This month, the pro-consumer website, Consumerist, ran a contest to determine the "Worst Company in America". Much like the NCAA basketball tournament, the champion is picked from a group of companies that compete with each other for the dubious distinction. There are a series five rounds where readers pitch in and vote for which is the worse company in each round. This year the honor went to a real champion - the infamous Comcast which has distinguished itself by escalating their cable charges and having notoriously terrible technical and customer service. For the record, last year's title went to the money sucking fiasco known as AIG.
Consumerist's readers seem to have a knack for separating really outrageous companies from those that just have a few questionable business practices. For instance, readers singled out Cash4Gold as having "fraudulent" business practices which helped propel it into the "Final Four" trouncing wanna-bees like Best Buy, a company that assaults its customers with it's Geek Squad overrated and overpriced 'Optimization' services.
We decided to run a few numbers on the results of this Consumerist unscientific contest to answer an intriguing question - "do companies that treat their customers like garbage get punished in the stock market?" Here's what we found.
Thankfully, our study came up with a very comforting answer - Yes. There seems to be a strong correlation between treating customers poorly and stock performance. In other words, the higher up in the "Worst" contest, the more likely a company was to underperform the S&P 500 Index over a 5 year period. For the companies that are currently publicly traded, here's their performance by category.:
- First Elimination Round: 73% (8 of 11 companies) beat the S&P 500 Index
- Second Elimination Round: 57% (4 of 7 companies) beat the S&P 500 Index
- Third Elimination Round: 33% (only 1 of 3 companies) beat the S&P 500 Index
- The Final Four: 0% (0 of 2 companies) beat the S&P 500 Index
Remember this is a "worst" contest so getting knocked out in the first round is a good thing. Of the bottom 5 publicly traded companies, only Apple beat the S&P 500 with a stunning return of 637% over 5 years. Apple's very existence on the list was hotly debated with many readers incredulous that a company that does so many things right could even be eligible for the competition, let alone make it past the first round. But Apple's closed architecture, onerous application approval process, and decision to only go with AT&T for the iPhone irked enough people for it to make it all the way to round 3.
If you follow the instincts of Consumerist readers who tend to have their radars on for bad company practices, eventually those companies take a beating in their stock prices. Perhaps that might offer some solace for those consumers who feel cheated.
Check out the Worst Company in America for more on this annual contest.
Returns of Consumerist Worst Company In America 2010 Contest:
(As you go through this chart - keep in mind that it's a good thing to be eliminated early in the competition.)
Some important notes for those interested in the details:
- Returns include all dividends and stock splits using data provided by Yahoo! Finance.
- Not all entity returns could be calculated due to bankruptcies, short stock price histories, and mergers.
- AIG and GM were excluded due to massive government intervention on a scale much greater than other firms.
- Paypal, Ticketmaster, NBC were not included since they make up a minority of revenues for their parent companies and therefore stock price is not necessarily indicative of their performance.
- Delta Airlines was not included due to lack of 5 year stock price.
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