INVESTING IN HEALTH – BEYOND THE
In a famous scene from Fawlty Towers, the classic 1970s
BBC comedy, Basil Fawlty (played by John Cleese)
argues with his wife, Sybil. In a moment of desperation,
he says: “Can’t we get you on Mastermind1, Sybil?
Next contestant: Sybil Fawlty from Torquay. Special
subject – the bleedin’ obvious.”
This quote aptly describes how, since the introduction of the
triple bottom line into business language, one of the most
obvious so-called non-financial factors has largely been
disregarded by stakeholders, including investors, namely
employee health. Research provides evidence that companies
with healthy workforces appear to have a competitive edge
in the stock market. A study published in the February 2016
issue of the Journal of Occupational and Environmental
Medicine (JOEM)2 compared the performance of ten of the
healthiest companies in South Africa to the market at large3.
Nine different investment scenarios were tested and, in all nine
scenarios, the healthy companies outperformed the FTSE/JSE
All Share Index (ALSI).
WHAT LOCAL RESEARCH REVEALS
The South African research follows on from a similar study that
was completed in the United States (US) by Ray Fabius and
The Fabius study tracked the performance of a group of
US companies that had won awards for their health and
safety programmes. Between 1999 and 2012, theoretical
investments into these companies outperformed the S&P 500
Index’s average return.
The arithmetic average annual excess return ranged from
3.03% to 5.27%, based on four of the 'portfolios' that were
considered. It is no surprise that the study concludes that
companies engaging in efforts to promote workforce wellbeing
and safety yield greater value to investors, as a result of
reduced healthcare costs, increased productivity and improved
The South African research methodology also involved
the creation of hypothetical investment portfolios. The list
of healthy companies was based on Discovery’s Healthy
Companies Index, and included Cadiz Holdings Limited,
Cargo Carriers Limited, Discovery Holdings Limited, Ellies
(Pty) Limited, Group Five Construction, JSE Limited, Mediclinic
International, Mr Price Group Limited, Sasfin Bank Limited
and Tongaat Hulett Limited. An initial theoretical investment
of R100 000 was made into various portfolios, simulated
over a chosen period and benchmarked against the ALSI. By
way of example, Portfolio 2 covered the 10-year period from
1 January 2005 to 31 December 2014, with rebalancing
performed annually, and at the time of new healthy company
listings. An initial investment of R100 000 grew to R774 211
during this period, equivalent to a total return of 674.21%.
Over this same period, the equivalent ALSI investment grew to
R532 303, which translates into a total return of 432.30%.
The annualised return over the 10-year period was 22.71% for
Portfolio 2 and 18.20% for the ALSI.
THERE IS MUCH WORK TO BE DONE
More research will be conducted in the future to explore
and refine our understanding of the link between health and
financial performance. Accurate data will be required for this
task, and there is a need to relook the ways in which companies measure and report on health. Traditionally, this
has been dealt with under the heading of 'occupational health
and safety' in the sustainability report, but there is growing
consensus that it is necessary to look beyond metrics like 'days
lost due to injury or illness'. In October 2014, a working
group of health experts and corporate leaders were convened
by the Vitality Institute to apply their minds to the following
vision: “By 2020, workforce health metrics will be an integral
indicator of overall organisational performance within the
broader corporate accountability framework.
These metrics will be core to existing corporate social
responsibility, sustainability and integrated reporting, and
critical for consideration by all shareholders and potential
investors.” The employee health and well-being metrics
identified by the working group fall into three equally weighted
- Governance based on leadership style, which sets
the tone for corporate culture.
- Management, reflective of the culture through programmes, policies and practices.
- Evidence of success, looking to specific metrics measuring the impact of the aforementioned
policies and practices on health risks and outcomes.
Two scorecards were developed: a core scorecard and a
comprehensive scorecard5. The core scorecard includes 10
high-level questions that reflect the longer comprehensive list of
metrics contained in the comprehensive scorecard6. The highlevel
questions are intended as indicators to be shared with
top leadership groups such as the C-Suite and the Board of
Directors, and also to be included in the integrated report.
They may also serve as conversation starters with potential
investors or shareholders who are interested in the health of
employees as a company asset or material risk.
Although the questions are designed to be answered on a
Yes/No/Not Applicable basis, the intent is for the emergent
qualitative information to provide a fuller picture of how these
questions reflect the health and well-being of employees and,
therefore, of the company.
To some extent the business case, both for companies to invest
in healthy employees and for investors to invest in healthy
companies, is “bleedin’ obvious”. Healthy employees are more
productive, spend more time at the workplace than unhealthy
employees, and are less likely to retire early due to ill health.
For example, between 2002 and 2008, Johnson & Johnson
experienced a return of US$2.71 for every dollar spent on
employee wellness programmes7. Apart from the business
case, it could be argued that employers have a duty of care
from a moral perspective – another compelling reason to
invest in the health of employees. Responsible investors will
understand and support both the business case and the moral
case, and benefit from both.
1 Mastermind is a popular BBC quiz show that originated in the 1970s. Contestants are tested on a specialist subject of their own choice as well as
on general knowledge.
2 The official journal of the American College of Occupational and Environmental Medicine.
3 Conradie, C., Smit, E. & Malan, D. 2016. Corporate health and wellness and the financial bottom line: evidence from South Africa. Journal of Occupational and
Environmental Medicine, Vol. 58, No. 2, pp 45 – 53, February 2016.
4 Fabius, R., Thayer, R.D., Konicki, D.L., et al. 2013. The link between workforce health and safety and the health of the bottom line: Tracking market performance
of companies that nurture a “culture of health.” Journal of Occupational and Environmental Medicine, 55(9), 993-1000.
5 The scorecards are available at http://thevitalityinstitute.org/projects/health-metrics-reporting/ for download.
6 Malan, D., Radjy, S., Pronk, N. & Yach, D. 2016. Reporting on Health – a Roadmap for Investors, Companies and Reporting Platforms. New York, Vitality
7 Berry, L., Mirabito, A., Baun, W. What’s the Hard Return on Employee Wellness Programs? Harvard Business Review. 2010, 104 – 112.