Posted on Monday, January 10, 2011
Customers, employees, shareholders and taxpayers hate large corporations for many reasons. 24/7 Wall St. reviewed many of these to choose the 15 most hated companies in America.
We examined each company based on six criteria. First, employee opinions, using research firm Glassdoor and other services, were reviewed. Second, we considered total return to shareholders in comparison to the broader market and other companies within the same sector. Third, we analyzed data from a broad array of sources, including Consumer Reports, JD Power, the MSN/Zogby Poll, and the University of Michigan American Customer Satisfaction Index. Fourth, we reviewed brand valuation changes based on data from Corebrand, Interbrand, and BrandZ. Fifth, we considered negative press coverage based on 24/7 Wall St.’s analysis of media coverage and the Flame Index, which uses a proprietary algorithm to review more than 12,000 websites and ranks companies based on the frequency of certain negative words. Finally, the views of these firms by taxpayers, Congress, and the Administration were considered where applicable.
Some of the companies on this list are widely despised because of the businesses that they are in. An airline or cable operation, that has millions of customers in an economic environment where its resources are stretched due to the economy, is likely to make a lot of enemies. Similarly, this puts banks and other firms with a large number of retail outlets at a disadvantage compared with companies with few customers. Some of the corporations on this list have also had to fire significant numbers of employees due to the recession. Downsizing causes poor morale, increase in work load for the remaining workers and affects customer satisfaction when there is poorer service.
Several companies which would have been expected to be to on the on this list based on performance and public perception during the financial crisis, for example, AIG (NYSE AIG), are not here. AIG became a pariah when the federal government spent huge sums of money to keep the insurer from going bankrupt However, AIG has since done a very good job selling off assets and improving earnings to pay back the money the federal government lent it. Its stock has nearly doubled over the past year. There is a chance that AIG could pay back all of its obligations to taxpayers.
GM (NYSE: GM) has faced similar obstacles, but its IPO and subsequent positive comments about the firm’s business make it more likely that taxpayers will not be burdened with the costs of the company’s turnaround. GM, which laid off tens of thousands of people from 2006 to 2009, has begun to add a modest number of workers.
It is worth noting that some of the companies on this list may have done very poorly in some of the measurements used and well in others. There are corporations among the most hated that have had good stock performances. There may be reasonable employee satisfaction at others. Each of these was taken into account when the decisions for the final list were made.
The following is 24/7 Wall St.’s Fifteen Most Hated Companies for 2010, in no particular order.
1. American Airlines
American Airlines (NYSE: AMR) made the list because of its dreadful customer service ratings and its poor on-time departure track record. These scores are surprising given that American is one of only a few large U.S. airlines that has not been involved in a merger or alliance – transactions that often lead to poor customer service. American’s stock has underperformed most of its peers during the last year. According to Glassdoor, only 36% of surveyed employees approve of CEO Gerard Arpey. American Airlines received a score of 63 on the American Consumer Satisfaction Index, the ninth-worst rating in 2010 out of 181 ranked companies. In the 2010 Travel and Leisure survey of best and worst airlines for delays, American Airlines was the worst large national carrier.
Although it is the world’s largest cellphone company, Nokia’s (NYSE: NOK) reputation for the quality of its smartphones is in tatters. The company received the worst possible grades in JD Power’s 2010 Mobile Phone and Smartphone ratings for customer satisfaction for physical design, ease of operation and overall satisfaction. The only smartphone company with worse scores was Palm. According to a recent Brandwatch study, Nokia received the third greatest amount of bad press on Twitter. In Brand Z’s annual rankings, the Nokia name has lost 58% of its value in the last year. Shares of Nokia dropped 20% in 2010.
Toyota (NYSE: TM) was known for thirty years in the United States for reliability that surpassed any domestic competitors. The automaker’s reputation was tarnished by defect-related accidents, lawsuits and an 8.8 million vehicle recall. Because of this bad press, Toyota’s U.S. market share dropped from 18% in 2009 to 15.5% in 2010. In the JD Power’s 2010 Automotive Performance, Execution and Layout Survey, Toyota received the worst possible marks in comfort, style, and overall performance and design.
4. Best Buy
Best Buy (NYSE: BBY) rates low on several surveys for both its bricks and mortar stores and its e-commerce site. Recent research by both the Consumerist and Consumer Reports gave Best Buy among their lowest rankings. According to Consumer Report’s December 2010 electronics store ratings, Best Buy ranked as the third-worst bricks and mortar store, and BestBuy.com was designated as the worst online store. Best Buy has disappointed Wall Street recently by missing earnings forecasts. Its shares are down more than 10% during the last year, which is below the DJIA and stocks in its peer group.
5. Charter Communications
Charter Communications received the lowest score given to any ranked company in the 2010 American Customer Satisfaction Index: 60/100. The company has long been plagued by customer complaints, often regarding improper billing practices and poor customer service. Charter has angered investors as well. The company filed for bankruptcy in late 2009, destroying the value of the stock.
Citigroup (NYSE: C) fell at the low end of a number of customer satisfaction surveys, even among banks, which generally performed poorly. It received particularly bad ratings from Zogby and the American Customer Satisfaction Index. The bank’s reputation has been hurt by employee discrimination suits, especially one which contends that the bank used the recession as an excuse to fire women. Citi’s image was also tarnished by the large amount of money that it received as part of the bailout, which was the most given to any other bank.
AT&T (NYSE: T) has received a great deal of negative press for its poor 3G service. That is not Ma Bell’s only problem. Independent research on customer satisfaction rates AT&T as poor. Consumer Reports recently reported that AT&T was the nation’s worst cellphone service provider, receiving a “poor” rating in all service categories other than texting. No other service provider was given a single “poor” rating. AT&T also receives the lowest marks among cell phone companies in ChangeWave Research’s survey of over 4,000 consumers.
8. Bank of America
Bank of America (NYSE: BAC) has a legion of reasons to be included among the most hated companies in America. It received one of the lowest scores in a recent Zogby/MSN customer satisfaction poll, and was rated as the worst bank in the poll. Many consumers complained about high fees, although this was a common response to many other financial service firms. Bank of America also has received large amounts of negative press. There is a great deal of resentment among the public because of the bank’s bailout. In addition, there is Bank of America’s participation in mortgage “robo-signing” activity – a practice that rubber stamped home loan documents to allegedly short-circuit the foreclosure process. Bank of America recently settled with Fannie Mae and Freddie Mac with a $2.8 billion payment to cover bad mortgages sold to the agencies by one of the bank’s operations. Bank of America’s stock has significantly underperformed its rivals, certainly disappointing its investors.
Dell’s (NYSE: DELL) electronic store performs worse than nearly every other online retailer. Its ratings in recent Consumer Reports research were abysmal. Its laptop reliability ranks last based on frequency of repairs needed and other serious problems. Dell also experienced much negative press about charges brought against it by the federal government which covered accounting misstatements and other business violations. Recently, The New York Times reported that Dell sold defective PCs even though a number of its employees were aware of their problems. Dell’s shares substantially underperformed the DJIA over the last year.
Dish Network (NASDAQ: DISH) recently received unusually poor ratings from the MSN/Zogby customer service poll–31.2% of those familiar with Dish Network’s service called it “poor.” Consumers were particularly upset with what they view as “surprise” fees for Dish service. Glassdoor research shows that the company has a terrible reputation among employees and that the company’s CEO, Charlie Ergen, is held in particularly low regard, with a mere 22% approval among surveyed employees. Dish Network stock has significantly underperformed the DJIA.
11. Johnson & Johnson
Johnson & Johnson’s (NYSE: JNJ) reputation has been badly affected by the recalls of a number of its generic and over-the-counter products including Tylenol, Motrin and Rolaids. The FDA has said that J&J was slow in making these recall decisions and announcements to the public. Several of the firm’s plants have come under scrutiny for manufacturing practices, particularly one that J&J operates in Puerto Rico. There is now speculation among Wall Street analysts that this plant may be closed. A survey of press coverage of the company shows it has an especially high number of negative mentions. J&J shares have underperformed the DJIA during the last year.
McDonald’s (NYSE: MCD) is the poster child for unhealthy food in America. As the demand for higher quality, lower-calorie foods has risen, McDonald’s is among the most savagely criticized firms. McDonald’s is in the bottom 10% of the American Customer Satisfaction Index among 181 firms across all industries measured in the poll. The negative reaction of the press to McDonald’s business practices has grown rapidly, fueled by attacks against the firm by the health care sector and consumer advocates. McDonald’s has also been accused of using free toys as an incentive to entice children to their fast food outlets. So far legal actions, like the one recently brought by the Center for Science in the Public Interest, do not seem to have damaged the company’s business. But the obesity epidemic and rise in diseases from high calorie and high fat foods will change consumer practice over time, especially if there is a “sin tax” placed on these foods. The bad PR appears not to have hurt the company’s share price, however, which has soared up nearly 25% in the last year.
13. United Airlines
In the 2010 American Customer Satisfaction Index, United received a score of 60, the lowest score received by any company across all industries – tied with Charter. According to a recent Consumer Reports article, United has a policy to reimburse consumers who find a lower fare for a flight they have already booked on United’s website by providing a voucher for a discount on the next flight booked by these customers. However, the airline charges a $150 fee if the consumer purchased a standard “nonrefundable” ticket. The company has a Glassdoor employee satisfaction rating of 2.1 out of 5, which is the worst of all the companies considered for our list. Before stepping down in October 2010 after the merger with Continental, former CEO Glenn Tilton had an approval rating of just 11%.
14. British Petroleum
BP plc (NYSE: BP) is the most obvious choice to be on a list of hated companies. The Gulf incident will be remembered as one of the worst man-made environmental disasters in history. Research shows that the company has received more bad press this year than almost any other company. The actions of its former CEO Tony Hayward after the incident, which contibuted to his dismissal, fueled negative public opinion about BP. Shares of BP are down more than 20% in the last year.
DirecTV (NYSE: DTV) scores a weak 68 on the American Customer Satisfaction Index, down 4.2% from the company’s score last year. The direct broadcast satellite company draws complaints for a number of reasons. It automatically extends customers’ contracts for 24 months when new equipment is added. Customers often receive unexpected fees, such as a $480 cancellation fee. There has been a great deal of dissatisfaction over aggressive telemarketing practices. Recently the company reached a settlement with all 50 states over allegations that it misled consumers about pricing and policies.
24/7 WALL STREET
Michael B. Sauter, Charles B. Stockdale, Douglas A. McIntyre