- What is the S&P/Drucker Institute Corporate Effectiveness Index? The S&P/Drucker Institute Corporate Effectiveness Index is designed to track stocks in the S&P 500® that consistently rank highly on proprietary management criteria. The best of these companies are published annually in a special section from the Wall Street Journal as the “Management Top 250.” These are companies that create value through excellence in employee engagement and development, customer satisfaction, social responsibility, innovation, and high-quality financial metrics, all of which may be leading indicators of both short- and long-term financial performance. Furthermore, companies that pursue success in one or two of these factors at the expense of the others may be taking on risk currently undervalued by the market. The S&P/Drucker Institute Corporate Effectiveness Index was thus constructed to identify companies that exhibit excellence and consistency in how they create and sustain value.
2. Why was the S&P/Drucker Institute Corporate Effectiveness Index created? While some investors obsess over short-term financial performance, they typically look right past crucial long-term factors that are difficult to measure—the reason these factors are often called “intangibles.” Yet a growing body of research shows that as much as 80% of a typical company’s value is driven by intangibles such as the strength of customer relationships, the engagement of the workforce, the ability to innovate, integrity in finances, and contributions to society. In collaboration with the Drucker Institute, S&P Dow Jones Indices created this index to give investors the whole picture: companies that effectively manage their intangibles with a holistic consistency that suggests they will continue to do so in the future.
3. What makes the S&P/Drucker Institute Corporate Effectiveness Index unique? The index combines two innovative measures—the Drucker Institute corporate effectiveness score and the S&P DJI quality score—into a single method that seeks to measure a company’s capacity for creating value while managing risk. The index uses an innovative construction that considers both financial and intangible management performance, and recognizes companies that stand out on the combined measure without resorting to a more risky unbalanced approach.
The objective of the S&P/Drucker Institute Corporate Effectiveness Index is to track firms that are managed effectively. This begins with the Drucker Institute’s rigorous and quantitative assessment of the managerial functions at the core of every enterprise: customer satisfaction, employee engagement and development, innovation, and social responsibility. Added to this is S&P DJI’s quality score as a recognized measure of financial strength. Together, these measures assess a firm’s ability to create, deliver, and sustain value for shareholders and stakeholders alike. Finally, in identifying companies that are not only effective on average but also well balanced, the index seeks a blend of short-term performance and long-term potential.
