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This chapter is from the book

Selecting Companies for the Second Edition

The first edition of Firms of Endearment utilized what we acknowledged was a somewhat subjective process for identifying companies that we believe to be good representatives of this way of being. This time around, we wanted to bring greater rigor to the selection process. We also wanted to widen our lens to include more companies outside of the retail and consumer products sectors, as well as more international companies. Our search for how we could accomplish this came full circle, leading us back to friends who have been with us on this journey from the beginning, including Rick Frazier, Jeff Cherry, and Peter Derby. Inspired by the vision and the stories in the book, Rick, Jeff, and Peter began work on an investment research process soon after the book was published in 2007. After investing a great deal of time, energy, and money over the past six years, they have produced what it is arguably the most comprehensive data-driven process for identifying U.S. companies that are guided by a multi-stakeholder operating system. (Appendix B includes additional information on the research process as part of an interview we conducted with Rick Frazier, Founding Partner at Concinnity Advisors, LP.)

As a first step, we asked Concinnity Advisors, LP to provide us with a list of companies that have consistently scored well enough with all stakeholders to be considered investment candidates each of the last five years. We believe it is important for companies to demonstrate consistency and stability over time in their approach to stakeholders. This yielded a set of 64 publicly traded U.S. companies. We also selectively looked at some companies that had made the cut four out of the last five years, especially if they had made it for the most recent four.

Next, we applied additional qualitative screens to the shortlisted companies. First, we looked at purpose. A company received a high score on this if it has a well-articulated and authentically lived purpose that goes beyond profit maximization. Companies received lower scores if the purpose was unarticulated but still lived, or if the purpose was articulated but not clearly manifested. Companies that did not have an articulated higher purpose and did not manifest one were rejected based on this criterion.

We used a similar approach to look at the company’s leadership. The company received a high score if it has a purpose-driven, service-minded, and reasonably paid CEO. Companies with autocratic and excessively highly paid leaders were rejected based on this criterion. Lastly, we looked for evidence that the companies had cultures that were rooted in trust, caring, and authenticity. Companies with overtly competitive, fear-based, and non-collaborative cultures were rejected.

This combined quantitative and qualitative approach yielded a set of 28 U.S. publicly traded companies that we deem to be firms of endearment.

Of course, an important caveat applies to all of these companies. Just as there are no perfect human beings, there are no perfect companies. Every one of the companies can be criticized by some for a perceived deficiency in certain areas. But all things considered, we feel very confident in the set of companies we’ve identified, and anticipate that their strong caring cultures will enable them to continue to operate in this manner for a long time to come. It is also important to point out that our stakeholder data on these companies spans the years 2008–2012. That provides a long enough time span for us to be able to assert with some confidence that these companies are likely to continue operating in this way into the future. But it does not guarantee that all of these companies did operate with a stakeholder orientation prior to 2008, though we do believe that was the case for most of them.

Although we used case studies and some personal interviews to qualitatively screen the U.S. public companies that had been identified through Concinnity Advisors’ scoring system, we had to rely entirely on the case study approach in order to identify a set of privately owned firms of endearment. This is because we did not have access to a similar database for private companies. In addition, the universe of private companies is much larger than that of public companies, making the challenge of identifying a small set of such companies even greater. Our approach was to identify a set of companies that appear to embody these virtues, without claiming that they are the only such companies or even that they are the best such companies. We have included 29 such companies in our list. In most cases, we have direct experience with these exemplary firms, and can attest to their deep commitment to the principles underlying this way of doing business and being in the world.

We followed a similar process to identify a set of 15 non-U.S. companies, which includes 13 publicly traded companies and two private ones. Our goal here was to point to a diverse set of companies from multiple geographies that all share a commitment to this philosophy of business. The list includes companies from Japan, South Korea, India, Denmark, France, Spain, Sweden, and Mexico.

Table 1.2 lists all the companies that are included in these various categories.

Table 1.2 The FoE companies

US Public Companies

US Private Companies

Non-US Companies



BMW (Germany)

Adobe Systems

Bon Appetit Management

Cipla (India)



fabIndia (India - private)


Clif Bar

FEMSA (Mexico)

Boston Beer Company


Gemalto (France)


GSD&M Idea City

Honda (Japan)


Honest Tea*

Honda (Japan)



Inditex (Spain)


Interstate Batteries

Mahindra & Mahindra


Jordan's Furniture*



L.L. Bean

Marico (India)



Novo Nordisk (Denmark)


Millennium Oncology*

POSCO (South Korea)


New Balance

TCS (India)



Toyota (Japan)

J.M. Smucker


Unilever (UK)

Marriott International


MasterCard Worldwide

SAS Institute


SC Johnson


Stonyfield Yogurt*




The Container Store


The Container Store

Southwest Airlines

The Motley Fool



T. Rowe Price


United Parcel Service

Trader Joe's*

Walt Disney

Union Square Hospitality Group

Whole Foods Market



WL Gore

* These companies are stand-alone subsidiaries of other companies, and operate essentially as private companies.

Finally, it is important to point out that all of these companies are at different points in their evolution toward becoming firms of endearment. Some of them have been on this path from the beginning, which in several cases was more than 100 years ago. Others have only recently discovered this approach to business and are now consciously moving toward it. A third subset of companies were born this way, lost their bearings for a while after becoming publicly traded, and at some point reconnected with their roots, rediscovered their soul, and became firms of endearment or conscious companies once again.

Appendix A provides thumbnail sketches of all the companies included in the preceding table. Examples of practices from many of them are included throughout the book.

As Table 1.3 indicates, firms of endearment have significantly outperformed the market over all time frames, ranging from three years to 15 years. They have also greatly outperformed the companies cited in the book Good to Great over the last 10 and 15 years.

Table 1.3 Financial performance

Cumulative Performance

15 Years

10 Years

5 Years

3 Years






International FoEs





Good to Great Companies





S&P 500





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