Fortune magazine yesterday issued its World’s Most Admired Companies list, a subject that prompted wide-ranging conversations within MSLGROUP about corporate reputation.

Andy Tannen, an SVP in our corporate practice in New York, has been following the Fortune list for 20 some odd years.  It started off as a list of only US companies; years later, the editors started to rank non-US companies separately. A few years ago, Fortune merged the two to create a global ranking.

Yet today’s “world” list is dominated by American companies, with only seven non-US-based firms making the Top 50. Sort of the World Series of corporate lists.

“The key thing that drives it is financial performance,” said Andy, who has seen IBM and Merck rank high and then plummet over the years.  “You have to do really well to be at the top.”

Innovation, in Andy’s view, is another huge factor that drives Fortune’s business-minded survey takers whose views create the list.

The ever-innovative Apple ranked No. 1, no surprise there; Warren Buffet’s Berkshire Hathaway, No.3,  manages a diverse portfolio and buys stocks when companies are out of favor; Southwest Airlines, No. 4, was the only US airline to not charge baggage fees when oil prices were skyrocketing (let’s call it an innovative pricing strategy); and Procter & Gamble, No. 5,  continues to regularly churn out new consumer products, albeit low-tech compared to Apple.

So what makes a company admirable in the Nordics? “If you look at Fortune’s criteria, you’d expect the companies on the list to be good at all of that,” says Maria Grimberg, CEO of MSLGROUP’s Stockholm-based agency, who also wondered why IKEA didn’t make the list. “It should also be a given that they do good for society and are accepted by society as being good. It’s not debatable,” she said, noting that high-ranking Apple and Google are not on the most admired sub-list for corporate social responsibility.

While consumers have historically been the group to care most about CSR, investors are beginning to do so, too, as is reflected in the list. Today, a company’s social responsibility is a function of risk management, as the world saw with BP, Goldman Sachs and Toyota, said Andy, who has written articles on the topic for Chief Executive and Forbes. “Reputation is not just a pie in the sky, intangible factor. When you have a major crisis you pay for it financially. Investors look at CSR in that way.”

Indeed, Toyota dropped from 7 to 33 in the Top 50 list following the crisis involving its cars’ acceleration problems, noted Hanna Fridell, a manager on the corporate communications team in Stockholm. The company minimized the problem initially, only recalling floor mats on select models. This and other gaffes severely damaged the company’s reputation. “When your company focuses on one thing, such as safety, and you fail on safety, what do you have left?”

Hanna Fridell: The list indicates that financial services companies have taken a hit in corporate reputation.

Maria and Hanna noted that many other companies on the list have experienced crises, notably Goldman Sachs, Google, Coca-Cola and McDonald’s. But because the concerns do well at so many things at any given time (from financial performance to new products), they are able to bounce back. What’s more, Hannah said, the list favors brands with household names, brands that sometimes “get a pass” for questionable behavior because they are so well-known. Nevertheless, Goldman dropped from 8 in 2010 to 25 in 2011.

Another interesting factor in the report is how relative “admirable” really is.  For example, Nestlé scored a high 8.13 based on ratings of nine criteria and was rated No. 1 in the consumer food products category, whereas KB Home scored 5.95 overall while ranking No. 1 in the homebuilding category.

But for Maria, there is one absolute. “To be admirable, you have to be a credible, long-term partner to society, employees and customers and create something that stands the test of time.”

In our second post about the Fortune list, we provide an Asian perspective.