You probably know that a strong health and safety program can boost your company’s bottom line, but three new studies published in the Journal of Occupational and Environmental Medicine suggest that strong safety and health programs can also boost your company’s stock price.
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The three studies were conducted by three different organizations, drawing from three different corporate populations. Keep reading to find out which health and safety factors correlate with stronger corporate financial performance.
The HealthNEXT® Study
One study, conducted by HealthNEXT, looked at the stock market performance of 17 companies that had applied for or received the American College of Occupational and Environmental Medicine’s (ACOEM) Corporate Health Achievement Award (CHAA), which is intended to recognize the healthiest and safest companies in North America. All of the companies were engaged in measurable efforts to reduce health and safety risks among their employees. All received high marks for either health or safety or both.
The study used a hypothetical initial investment of $10,000, invested in 2001, until 2014. Over that 13-year period, the hypothetical investment returns for the companies being studies exceeded average Standard and Poor’s (S&P) 500 Index returns by as much as triple in some of the scenarios. In the best-performing scenario, CHAA companies achieved a 333% return compared to an S&P return of 105% during the same period. In the lowest-performing scenario, CHAA companies achieved a 204% return compared to an S&P return of 105% during the same period.
The Health Project Study
Another study, performed by The Health Project, looked at investment returns on companies that have won the C. Everett Koop National Health Award, which recognizes companies whose wellness programs have led to documented health behavior change and risk reduction plus cost savings.
The researchers analyzed stock performance data on 26 publicly traded companies that won the Koop Award between 1999 and 2014. Their hypothetical portfolio was annually “rebalanced” to reflect purchases of stock from new award winners. Compared to S&P 500 companies, Koop Award winners produced substantially higher returns—235% higher than the S&P 500 strategy—and outperformed the market in 11 of the 14 years studied. The Koop Award winners held their value better when the stock market dropped and recovered faster when the market went back up.
The Koop Award-winning companies did better on other measures of stock performance as well. They produced dividends of 2.31%, compared to 1.95% for the S&P 500 companies. The price-to-earnings ratio was lower than the overall S&P 500—17.31 versus 18.27—meaning that the performance of the Koop Award winners was not based on an overvaluing of the companies’ stock.
The Hero Study
The third study evaluated the stock performance of publicly traded companies that received high scores on the HERO Scorecard. The HERO Scorecard is an international tool designed to help organizations learn about best practices for promoting workplace health and well-being that enables them to compare their program’s success to that of other companies in the HERO database.
The study used a simulation analysis to compare the stock price trends of a portfolio of high-scoring companies against past performance of companies represented on the S&P 500 Index. Stock values for the high-scoring portfolio appreciated by 235% compared with the S&P 500 portfolio appreciation of 159% over a 6-year simulation period.
The studies show correlation, not causation—strong health and safety programs are correlated with stock performance that outperforms the S&P 500. Nevertheless, they do indicate that companies that focus on taking care of worker health and safety are likely to perform well in other areas that matter to investors—also, they show that effective health and safety programs are not detrimental to a company’s stock performance. For management types who are more concerned with financial outcomes than with worker health, these studies can help environment, health, and safety managers demonstrate that the two goals are not add odds with one another.
Need more information on building the business case for safety? Safety.BLR.com® can help you make the connection.