Good Corporate Citizenry, No Longer a Choice But a Necessity

By Victoria Galeano & Jerry Haar

When queried at a 1909 business meeting about the choice of colors available for his automobiles, Henry Ford replied that customers could have any color they wanted as long as it is black. Fast forward to the late 20th and early 21st centuries and consumers today are now in the driver’s seat (no pun intended). Publications such as Consumer Reports, CNET, and a myriad of other independent professional and consumer reviews of goods and services empower buyers, dictating to producers the style, features, and price ranges that consumers seek.

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Forbes: Best Countries For Business

Three years ago, European governments and the International Monetary Fund sent Ireland a $113 billion (85 billion euro) bailout package to support the country’s budgetary needs and prop up the Irish banking system. The loan came after the Irish economy was devastated by the Great Recession. The bursting of the housing bubble was at the center of Ireland’s problems, and even with recent gains, home prices are still roughly 50% off their 2007 highs. Moody’s Analytics doesn’t expect home prices to reach 2007 levels for another two decades.

Yet despite these economic troubles, Ireland still maintains an extremely pro-business environment that has attracted investments by some of the world’s biggest companies over the past decade. In Forbes’ eighth annual ranking of the Best Countries for Business, Ireland grabs the top spot for the first time.

Ireland scores well across the board when measuring its business friendliness. It is the only nation that ranks among the top 15% of countries in every one of the 11 metrics we examined to gauge the best countries. Ireland ranks near the very top for low tax burden, investor protection and personal freedom.

Ireland moved up from its No. 6 ranking last year on the strength of improved scores on the Heritage Foundation’s measure of monetary freedom, which gauges price stability and assesses price controls. Ireland also benefited from a stock market that has been on fire. The 44% return for the Irish Stock Exchange Overall Index in the 12 months through Nov. 20 ranks first among the top 30 countries.

“Ireland has continued to attract direct foreign investment despite its problems,” says Melanie Bowler, a Moody’s Analytics economist focused on Ireland. Bowler highlights the educated workforce and 12.5% corporate tax rate—one of the lowest in Europe—as big draws, as well as the language factor for companies from anglophone countries. “You want to have a common language if you are setting up operations in Europe,” she says.

Full Coverage: The Best Countries For Business

The American Chamber of Commerce Ireland released a report in October that shows U.S. firms invested $129.5 billion in Ireland between 2008 and 2012. It represented a greater total than had been invested in the previous 58 years combined. Ireland was the fourth-biggest recipient of U.S. foreign direct investment last year and attracted almost as much U.S. investment as all of developing Asia.

Dublin serves as the European headquarters for a number of U.S. tech firms including Google GOOG +0.23%,LinkedIn LNKD +0.83%, Twitter and Facebook. Twitter opened new Dublin offices in September where it employs 100 people with plans to double in size over the next 12 months. Facebook established a presence in Dublin in 2009 and is opening new office space in the city that will make it the social media company’s largest operation outside of its Menlo Park, Calif., global headquarters.

Ireland’s recent troubles have made it more attractive for companies moving in. Nominal wages fell 17% between 2008 and 2011, which helped keep labor costs in check. Unemployment remains stubbornly high—a recent 12.8%—providing companies a large labor pool to pick from. There are now more than 1,000 overseas companies with a presence in Ireland and they employ 150,000 of the nation’s 1.9 million workers. “Dublin has already established itself as a location for multinationals, so it has the necessary infrastructure for other companies to easily move into the country and set up shop,” says Bowler.

While Ireland moves up the ranks, the U.S. continues a four-year slide to No. 14 after ranking second in 2009 (the U.S. ranked 12th in 2012). The U.S. gets dinged for the Federal Reserve’s easy-money program, which has distorted prices and risked long-term inflation. It ranks 80th out of 145 countries for monetary freedom. Only the U.K. fares worse among the top 50 countries. The U.S. has also ramped up its rules on businesses. The Heritage Foundation cites more than 100 major new federal regulations on businesses since 2009 with an annual cost of $46 billion.

The U.S. fares poorly for its excessive tax burden, which ranks 51st (only Belgium is worse in the top 20). U.S. statutory corporate tax rates are the highest in the world among developed countries, although tax breaks reduce the overall burden. But an equally large problem is the complexity of the tax code. The World Bank says the typical medium-size business requires 175 hours to comply with U.S. tax laws.

We determined the Best Countries for Business by grading 145 nations on 11 different factors: property rights, innovation, taxes, technology, corruption, freedom (personal, trade and monetary), red tape, investor protection and stock market performance. Each category was equally weighted. The data came from published reports from the following organizations: Freedom House, Heritage Foundation, Property Rights Alliance, Transparency International, World Bank and World Economic Forum.

New Zealand ranks second overall, down one spot from last year. The $170 billion economy is the smallest of the top 10, but one of the fastest growing with GDP up 2.5% last year. New Zealand posted the best scores among all countries on four metrics including personal freedom and investor protection, as well as lack of red tape and corruption.

Hong Kong ranks third for the second straight year, although economic growth has slowed for the international trade and finance center. GDP grew 1.4% last year to $263 billion versus 5% in 2011. Hong Kong ranks among the top five for investor protection, trade freedom, tax burden and red tape.

Rounding out the top five countries are the Scandinavian kingdoms of Denmark (No. 4) and Sweden (No. 5). Both countries feature highly educated workforces with GDPs per capita among the highest in the world. Denmark scores better for its lower tax burden and corruption, while Sweden ranks first overall when it comes to technology and third for innovation.

Full List: The 25 Best Countries For Business

Forbes: The World’s Top 50 Microfinance Institutions

Whole Article available at FORBES

Instead of merely writing a check (then writing it off), why not make a tidy profit from a short-term, high-interest loan, most for under $200, so that a Mexican seamstress may buy a new sewing machine? Or so a Moroccan farmer can buy chickens so he may sell more eggs? Billionaires, global leaders and Nobel Prize recipients are hailing these direct loans to uncollateralized would-be entrepreneurs as a way to lift them out of poverty while creating self-sustaining businesses.
That promise has had a magnetic effect on private capital sources. Microfinance funding from private investors more than tripled to $2 billion in 2006. The field has attracted sterling banks and fund managers, including Citigroup , blue-chip venture capitalists like Sequoia Capital, tycoons like eBay founder Pierre Omidyar and Oscar-winning screen stars such as Robert Duvall–they’ve all joined the chase for returns in microfinance. Today, there are upward of 12,000 microfinance institutions issuing loans.
To help investors parse them, Forbes compiled its first-ever list of the Top Microfinance Institutions. We scoured 2006 data from the Microfinance Information Exchange, as well as analysis from ratings firms Micro-Credit Ratings International Limited and MicroRate, to rank the top 50 microfinance institutions (from a field of 641 reporting microfinance providers) by examining six key variables: gross loan portfolio, operating expense, operating expenses divided by the average number of active borrowers as a percentage of gross national income per capita, the outstanding balance of loans overdue by more than 30 days as a percent of gross loan portfolio, return on assets and return on equity. Each microfinance institution earned scores in four equally weighted categories–scale, efficiency, portfolio risk and profitability. Rankings were then based on the combined average score of those four categories.
To earn a spot on our ranking, the institution must have had audited financial statements for 2006 or submitted these for 2005, with the intention of providing audited 2006 results when available. Note that our rankings attempt to measure financial performance, not the social benefits of any microfinance institution.
Even the least credit-worthy Americans might gasp at the high rates of interest to which recipients of microfinance loans are subjected–as much as 85% isn’t unusual. But veteran microfinance experts are quick to remind scoffers about the typical alternatives–a village moneylender who might charge interest rates three or more times as high.
As is the case for any “hot” investment vehicle, investors should exercise prudence when jumping into the arena. Fly-by-nights aren’t uncommon in this new market. Supporting the wrong microfinance outfit may fail to reduce poverty or produce financial returns. Check out the essay by Morgan Stanleyexecutive Ian Callaghan on the perils of hunting for microfinance investments.
Our microfinance package also includes fresh commentary from Elizabeth Littlefield, a senior World Bank official, who discusses public vs. private funds flowing to this trendy niche. Michael Chu, a veteran private-equity investor in microfinance and Harvard Business School professor, argues why lending to the poor shouldn’t involve self-sacrifice. And legendary actor Robert Duvalland his wife Luciana Pedraza give an exclusive interview to the Forbes Video Network on their work on behalf of microfinance in Latin America.

Forbes: Global High Performers

Scott DeCarlo

Scott DeCarlo, Forbes Staff

These Global High Performers has been expanding their earnings at 23% annually and returned an average 16% to shareholders over the past five years. To find such examples, we did a careful search of the Forbes Global 2000–our list of the world’s largest companies based on a composite ranking of sales, profits, assets and market value–in order to identify companies that are global superstars in every sense. 

We analyzed 26 industries (excluding trading companies) of the Global 2000 and scored each company on long-term and short-term sales growth, profit growth, return on capital and total return to shareholders. We also factored in earnings forecasts and used outside research to help weed out seemingly strong but dicey entities. Once we generated our industry-specific rankings of fast-growing global companies, we carefully went through each industry to select the best five companies in each group. Companies must have sales of at least $1 billion and positive equity. Non-U.S. companies must trade in the U.S. as ordinary shares or American Depositary Receipts.

These companies are considered global for a few reasons–they trade in the U.S. as well as trade in their local market and earn an average 56% of their sales outside their domestic country. These global firms, India’s Infosys Technologies, Israel’s Teva Pharmaceuticals and U.S.-based First Solar, generate a majority of their sales outside their homeland.

Almost half of the companies on this year’s list are returning from last year. Among this group— América Móvil of Mexico, controlled by the world’s richest man Carlos Slim, with average five-year sales and earnings growth over 20% and U.S.-based MasterCard, with an average five-year earnings growth of 61%.

In Pictures: Industry Leaders

Some of the best-performing companies on the list produced record years in sales and earnings. They include Japan’s Belle International, U.S.-basedCelgene and India’s Tata Motors.

As a group, the five companies in the Chemicals industry-BASFMosaic,Potash of SaskatchewanSyngenta and Yara International–has the best five-year annualized total return (32%). The Technology industry as a group has the best five-year average sales (52%) and earnings (46%) growth-AmphenolAppleFirst SolarWestern Digital and Research in Motion. According to Thomson Reuters IBES consensus estimates, the Consumer Durables industry as a group-BMW Group, Johnson Controls,Michelin GroupTata Motors and TRW Automotive Holdings-are expected to see earnings grow the most annually over the next three-to-five years (32%).

There is value on this list for investors.  We looked at price to book value. The metric may not be perfect, but it’s one that many value investors and contrarians use in their research. Book value, roughly speaking, is a company’s assets less its liabilities. So the lower the price-to-book ratio, the cheaper a company looks relative to its net worth. The price-to-book multiples for these three stocks are all under 1.0 and stand at a discount to five-year historic averages—Hong Kong’s Swire Pacific, France’s GDF Suez and U.S.-based BlackRock.

On average, last year’s list of Global High Performers are up 17% over the past year, outperforming the S&P 500 (up 14%) over the same time period., McDermott International and Genting led all companies in price performance.

On our list, 69 of the 130 companies have headquarters outside the U.S. and includes global brand names, such as Spain’s TelefónicaNestlé(Switzerland) and Christian Dior (France); as well as foreign companies with lower profiles, such as Denmark biotech, Novozymes. Among notable U.S. Global High Performers are Walt Disney, Google, McDonald’sandNike.

Asia’s 200 Companies With Sales Under $1 Billion. Forbes

Again this year, China/Hong Kong firms dominate the list with 63 names. Add those domiciled in Taiwan, and you get to 89 in Greater China—with several more in Southeast Asia drawing on Chinese business networks. So, the growth of the world’s second-largest economy continues to be central to the BUB story.

Weakness in sustaining star performers in this “SME”-sized sector was in evidence where nations failed to gain any representation or, in the case of the otherwise booming Philippines, scored only one.  By contrast, Vietnam, struggling to regain recent economic-growth rates, has 10 names on the list.  Meantime, slowdown-hit India, with 19 selections, fell to its lowest level since 2007.

FORBES ASIA’s editors, drawing on databases of 15,000 stock-traded companies in Asia-Pacific with revenues between $5 million and $1 billion, winnowed the choice to 873 that satisfied the following criteria: five-year average return on equity and pretax margin greater than 10%, positive sales and earnings per share growth for both the most recent fiscal one and three-year periods, debt less than 75% of shareholders’ equity, and a trading history of at least on year.

The final list of 200 is not ranked, but qualified firms are measured comparatively. This is truly a select field—the top 1.3% of the category.

Only  52 of the 200 repeat from last year, although a dozen others returned to the BUB from lists previous to that. Of the 2013 group, four companies—Hartalega Holdings , Mudajaya Group , Philweband YGSoft—share the mark for longest BUB streak, four years apiece. (Last year’s record holder, Ctrip, fell off the list along with longtime regular Changyu Pioneer Wine, as China’s economy adjusted.)

Which industry spawned most of our Best Under A Billion? Information technology, with 55 companies when you include six chipmakers.

A handful of achievers from last year’s 200 “graduated” off the list this year by exceeding $1 billion in latest-year revenues. Among them: China’s Kangmei Pharmaceutical and Tianneng Power International .

This year’s compilation involved number crunchers Christina Settimi, Michael Ozanian and  Scott DeCarlo, with assistance from our editorial team in Asia and Sandy Chan, Heng Shao and Dan Alexander in N.Y.

To see the biggest individual shareholders of companies for to