Are Glassdoor reviews correlated with strong corporate performance?

Glassdoor, one of my favorite tools in SRI/Impact Investing, has announced it will be taken over by Recruit Holdings for $1.2Bn.    Recruit Holdings, thankfully, has said it will maintain Glassdoor (a California company founded 10 years ago) as an independent entity.  It will utilize Glassdoor’s tool in its recruiting work (which is headquartered in Japan).

The Glassdoor story reminded me that it is such a powerful tool not only for job-hunting (as mentioned above) but to notice happy employees and their relationships with their employers.  This is a key tool I use to detect employee satisfaction.  I examine the company rating (1 worst through 5 Best) as well as a historical evolution and trends.  Many of our readers are familiar with Glassdoor so I will leave it up to you to get to know their offerings.  The key takeaway you should know is that reviews cannot be deleted.  Sure, some companies arm-twist new employees to post rosy reviews, but historical reviews are not deleted.

Other important rating measures includes the percentage of reviewers that approve of their CEO and the percentage that would recommend their employer to a friend.  Companies with ratings of 4.0 (out of 5.0) and 80% and greater CEO approval have been noted to have stronger financial performance as well as better governance.

It follows that stronger company performance should be at least indirectly tied to share price out-performance for those companies that are publicly-traded.  There haven’t been many studies in this area other than a recent study out of a UK business school.  Now that Glassdoor’s historical data is nearing the 10 year mark, it would be interesting if someone performed a global analysis of stock price performance versus Glassdoor ratings.   Another idea would be to examine the performance of IPO (initial public offerings) based on their Glassdoor ratings as the company has many privately owned firms in its database.  As a side-note, Glassdoor itself was talking to bankers recently about its own IPO before being swooped up.

Last month Snap (the Snapchat app for teenagers) share price plunged over 20% in one day after releasing earnings and metrics that shows the company may be losing control of its business (Elon Musk take note ! )  If a prospective investor were to have examined Snap’s Glassdoor ratings they would have at least thought twice before pulling the trigger given its lackluster ratings (see below).

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