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January 20, 2016 | Volume 10 | Number 1
January 20, 2016
Score another win for companies with robust, comprehensive workplace wellness programs. The evidence supporting the financial benefit of promoting employee health and well-being recently grew with a series of studies showing that investments in these companies outperformed the stock market, at rates ranging from 7 percent to 16 percent each year.
In the three new studies published by the Journal of Occupational and Environmental Medicine, researchers created hypothetical portfolios of publicly traded companies that won either awards or self-scored highly for their programs that promote employee health. While the methodology slightly varied in each study, the results showed that each of the portfolios grew at rates higher than the Standard & Poor’s 500 index, a common benchmark for the overall U.S. stock market.
The three studies each looked at companies recognized by American College of Occupational and Environmental Medicine (ACOEM) Corporate Health Achievement Award, The Health Project’s C. Everett Koop National Health Awards, and the companies that self-scored themselves as having a comprehensive program on the Health Enhancement Research Organization (HERO) Scorecard.
Each of the three studies used a similar methodology: create a portfolio of companies that had won their awards or highly self-scored; make a hypothetical, simulated investment of $10,000; follow the earnings of the portfolio. In each of the studies the portfolio of employee health-centered companies outperformed the S&P by more than 200 percent.
Just how well did each of the hypothetical healthy-company portfolios do?
None of the studies determined why the healthy-workplace portfolios grew at such an astonishing rate or why they outdid the rest of the market, each of the study authors cautioned. But the results add to the growing body of research that builds a financial case for investing in the health of employees.
“Maybe it is a proxy measure of great management,” Michael P. O’Donnell, MBA, MPH, PhD, wrote in a JOEM editorial discussing the three studies. “That is good enough, because great management is what makes companies perform and great management is what makes sophisticated investors invest.”
ACOEM Corporate Health Achievement Award (CHAA)
The CHAA annually recognizes the healthiest and safest organizations in North America, which must be engaged in measurable efforts to reduce health and safety risks among their employees. Award-winners are judged and recognized in 17 standards addressing various aspects of workplace safety, health and wellness in four categories: leadership and management, healthy workers, healthy environments, and healthy organizations.
The authors of the study, Tracking the Market Performance of Companies That Integrate a Culture of Health and Safety: An Assessment of Corporate Health Achievement Award Applicants, tracked the stock market performance of 19 CHAA applicants and recipients recognized for excellence in their health and/or safety programs using six investment modeling scenarios. The study’s results suggest that employers that invest significantly in health and safety programming are likely to have superior financial performance in the marketplace.
In the study, investment scenarios were created and analyzed for the period spanning 2001 to 2014, using a hypothetical initial investment of $10,000. Over this 13-year period, the investment returns for CHAA companies were significantly higher than average S&P 500 returns – as much as triple in some of the scenarios.
In the best-performing scenario, the CHAA companies achieved a 333 percent return, compared to an S&P return of 105 percent during the same period. The study was funded by UL’s Integrated Health and Safety Institute.
“The CHAA study supplements the growing body of research establishing correlation between a true culture of health, safety and well-being for workers and an organization’s bottom line,” said Todd Hohn, ISHI’s global director.
The Health Project C. Everett Koop Health Awards
The Health Project has awarded the C. Everett Koop National Health Awards to more than 50 organizations to recognize those with wellness programs have led to documented health behavior change and risk reduction plus cost savings.
In their study, The Stock Performance of C. Everett Koop Winners Compared With the Standard & Poor’s 500 Index, researchers analyzed the stock performance of 26 publicly traded companies that won the award between 1999 and 2014.
According to Koop Award study, since 2000 investing in the awards’ publicly traded winners would have produced more than double the returns of the S&P 500—235 percent higher than the S&P 500. Over 14 years, on an initial investment of $10,000, a Koop Awards portfolio yielded a return of $42,500, compared to $22,500 for the S&P 500 companies.
“Given the many changes affecting population health and healthcare delivery, and the role employers can play in improving the health and well-being of people at work, there may come a day when recognition of exemplary workplace health promotion programs, like the Koop Award, may signal a clear ‘buy’ recommendation for Wall Street investors,” said Ron Goetzel, president and CEO of The Health Project.
The HERO Scorecard is a free, online tool that allows companies of all sizes and from any industry to complete a self-assessment of their employee wellness program. Companies that score high on the HERO Scorecard report adhering to common best practices, including strong strategic planning, senior leadership engagement and cultural support for health, a rich and comprehensive set of programs that meet a diverse spectrum of health needs, and robust program evaluation and performance reporting.
The HERO study, Linking Workplace Health Promotion Best Practices and Organizational Financial Performance, tracked the stock performance of a portfolio of 45 publicly traded companies that earned top scores on the HERO Scorecard in comparison to the S&P 500 over a six-year period.
Companies that were included in the HERO study ranged in size from 762 to 272,890 employees and came from eight industry categories, including consumer discretionary, consumer staples, energy, financial services, health care, industrial, information technology and utilities.
The HERO study followed the stock performance the companies from 2009 through 2014. Researchers found that this simulated portfolio outperformed the S&P 500 in the following areas:
“Will this study put an end to questions about how much of a return on investment to expect from corporate wellness? Probably not,” said Paul Terry, PhD, president and CEO of HERO. “But what this study does tell us is that there is a compelling correlation between companies that deliver strong financial returns and those that have documented, best practice wellness programs. This knowledge can benefit business leaders looking for a competitive edge, and investors looking for a sound investment.”
The Bottom Line
More and more companies are taking an interest in workplace wellness programs, but they are also considering if it’s worth the budget. Some wellness programs even come under fire as being too costly or ineffective. Not all programs and policies are set up to succeed by helping employees in the most effective ways, nor are they created with a comprehensive workplace culture that supports the programs and the employees.
But workplace wellness programs can be put into place that help build a culture of well-being, health and productivity. These strategic, comprehensive programs can help employers recruit and retain strong workers, lower health-care costs, and improve performance. All these factors make for a competitive advantage in the marketplace and may even keep shareholders happy.
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