Talent quality, turnover, and employee wellbeing
Forget the "warm and fuzzy" narrative. Does treating employees well actually beat the market? Alex Edmans (Wharton) analyzed 28 years of stock data to answer this. He found that a portfolio of the "100 Best Companies to Work For" earned an annualized excess return ("Alpha") of **3.5%** over the risk-free rate, even after controlling for industry, size, and growth factors. This finding dismantles the idea that employee welfare comes at the expense of shareholder value. In reality, employee satisfaction is a leading indicator of future stock outperformance.
https://www.sciencedirect.com/science/article/abs/pii/S0304405X11000869We view Employee Satisfaction not as a social metric, but as a "Quality Factor" similar to low debt or high cash flow. In asset management terms, it is a source of Alpha. Because this asset is intangible, it doesn't show up on the balance sheet, allowing astute investors to buy high-quality companies at a discount before the broader market prices in the productivity gains.
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