employee satisfaction and market performance. In its report titled ‘When Employees Thrive, Companies Triple Their Stock Market Performance’ they cite a corresponding report from FTSE Russell, the global index and data provider, which found that companies that make the ‘Fortune 100 Best Companies to Work For®’ list consistently outperform the market by a factor of 3.36.
Glassdoor themselves are aware of this phenomenon. The very first Best Places to Work list was launched in 2008, and since then one of the most common questions they are asked is ‘do companies with high employee satisfaction on Glassdoor outperform their peers financially?’
In a 2020 report titled ‘What’s culture worth?’, Glassdoor’s Chief Economist Andrew Chamberlain, PhD., and Zanele Munyikwa from the MIT Sloan School of Management looked at stock performance of Glassdoor’s Best Places to Work between 2009 to 2019. They found that the Best Places to Work outperformed the S&P 500 index in nine of the 11 years examined, or roughly 82 percent of the time. By contrast, Best Places to Work winners averaged a 20.3 percent annual return, an average outperformance of 7.4 percentage points annually compared to the S&P 500.
Clearly there is awareness about a correlation between being a good company and market performance, but the next question here is if there is an ETF designed to track these Glassdoor lists.
Having not found one, I proceed to create my very own tracker fund (read: stock picks) based on the 2023 Glassdoor list, weeding out pharma companies and Cisco — for the company’s stock has been abysmal over the last 5 years with more hold ratings than buy (and I personally don’t see it changing anytime soon). I look forward to offering a yearly update on the performance.
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