Does Company Culture Increase Shareholder Value?

Posted on Oct 19, 2019


There are many factors to assess when looking to invest in a company, but I believe company culture could be one of the biggest value drivers and should be closely analyzed, especially for a long-term investor. Great company culture is necessary for the longevity of a company’s success. Culture is not just a short term catalyst but a long term competitive advantage.Great company culture means the employees are feeling secure and happy with the environment they work in everyday, which fosters greater productivity and innovation. Those effects would contribute to greater shareholder value/economic value. I set out to determine if the impact is indeed measurable in terms of  shareholder value (stock appreciation).

The Data

In order to measure company culture, I scraped “Top Large” companies in Glassdoor’s “Best Places to Work” from years 2009-2019. To measure stock performance, I only looked at public companies that were elected to “Best Places to Work” and scraped for their annualized stock returns.

The Analysis

Every year, during the month of December, Glassdoor releases a list of companies categorized by size and location that are deemed to have the best company culture based on that year’s employee feedback. The companies that end up on this list generally have a great CEO, great benefits, and a difficult but positive interview experience, which amounts to a median culture score of 4 out of 5.  A great CEO is measured by how many would recommend the CEO to a friend and how many approve of the CEO. Glassdoor’s “Best Places to Work” companies have a high median rating, which means 91% of ratings approve of their CEO and 80% would recommend their CEO to a friend. Furthermore, these companies have great benefits with a median score of 4.2, which include benefits like 401K matching, health insurance, vacation & paid time off, maternity/paternity leave, free food, etc. Lastly, these companies have difficult interviews, thought candidates leave with positive experiences. Companies with a thoughtful vetting process can build stronger teams for the goals they want to achieve and also retain the team with a great CEO and benefits. Companies that have won every year since 2009 are Google, Apple, and Bain & Company. Google and Apple are now among the largest companies by market cap in the United States. The industries that repeated win “Best Places to Work” are in technology and consulting, two highly competitive human capital industries that need and must retain top talent to succeed.

So what are employee’s saying about these companies? I scraped reviews both pros and cons from each company to take a look. Positive reviews contained themes around great benefits, smart people, flexible schedule, amazing work-life balance, competitive pay, etc.

Negative reviews contained themes around lack of benefits, middle and upper management, low pay, long hours, growing pains, etc.

Wordcloud of negative reviews from Glassdoor's "Best Places to Work" Companies 2009-2019

A recurring theme in both positive and negative reviews  is “work-life-balance.” Employees really care about “work-life-balance” and so should companies.

Companies that make it to Glassdoor’s “Best Places to Work” work on improving their culture by sending out employee surveys and assessing employee feedback proactively. These companies have large human resource teams that assist with the process. Only the best of company cultures are selected to make it to this list. My analysis shows that the investable public companies in the “Best Places to Work” list on average have better returns over the S&P 500 companies. Glassdoor “Best Places to Work” public companies in the “Top Large” size have an average 1-year return of 19.1% vs. the S&P 500’s average 1-year return of 12.3%. This average is over 10 years between December 2008 and October 2019 (2019 numbers have been annualized). Those returns compounded over 10 years makes a significant impact on your portfolio. A dollar invested in December 2008 in Glassdoor’s “Best Places to Work” public companies would have turned into $6.1, while a dollar invested in the S&P 500 would have grown to just  $3.4. 

(Note: December 2008 was a timely month and year to invest with the ’08 crash and rebound, so returns may be inflated to normalized equity returns but it is clear Glassdoor’s “Best Places to Work” companies beat the benchmark by a far margin).

I also split the ranks into categories with first place to tenth places as one category and so on (below). The average return was highest for first to tenth place and generally higher for companies of higher ranks.

Instead of holding for just one year, I was also curious what returns would be like under 3-year and 5-year holds of each year’s cohorts. Even buying and holding a basket of Glassdoor’s “Best Places to Work” public companies for 3 and 5 years would have still given you a better return over the benchmark.

While company cultures can deteriorate, great cultures tend to hold over time. Like the city of Rome, culture isn’t built in a day. It’s built over time, through  a constant iterative process between companies and employees. The lesson for shareholders here is invest in companies with good culture. The lesson for companies is invest in culture, invest in people. The lesson for those looking for a company to work for is to look for great culture, benefits and ‘work-life-balance’.


Future work:

Glassdoor “Best Places to Work” vs. Fortune “100 Best Companies to Work For”

Scrape Glassdoor companies to create a list of worst companies to work for based on culture score and look at stock performance.


The skills the authors demonstrated here can be learned through taking Data Science with Machine Learning bootcamp with NYC Data Science Academy.

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