Stock Performance of Glassdoor’s Best Places to Work 2009 ...

What's Culture Worth?

Stock Performance of Glassdoor's Best Places to Work 2009 to 2019

Andrew Chamberlain, Ph.D. Chief Economist, Glassdoor Zanele Munyikwa MIT Sloan School of Management

WHAT''S CULTURE WORTH?

Contents

03 KEY FINDINGS 04 INTRODUCTION 07 I. Methodology 11 II. Stock Performance of Best Places to Work 22 CONCLUSION 25 APPENDIX

Note: This report is provided for informational purposes only, and should not be construed as providing forward-looking investment advice from Glassdoor. The findings in this report are based on historical stock market performance data, and past stock market performance may not necessarily be indicative of future investment returns. Investors should consult a qualified investment professional before making stock market investments.

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WHAT'S CULTURE WORTH?

Key Findings

? Do companies named to Glassdoor's Best Places to Work

(BPTW) award outperform the stock market? We provide new stock performance estimates of all publicly-traded BPTW award winners for the complete history of the annual award program that recognizes outstanding workplace culture from 2009 through 2019.

? We find a simple investment strategy of buying an equally

weighted portfolio of each year's U.S. large BPTW winners outperforms the S&P 500 index in nine of the 11 years we examined. On average, stocks of BPTW winners earned 20.3 percent per year between 2009 and 2019, compared to 12.9 percent for the S&P 500.

? Over time, the compounded gap in stock performance between

BPTW winners and the overall stock market is substantial. A hypothetical investment of $1,000 in each new class of BPTW winners beginning in 2009 would have grown to $6,529 by 2019, a total investment return of 553 percent. By contrast, $1,000 invested in the S&P 500 index for the same period would have grown to $3,580, a total return of 258 percent -- an outperformance by BPTW winners of 295 percentage points compared to the S&P 500 index.

? Three industry sectors lead in terms of stock performance among

BPTW companies: Retail (40.5 percent average annual return in the year after award recognition); professional and business services (28.3 percent); and information technology (24.7 percent). The lowest stock returns among award winners were found in more traditional sectors of the economy: Construction,

repair and maintenance (-1.4 percent); oil, gas, energy and utilities (3.9 percent); and insurance (4.4 percent).

? Among companies, Whole Foods (now a subsidiary of Amazon)

saw the highest annual returns earned by any BPTW winner in the year after an award recognition. It earned an annual return of 191 percent in 2009. Other BPTW winners with above-average stock returns include Nordstrom (+182 percent in 2009), and Orbitz Worldwide (now a subsidiary of Expedia) (+164 percent in 2013).

? Among the 134 publicly-traded BPTW winners we examined,

the NASDAQ-listed companies collectively saw higher returns compared to the other major U.S. exchange. The 81 listed on the New York Stock Exchange (NYSE) earned an average annual stock return of 16.9 percent from 2009 to 2019. By contrast, BPTW winners traded on the NASDAQ exchange averaged 24.9 percent -- nearly twice the average return of the S&P 500 index during that period.

? Does rank on the annual BPTW list matter to stock performance?

We find a positive -- although very weak -- association between company rank on the yearly award and subsequent stock market performance. On average, rising 10 places in the BPTW ranking is associated with a 1.7 percentage point rise in annual stock returns in the subsequent year.

? Consistent with the growing academic literature that finds a link

between employee culture and business performance, we find that stocks of publicly-traded winners of Glassdoor's Best Places to Work award historically outperformed the U.S. stock market in most years.

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WHY DO CANDIDAWTHEAST'RSEJCEUCLTT JUOREB OWFOFRETRSH?

Introduction

In June 2008, the launch of Glassdoor's employer review survey marked a turning point for academic research on company culture. As one of the first online platforms allowing employees to review employers anonymously, Glassdoor rapidly amassed one of the most extensive and detailed databases on company culture in the world. Through the process of surveying millions of online job seekers as they arrived onto Glassdoor's platform from popular search engines each year, the company has compiled more than 55 million company reviews and insights, offering rich cultural information on more than 1 million workplaces globally.

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WHY DO CANDIDAWTHEAST'RSEJCEUCLTT JUOREB OWFOFRETRSH?

Less than a year after the 2008 launch of Glassdoor, the company announced its inaugural Employees' Choice Award for the "Best Places to Work." The award was unique at the time, using the company's growing database of anonymous employee reviews to create the first-ever ranking of best workplace cultures based solely on online feedback from employees. It was a radical new approach to measuring workplace culture, using big data from an online tech platform rather than traditional employer-led HR surveys and applications.

Since then, Glassdoor's annual Best Places to Work award has grown into a celebrated institution. More than 250 U.S. employers representing a diverse cross-section of the economy have been

recognized as Best Places to Work over the course of 12 years1, including companies in retail, technology, manufacturing, finance, government, energy, professional services, media and more. Today, the award consists of 10 separate lists of top employers spanning nine countries globally and includes both small companies (fewer than 1,000 employees) and large enterprises.

One of the most commonly asked questions about the companies listed as Glassdoor's Best Places to Work is whether, in addition to having satisfied employees, they are high-performing companies. That is, do companies with high employee satisfaction on Glassdoor outperform their peers financially?

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