At the heart of the evaluation and selection process for Ethisphere’s World’s Most Ethical Companies is Ethisphere’s proprietary rating system, the corporate Ethics Quotient (EQTM). The framework of EQ is comprised of a series of multiple choice questions that capture a company’s performance in an objective, consistent and standardized way. The information collected is not intended to cover all aspects of corporate governance, risk, sustainability, compliance or ethics, but rather it is a comprehensive sampling of definitive criteria of core competencies. The EQ framework and methodology was determined, vetted and refined by the expert advice and insights gleaned from Ethisphere’s network of thought leaders and from the World’s Most Ethical Companies Methodology Advisory Panel.
The EQ framework consists of five core categories. The categories and associated weighting for each is defined as follows:
- Ethics and Compliance Program (25%)
The criteria used for this category are fully aligned to corporate best practices, relevant case law and the “hallmarks” of an effective compliance and ethics program as outlined by the Federal Sentencing Guidelines, including:
- Program structure, responsibility and resources
- Program oversight and the tone at the top
- Written standards
- Training and communication
- Due care
- Detection, monitoring and auditing
- Enforcement and discipline
- Reputation, Leadership and Innovation (20%)
This category measures a company’s legal compliance, litigation and ethical track record, along with the strength of the company’s reputation in the market place. While we take into account awards and accolades garnered, we also look at some concrete examples of corporate leadership in local, national, industry and/or global initiatives that promote business ethics, responsible and sustainable business practices, environmental stewardship, good governance, transparency and social responsibility. Standard-setting and thought leadership is important, but ultimately what matters most is the quality and innovation of company’s engagement with various stakeholders considered within the context of the company size, industry and performance in comparison to industry peers. Questions on leadership and innovation are not only presented in a standalone section of the survey, but are ever-present throughout the entire survey.
- Governance (10%)
This category looks at the availability and quality of systems designed to ensure strong corporate governance (as defined by the U.S. Sentencing Commission, Securities and Exchange Commission and other regulatory bodies), including oversight, governance principles and risk management. Actual performance of the governing authorities, as measured by governance rating agencies, is also taken into account. Governance criteria is modified as needed and as is appropriate when reviewing private companies, partnerships, educational institutions and non-profits.
- Corporate Citizenship and Responsibility (25%)
This category reviews a wide range of a company’s performance indicators associated with sustainability, citizenship and social responsibility, specifically including such areas as environmental stewardship, community involvement, corporate philanthropy, workplace impact and well-being and supply chain engagement and oversight. The quality and effectiveness of the initiatives are considered, in addition to stated and measureable goals, accountability and transparency. Performance across this category is viewed in both absolute and relative terms—there are some standards that are universally applicable, and others that vary based on company demographics.
- Culture of Ethics (20%)
This category examines the extent to which an applicant promotes an organizational culture that encourages ethical conduct and a commitment to compliance with the law. Specifically, the category measures an organization’s efforts and success at establishing an ethical tone at the top of the organization and then the steps taken to communicate, reinforce and monitor the effectiveness of that tone throughout every level of the organization.
THE EQ SCORE
An initial “unverified” EQ score is derived through a proprietary matrix of relationships between answers to given questions and a set of complex formulas based on demographic qualifiers. It is important to understand that while the EQ is the foundation for the WME selection process, the process does not end when the survey is complete. The EQ results simply help us to narrow the number of entrants to the top percentile of performers in each industry. Once a company’s EQ score warrants additional consideration for WME recognition, additional due diligence efforts begin. This process may include multiple means of verification as needed and warranted, including independent research, request for documentation supporting select answers and/or interviews with company leadership.
ACCESSING THE EQ QUESTIONNAIRE
The EQ Questionnaire is currently under review for relevancy and updated best practices. To obtain a personalized link to the online survey, simply complete the nomination form here. When the new survey is ready, we will send out a notification.