Legitimacy of corporate ratings and 'best-of' lists questioned

In "The Corporate Rating Sham: The Case of T-Mobile," Tom Juravich, professor of sociology, evaluated the various awards and recognitions received by the mobile telephone carrier from 2011-13. Upon examining these award programs' selection and evaluation criteria, the quality of the data used, and the independence of the rating programs, Juravich and research assistant and co-author Essie Ablavsky concluded that these ratings and awards cannot be seen as objective measures of corporate performance. Instead, they believe that they are best viewed as marketing promotions operating in the guise of contests and competitions.

"The U.S. market has witnessed an explosion of corporate rating programs in the last 20 years," Juravich says. "T-Mobile received at least 47 'best of' awards from 2011 to 2013, making the company an excellent candidate for our study."

Juravich and Ablavsky found that the majority of corporate recognition contests are based on self-nomination and company self-reports with little independent verification of data, and very few awards are transparent about how firms are actually selected. Programs often lack transparency in terms of the criteria used for evaluation, so consequently several questionable firms are included in awards, and many of the firms conducting national evaluations also provide consulting services to the very companies they are rating. This creates a strong potential for conflict of interest, the authors write.

"Rather than evaluating actual company performance, the ratings are a better indicator of a company's allocations of resources to win awards and its work to create a facade of good behavior," Juravich and Ablavsky write in the report.

"Consulting more rigorous and objective measures of corporate social responsibility suggests very different findings than the popular 'best of' contests," Juravich says. "At the same time that T-Mobile was named 'One of the World's Most Ethical Companies' by one corporate ratings organization, a highly-respected independent analyst rating gave T-Mobile a CCC rating, the lowest score possible."

Juravich believes that a number of changes would need to be made for many of the awards and recognition lists to conform to current industry practices, including full disclosure of all scores for winners and losers, complete transparency of the evaluation process, third-party collection of data and a separation of consulting services from the industries and companies they are rating.

Further information on "The Corporate Rating Sham: The Case of T-Mobile" by Tom Juravich and Essie Ablavsky at http://www.umass.edu/lrrc/