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Don't Be Evil: 3 Companies That Highlight the Importance of Good Company Culture

MyWallSt Staff, The Motley Fool

This article was first published by MyWallSt.

When it comes to investing, one of the most overlooked components of a company's health is its culture. This includes how management treats employees, how employees treat one another, the way in which a company interacts with its environment, and its relationship with customers.

A central aspect of a company's culture is how employees feel about working there. Do they come into the office every day with a spring in their step? Do they admire or have a good relationship with its management team?

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Unlike annual revenue figures, these considerations can be hard to quantify, but they can be every bit as important when it comes to determining whether a business will last.

The employee evaluation site Glassdoor offers direct feedback from employees on a business and allows investors an inside look into how it is being run. You'll find here that some of the most enduring stocks are ranked highest in terms of employee satisfaction.

Rarely does a toxic work environment translate to the long-term success of a share price.

When consumers find out that a beloved company provides a poor environment for its employees, they don't react well. Uber (NYSE: UBER), for example, was sued by its own drivers in 2013 for the unfair wages they were receiving, and was plagued in the years afterward by a series of scandals involving sexual harassment and racism by upper management. The slew of controversies may have taken as much as $10 billion off the company's value.

However, after a change in CEO and a reformation of company culture, Uber now boasts a 4.3 out of 5 stars on Glassdoor, as well as an overall improved reputation.

Here are three companies that have kept the importance of a good company culture right at the heart of operations from day one.

1. Netflix

There are few companies more closely associated with culture -- in every sense of the word -- than Netflix (NASDAQ: NFLX).

In 2009, the streaming service published its celebrated "culture deck," outlining the various ways in which it safeguards the well-being of its employees. The long document impressed businesses in Silicon Valley and farther afield with its sophisticated, in-depth approach to organizational culture, even prompting Facebook's Sheryl Sandberg to call it "the most important document ever to come out of the Valley."

What did Netflix do right? Building outward from its internal mission to put "people over process," the company avoided hiring "superstars" with poor attitudes -- or "brilliant jerks," as CEO Reed Hastings calls them -- in favor of a flatter hierarchy and an emphasis on teamwork, communication, and honest feedback. On top of that, Netflix continues to offer enviable perks such as unlimited holidays.

The result is that the company regularly tops polls surveying the best businesses to work for and has successfully marketed itself to millennials as a progressive West Coast technology hub without the troublesome cliches.

2. Shopify

Shopify (NYSE: SHOP) is a great example of how a healthy company culture translates to high stock returns. The e-commerce giant's employees speak glowingly of their ability to use company resources to upskill.

CEO Tobias Lutke has said he "wants Shopify to be a company that sees the next century. To get us there, we not only have to correctly predict future commerce trends and technology but be the ones that push the entire industry forward."

Under the hashtag #LifeatShopify, the company broadcasts its holiday parties, its onboarding process, and its employees' gifts, conveying an impression of workplace openness that is easily converted into customer trust.

Since MyWallSt picked this innovative technology company in 2016, its stock price has grown close to 600%; it has an overall rating of 4 stars out of 5 for employee satisfaction.

3. Alphabet

"Don't be evil" was Google's unofficial motto and is clearly represented throughout the company culture. Although Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) changed it recently to "do the right thing," the meaning of both is blatantly clear -- Google is looking to do the right thing, and the first place they do that is on the Google campus.

Google consistently receives outstanding employee reviews for the atmosphere and culture present in its offices. As well as benefits such as free meals and donation matching, Google allocates 20 hours of work time per year for employees to volunteer.

Glassdoor reviews consistently cite the company's dedication to advancing employees' work-life balance. Googlers are able to take anything from cooking to coding classes on campus and are offered tuition reimbursement for university classes. The company's overall rating on Glassdoor is 4.3 out of 5 stars.

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MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in Alphabet (Google), Netflix, and Shopify. Read our full disclosure policy here.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Facebook, Netflix, and Shopify. The Motley Fool recommends Uber Technologies. The Motley Fool has a disclosure policy.