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Microsoft, GE, and Starbucks Celebrate Being Named Some of the World's Most Ethical Companies

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With the honor, Microsoft gains some bragging rights over fellow tech titans Apple, Google, and Facebook.

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As fanboys around the world get their hands on the spanking new iPad officially released today, Microsoft (MSFT) can take comfort that it's gotten itself onto one prestigious list that Apple (AAPL) has not.

For the second year running, Microsoft can boast of being listed on the Ethisphere Institute's table of the World's Most Ethical Companies, an honor that its tech rivals Apple, Google (GOOG), and Facebook cannot claim.

The Ethisphere Institute, a New York-based international think-tank focused on business ethics, corporate social responsibility, anti-corruption, and sustainability, started publishing this list in 2007. This year, the institute received nearly 5,000 submissions for consideration from companies in over 100 countries and 36 industries, a record high that shows that companies these days are increasingly seeking acknowledgement for their high ethical standards.

"As it becomes more competitive, more companies see the value of it," said Stefan Linssen, editor-in-chief of Ethisphere Magazine, the quarterly publication of the institute. "Being an ethical company is very important, particularly since 2008, when the financial crisis hit and certain industries, if not all, declined. A lot of companies wanted to show to their customers that they're ethical companies, ethical businesses. So they focus on recognition like these as a credible third party validation. And as the award continues to go on, every year, it continues to grow and gain more influence."

Besides Microsoft, 144 other companies and organizations made this year's list, including major publicly traded American companies like Ford (F), Intel (INTC), Time Warner (TWX), Starbucks (SBUX), PepsiCo (PEP), General Electric (GE), and Target (TGT).

"Microsoft is honored to again be named one of the World's Most Ethical Companies. We are guided by the core values Bill Gates lives every day and work to meet our responsibilities as a corporate citizen.... We expect our employees to do the right things every single day – and hold ourselves to the standards our customers expect," said Dan Bross, senior director of corporate citizen at Microsoft, in a statement.

Thirty-seven companies were first-time honorees, including Hasbro (HAS), Kimberly-Clark (KMB), and Progressive (PGR).

"At Progressive, we have five core values – integrity, golden rule, objectives, excellence and profit, and they've always been the basis for everything we do, and you see that integrity is number one on the list," said Michael R. Uth, the corporate compliance and ethics officer at Progressive.

"I think that the only way that you can have long-term, sustainable financial success is by first honoring your values and maintaining high ethical standards."

In coming up with the list of 145 honorees, Ethisphere used its proprietary rating system, termed the Ethics Quotient. Nominees answer a series of multiple choice questions that capture a company's performance in an objective and standardized way. What Ethisphere's judging panel looked at included companies' ethics and compliance programs, their track record in legal compliance and litigation, their work in corporate social responsibility, and their company culture of ethics.

In previous years, there were some who thought that companies dealing with alcohol, cigarettes, and firearms were banned from the list, but Linssen explained that that was not exactly the case. It is, however, true that because of the way the evaluation system is set up, companies like Philip Morris (PM) or Molson Coors (TAP) are unlikely to ever make the list.

"We get a lot of feedback from customers and consumers of different businesses every year and it's a tough call. We debate: For example, unhealthy food products – where does that weigh in versus what a company is doing? For example, Pepsi and McDonald's (MCD) are companies that have really good corporate social responsibility programs focusing a lot on water conservation and energy conservation and so on, but Pepsi makes sugary drinks – where does that weigh?" explained Linssen.

"So we have a methodology developed from an external methodology advisory committee and we have a category that says innovation that contributes to the public well-being. Ultimately what we decided is that companies like cigarette or alcohol companies really get a zero in that category, and then that just skews it so it's really not possible for them to make the list," he continued.

Last night, Ethisphere celebrated the winning companies at an honoree dinner held at New York City's Grand Hyatt Hotel, with former US Secretary of State Madeleine Albright serving as the program's keynote speaker. For the complete list of 2012's World's Most Ethical Companies, head to Ethisphere's website.

Twitter: @sterlingwong

No positions in stocks mentioned.
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