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The Dow Jones Industrial Average (DJIA), also referred to as the
Industrial Average, the Dow Jones, theDow 30, or simply the Dow, is a
stock market index, and one of several indices created by Wall Street
Journaleditor and Dow Jones & Company co-founder Charles Dow. It is now
owned by the CME Group, who is the majority owner of Dow Jones Indexes.
The average is named after Dow and one of his business associates,
statistician HYPERLINK
"http://en.wikipedia.org/wiki/Edward_Jones_(statistician)" Edward Jones. It is
an index that shows how 30 large, publicly owned companies based in the
United States have traded during a standard trading session in the stock
market. [1] It is the second oldest U.S. market index after the Dow Jones
Transportation Average, which was also created by Dow.
The Industrial portion of the name is largely historical, as many of the modern
30 components have little or nothing to do with traditional heavy industry. The
average is price-weighted, and to compensate for the effects of stock splits
and other adjustments, it is currently a scaled average. The value of the Dow
is not the actual average of the prices of its component stocks, but rather the
sum of the component prices divided by a divisor, which changes whenever
one of the component stocks has a stock split or stock dividend, so as to
generate a consistent value for the index.
Along with the NASDAQ Composite, the S&P 500 Index, and the Russell
2000 Index, the Dow is among the most closely watched benchmark indices
tracking targeted stock market activity. Although Dow compiled the index to
gauge the performance of the industrial sector within the American
economy, the index's performance continues to be influenced by not only
corporate and economic reports, but also by domestic and foreign political
events such as war and terrorism, as well as by natural disasters that could
potentially lead to economic harm. Components of the Dow trade on both the
NASDAQ OMX and the NYSE Euronext, two of the largest stock market
companies. Derivatives of the Dow trade on the Chicago Board Options
Exchange and through CME Group, the world's largest futures exchange
company, which owns 90% of the indexing business founded by Dow Jones,
including the Industrial Average. [2][3 ]
The Dow Jones Industrial Average was founded by Charles Dow on May 26,
1896, and represented the dollar average of 12 stocks from leading American
industries. Previously in 1884, Mr. Dow had composed an initial stock average
called the Dow Jones Averages, which contained nine railroads and two
industrial companies that appeared in the Customer's Afternoon Letter, a daily
two-page financial news bulletin which was the precursor to The Wall Street
Journal. Of the original 12 stocks forming the Dow Jones Industrial Average
compiled later in 1896, no longer railroad stocks, but purely
industrial stocks, only General Electric is currently part of that index.
Financial crisis
On September 15, 2008, a wider financial crisis became evident when
Lehman Brothers filed for Chapter 11 bankruptcy along with the economic
effect of record high oil prices which reached almost $150 per barrel two
months earlier. The DJIA lost more than 500 points for only the sixth time in
history, returning to its mid-July lows below the 11,000 level. A series of
"bailout" packages, including the Emergency Economic Stabilization Act of
2008, proposed and implemented by the Federal Reserve and U.S .
Treasury, as well as FDIC-sponsored bank mergers, did not prevent further
losses. After two months of extreme volatility during which the Dow
experienced its largest one day point loss, largest daily point gain, and largest
intra-day range (more than 1,000 points), the index closed at a new twelve-
year low of 6,547.05 on March 9, 2009 (after an intra -day low of 6,469.95 [17]
during the March 6 session), its lowest close since April 1997, and had lost
20% of its value in only six weeks. Towards the latter half of 2009, the
average rallied towards the 10,000 level amid optimism that
the Late-2000s Recession, the United States Housing Bubble and the
Global Financial Crisis of 2008–2009 , were easing and possibly coming to
an end. For the decade, the Dow saw a rather substantial pullback for a
negative return from the 11,497 level to 10,428, a loss of a little over 9%.
During the early part of the 2010s, the Dow made a fairly notable rally
attempt in the face of growing global concerns such as the 2010 European
sovereign debt crisis and the Dubai debt crisis. Although for the most part
just a political event, the Dow closed at the 10,785.89 level on March 22,
2010 following the passage of the landmark Patient Protection and
Affordable Care Act in Washington. On May 6, 2010, just after 2:30 pm EDT,
the Dow Jones Industrial Average plunged by 998.50 points, an intra-day loss
of 9.2%. The event later became known as the 2010 Flash Crash or the
"Flash Crash". [18] Although there was an immediate recovery, it was the
biggest intra-day fall ever. This would have put the trading day as the fifth-
worst market sell-off on a percentage basis as well. The Dow bottomed out at
9,869, and then recovered quickly, eventually ending at 10,520.32, a loss of
347.80 points or 3.2%. [18] On November 5, 2010, the Dow would settle at the
11,444.08 level, its highest close since September 2008.
Calculation
To calculate the DJIA, the sum of the prices of all 30 stocks is divided by a Divisor, the
Dow Divisor. The divisor is adjusted in case of stock splits, spinoffs or similar structural
changes, to ensure that such events do not in themselves alter the numerical value of
the DJIA. Early on, the initial divisor was composed of the original number of
component companies; which made the DJIA at first, a simple arithmetic average. The
present divisor, after many adjustments, is less than one (meaning the index is larger
than the sum of the prices of the components). That is:
where p are the prices of the component stocks and d is the Dow Divisor.
Events like stock splits or changes in the list of the companies composing the
index alter the sum of the component prices. In these cases, in order to avoid
discontinuity in the index, the Dow Divisor is updated so that the quotations right
before and after the event coincides:
The Dow Divisor is currently 0.132319125. [21][22] Presently, every $1 change in price in
a particular stock within the average, equates to a 7.56 (1/0.132319125) point
movement.
Assessment
With the current inclusion of just 30 stocks, critics like Ric Edelman argue that the
DJIA is not a very accurate representation of overall market performance. Still, it is the
most cited and most widely recognized of the stock market indices. [23][24] Additionally,
the DJIA is criticized for being a price-weighted average, which gives higher-priced
stocks more influence over the average than their lower-priced counterparts, but takes
no account of the relative industry size or market capitalization of the components. For
example, a $1 increase in a lower-priced stock can be negated by a $1 decrease in a
much higher-priced stock, even though the lower-priced stock experienced a larger
percentage change. In addition, a $1 move in the smallest component of the DJIA has
the same effect as a $1 move in the largest component of the average. The Dow would
see the negative effects of this price weighted average during September–October
2008 with a former component AIG. Before its reverse-split adjusted stock price
change, the stock collapsed from $22.76 on September 8 to $1.35 on October 27;
contributing to sending the Dow down roughly 3,000 points.
As of November 2010, IBM and 3M are among the highest priced stocks in the
average and therefore have the greatest influence on it. Alternatively, Bank of America
and Alcoa are among the lowest priced stocks in the average and have the least
amount of sway in the price movement. Many critics of the DJIA recommend the float-
adjusted market-value weighted S&P 500 or the Wilshire 5000, the latter of which
includes all U.S. equity securities, as better indicators of the U.S. stock market.
What is the Dow Jones?
Before I go over the Dow Jones history, it’s important to know what the Dow Jones is.
The Dow Jones is a stock market index. Currently it is calculated from the stock prices
of 30 large US companies. It is actually a complex equation because of repeated stock
splits. It is not the sum of the prices of each of those 30 companies.
What is the history of the Dow Jones?
The Dow Jones history goes way back into the 1800's. The Dow Jones Industrial
Average was founded on May 26, 1896. At the time it only represented 12 stocks. Of
those original 12 only one, General Electric, is still around. By 1928 the number of
stocks increased to 20. By 1928 the number of stocks hit 30.
During the Great Depression the Dow was reduced to 90% of its 1929 peak on July 8,
1932. Not coincidentally, the largest one-day percentage gain of 15% happened soon
after the 90% big drop on March 15, 1933. However, the 1930s was a terrible decade
as the Dow Jones industrial average was cut in half from the beginning to the end of
the decade.
As can be expected after great declines in the Dow Jones history, soon came the
great increases in the 1940s and 1950s. The Dow went from about 40 in 1932 to
616 in the 1950s. The Dow continued to increase into the 1960s and ended the
1960s at about 800. The enthusiasm took the Dow in the early 1970s above the
1000 mark. That’s a growth of about 25 times your money over 40 years or 8.4%
compounded annual growth rate. That doesn't include dividends - which were
about 4-5%.
But the cycle continued with the stagnant market of the 1970s. There was a big crash
in 1973 and 1974 where the Dow lost about half its value. For the whole decade the
Dow only rose from 800 to 838.
The 80s saw large gains in the Dow -- despite Black Monday on October 19, 1987,
where the Dow fell 22.61% in one day. The overall increase from the beginning to end
of the 90's was 838 to 2,753.
The 90s were even better for the Dow as it reached the 11,000s -- more than tripling
the Dow for the decade. But, as we all know, that just set the Dow up for large losses.
By the end of the week after the September 11 attacks the Dow had fallen 14%. The
Dow eventually bottomed out in 2002 at about 7200 -- its lowest since 1997. By
2006 the Dow was roaring again above 11,000 and by 2007 it was above 14,000.
But, the Dow Jones dropped to 6500 in 2009 -- its lowest since 1997.
What does the Dow Jones history teach us?
There will be ups and downs that will last for years. Do not panic when there is a
protracted downfall. It will rise again even if it takes 10 to 15 years. As long as you
put your money into the stock market for the long run you will be okay. Do not get too
excited when the Dow rises significantly. If you buy more than what you planned
when the stock market peaks, you will regret it.
Regardless of what the Dow is doing continue on your investing plan. Do not increase
or decrease your holdings or investment rate based upon the recent movements of
the market.
Don't think you can predict what the market will do based upon current world
conditions or history. No one knows what the market will do in the short-term and
anyone who tells you they do is either lying or ignorant. If the best investor in the world,
Warren Buffett, doesn't think he or anyone can predict the short-term stock market
movements, then what are the chances you can too? Don't try to time the market
because you will lose more often than not. It's exciting to think that you might actually
pick what will happen. And you might even be right from time to time. But, if you're
investing for you and your
family's future, then the boring investing decisions will be the right ones.
History of the Dow Jones Industrial Average
From a niche news agency in an obscure Wall Street basement to a global news and
business-information leader, the vision at Dow Jones & Company has been consistent
and defining for more than a century. Excellence, integrity and innovation are the
qualities which started the company in 1882, which sustained its growth in the 20th
Century and which guide its progress as it pioneers new approaches to business and
journalism in the digital age.
1882-1902 – Founders and Foundation
The foundation for success is laid by Charles Dow, Edward Jones and Charles
Bergstresser who over two decades conceive and commence three products which
define Dow Jones and financial journalism: The Wall Street Journal, Dow Jones
Newswires and the Dow Jones Industrial Average. The founders state their
commitment to excellence in the Journal’s first issue: “We appreciate the confidence
reposed in our work. We mean to make it better.”
1882
Dow, Jones & Company’s first product is brief news bulletins hand -delivered
throughout the day to traders at the stock exchange. Those “flimsies” as they are
called later are aggregated in a printed daily summary called the “Customer’s
Afternoon Letter.”
1889
The first edition of The Wall Street Journal is published July 8. An afternoon
newspaper, it covers four pages and sells for two cents.
1896
The Dow Jones Industrial Average is officially
launched. 1897
The Ticker, the real-time newswire and the fundamental source for news in the
investment community, is announced.
1898
The Journal, now six pages, adds a morning
edition.
1899
The Journal’s “Review & Outlook” column, which still runs in the Journal today,
appears for the first time. It initially was written by Charles Dow.
1902 – 1941 – Professionals and Progress
Dow Jones is acquired in 1902 by the leading financial journalist of the day, Clarence
Barron. Over the next 30 years, Barron recruits and develops a generation of
journalists who further Dow Jones’s reputation for excellence. Those journalists would
lead the company successfully through the Great Depression and into a new era of
prosperity and progress.
1921
Barron’s, America’s premier financial weekly, is founded; its first editor is
Clarence Barron. 1926
A motor-driven version of the “Ticker” – a key innovation in the delivery of real-time
news – was developed by the Dow Jones engineering department.
1929
The first issue of the Pacific Coast Edition of the Journal rolls off the presses on Oct.
21, eight days before the great stock-market crash.
1930
Dow Jones is incorporated in New York. It is now known as Dow Jones & Company
after the comma is dropped from the former Dow, Jones & Company.
1934
Afternoon edition of the Journal ceases.
Chief Executive Officer Casey Hogate begins a series of changes during the next
decade that ultimately result in the metamorphosis of the Journal into a new kind of
daily newspaper. One of these changes is advent of the “What’s News” column.
Created by Bernard “Barney” Kilgore, that column was the first major summary of the
news, a precursor to omnipresent summaries and digests on the Internet today.
1941-1967 – The Journal’s Genius
Barney Kilgore takes over as managing editor of the Journal in 1941 and as CEO of
Dow Jones in 1945, setting the company on a new and revolutionary course. In print,
Dow Jones isn’t satisfied reporting “what happened”; our publications redefine
journalism to include “what it means.” In business, the Journal would harness new
technologies such as microwaves to open new markets to readers in distant cities.
1947
The Journal wins its first Pulitzer Prize for editorials by William Henry
Grimes. 1948
The Journal launches a Southwest
edition 1950
The Journal launches a Midwest
edition 1953
When the New York Stock Exchange cancels its Saturday trading session, the
Journal ceases publication of a Saturday edition
1962
Making innovative use of microwave technology, Dow Jones is able to reproduce
newspaper pages by facsimile over long distances – a vital step toward a truly
national newspaper
1966
Now with regional editions spanning the U.S., the Journal counts more than one million
subscribers for the first time.
1967–2007 – Innovation and Globalization
Innovation would define Dow Jones in the 40 years after Kilgore’s death in 1967 as the
news moved into space and online. Dow Jones pioneered the use of satellites to
transmit newspaper pages and make possible a daily newspaper on truly national
scale. A decade before the Internet, Dow Jones was storing and coding its news
digitally so that it could be accessed online. Factiva’s content and technology tools set
the standard for innovation and quality in the news and information industry. The
Journal, Newswires and Dow Jones Indexes built successful franchises in Europe and
Asia. 1967
Dow Jones Newswires begins a major expansion outside the U.S. that ultimately puts
journalists in every major financial center in Europe, Asia, Latin America, Australia and
Africa.
1970
Dow Jones buys the Ottaway newspaper chain, which at the time comprised nine
dailies and three Sunday newspapers.
1971
A joint venture with Bunker Ramo is the advent of electronic delivery of news from
Dow Jones Newswires in an age before personal computers. It would also mark the
company’s pioneering efforts to store news and information electronically, a
business that would evolve into Factiva. 1976
The Asian Wall Street Journal is
launched. 1983
The Wall Street Journal Europe is
launched. 1995
The initial version of the WSJ.com appears online. Content won’t be all that
distinguishes the Journal on the Web. Dow Jones insists that its differentiated content
is worth paying for and thus built the Internet’s most successful paid news Web site.
1997
The Dow Jones Industrial Average is licensed for the first time, setting in motion a
successful new business called Dow Jones Indexes.
2005
MarketWatch is acquired, adding a key component to what will become the Wall
Street Journal Digital Network
The Journal resumes publication on Saturday with the debut of
Weekend Edition. 2006
Factiva is acquired, extending the suite of business-to-business products in what later
will become the Dow Jones Enterprise Media Group.
2007
Dow Jones is acquired by News Corp., the world’s most global media company.
Les Hinton takes over as chief executive. Robert Thomson becomes editor-in-
chief and later managing editor of the Journal.
2007 and beyond – Something Bigger
News Corp. acquires Dow Jones in December 2007, and the horizons expand again.
Now part of a global media company which includes Fox, SKY, HarperCollins and
newspapers from London to Sydney, Dow Jones reinvents the Journal for a new era of
news. Now the Journal covers more political and general news along with its leading
business coverage. Fresh investment delivers new game-changing business
intelligence tools as well as new markets in Europe and Asia. At a time when other
media companies are retrenching, Dow Jones is moving aggressively to build on the
success of the past and to capture the opportunity of the future.
2008
The Journal is reconceived as a more complete source of news with expanded
coverage of national and international events as well as more opinion, culture and
sports.
Audiences expand. In addition to growth in paid circulation at the Journal, there are
new local language products from Newswires in Spanish, Dutch and Arabic.
Newswires also expands significantly in India.
Dow Jones Indexes launches the Global Dow, a global version of the Dow Jones
Industrial Average aggregating 150 blue-chip stocks from around the world.
WSJ., the Journal’s glossy lifestyle magazine debuts
world-wide. 2009
Ottaway Newspapers Inc. is renamed the Dow Jones Local Media Group.
The company moves its headquarters to midtown Manhattan where at 1211 Avenue of
the Americas it joins its sister companies at News Corp. under one roof.
Dow Jones Sustainability Index
The Dow Jones Sustainability Indexes (DJSI) launched in 1999, are a family of
indexes evaluating the sustainability performance of the largest 2,500 companies
listed on the Dow Jones. They are the longest-running global sustainability
benchmarks worldwide and have become the key reference point in sustainability
investing for investors and companies alike. The DJSI is managed cooperatively by
Dow Jones Indexes and Sustainable Asset Management.
The DJSI is based on an analysis of corporate economic, environmental and social
performance, assessing issues such as corporate governance, risk management,
branding, climate change mitigation, supply chain standards and labor practices. The
trend is to reject companies that do not operate in a sustainable and ethical manner. It
includes general as well as industry specific sustainability criteria for each of the 57
sectors defined according to the Industry Classification Benchmark (ICB).
The DJSI family contains one main global index, the DJSI World, and various indexes
based on geographic regions such as: Europe, Nordic, North America and Asia Pacific.
The DJSI also contains industry specific indexes called “blue chip indexes.” In addition,
the DJSI methodology facilitates the design, development and delivery of customized
sustainability indexes; e.g. indexes covering different regions, indexes covering
different segments of the leading sustainability companies, indexes covering additional
exclusion criteria and indexes denominated in different currencies.
To be incorporated in the Dow Jones Sustainability Index, companies are assessed
and selected based on their long term economic, social and environmental asset
management plans. Selection criteria evolve each year and companies must continue
to make improvements to their long term sustainability plans in order to remain on the
Index. Indexes are updated yearly and companies are monitored throughout the year.
History
o 1999: The Dow Jones Sustainability Indexes are launched in September. It is
o collaboration with SAM and the Dow Jones Indexes. SAM is a global investment
company focused exclusively on Sustainability Investing. The Indexes are
created to track financial success of leading sustainability companies. The top 10
percent of the largest 2500 companies listed on Dow Jones are included.
o 2001: The DJSI is expanded to include STOXX Ltd., another indexing company. The
o Dow Jones STOXX Sustainability Index is introduced and marketed towards
Europe‟s sustainability leaders. 2005: Dow Jones Sustainability North America
Index is created.
o 2006: Dow Jones Indexes and SAM Launch Dow Jones Islamic Market
Sustainability
o Index that combines Islamic investing principles and sustainability criteria from
the DJSI.
o 2010: SAM and Dow Jones Indexes terminate collaboration with STOXX. “Dow
Jones
o Indexes will be responsible for calculation, marketing and distribution of the indexes
including the European Indexes, while SAM [will] remain responsible for the
component
o selections. As a result, SAM‟s collaboration with STOXX Ltd., which had
previously calculated the European STOXX Sustainability Indexes, has been
terminated.”
o 2010: SAM and Dow Jones Indexes Launch DJSI Nordic Index
Indexes
Indexes are denominated in both US dollars and Euros and are calculated using the
Laspeyres formula. All Indexes that are not subsets exclude companies that generate
revenue from alcohol, tobacco, gambling, armaments and firearms, and adult
entertainment. Index components are based on free float market capitalization and
most main indexes are reviewed quarterly, excluding the world index. Customized
indexes are continuously being developed and delivered to encompass different
regions or individualized sections of companies to add additional exclusions when
needed and to change the currencies they are denoted in.
The Dow Jones Sustainability Indexes have been divided into various benchmarks
including the World, Europe, North America, Asia Pacific, Nordic, and Korean indexes.
DJSI World Index
The World Index, or DJSI World, was first published on September 1999. It is based on
the largest 2500 companies in the Dow Jones Global Total Stock Market Index
(DJGTSMI). It covers the top 10% of these companies in terms of economic,
environmental, and social criteria which equals about 300 companies. The DJSI World
has two subset indexes, which are the Dow Jones Sustainability Index World 80 (DJSI
World 80) and the Dow Jones Sustainability Index World ex US 80 (DJSI World ex US
80). Both subsets were initially published in August 2008 and track the performance of
the largest 80 companies globally in terms of sustainability, with the DJSI World ex US
80 excluding the US from the top 80. The DJSI World and its subset are all reviewed
on an annual basis.
DJSI Europe and Eurozone Index
The Dow Jones Sustainability Europe Index covers the leading 20% of the largest 600
European companies in terms of sustainability from the DJGTSMI. It is subset by three
different more specific indexes for the region, the main subset being the Dow Jones
Sustainability Eurozone Index (DJSI Eurozone). This index tracks the financial
performance of sustainability leaders in the smaller eurozone region. Both indexes
were launched in August 2010 and have their own further subset. The two subsets are
the Dow Jones Sustainability Europe 40 Index (DJSI Europe 40) and the Dow Jones
Sustainability Eurozone 40 Index (DJSI Eurozone 40), both of which were also
launched in August 2010. These track the top 40 sustainability leaders in Europe and
the smaller Eurozone region. DJSI Europe and Eurozone are reviewed annually as
well as quarterly to maintain accuracy of the index composition while the DJSI Europe
40 and DJSI Eurozone 40 are reviewed only annually.
DJSI North America and United States Index
The Dow Jones Sustainability North American Index has a similar design as the DJSI
Europe and also reviews the top 20% of the 600 largest companies, but in this case in
North America. It was originally launched, along with its subset Dow Jones
Sustainability United States Index (DJSI United States), in September 2005. Both
Indexes are further broken down by the Dow Jones Sustainability North America 40
Index (DJSI North America 40) and the Dow Jones Sustainability United States 40
Index (DJSI United States 40), which cover the leading 40 sustainability driven
companies in North America and The United States, respectively. Both subsets,
however, were not launched until August 2008, three years after the DJSI North
America.
DJSI Asia Pacific Index
The Dow Jones Sustainability Asian Pacific Index (DJSI Asia Pacific) was launched at
the same time as its single subset, the Dow Jones Sustainability Asia Pacific 40 Index
(DJSI Asia Pacific 40), in January 2009. As of 2009, the DJSI Asia Pacific included 122
companies and captures the leading 20% of the top 600 companies in developed Asia
Pacific Markets in terms of sustainability as derived from the DJGTSMI. DJSI Asia
Pacific 40, the subset, tracks the largest 40 companies who are sustainability leaders
in the Asia Pacific region.
DJSI Korea Index
The Dow Jones Sustainability Korea Index is derived from the smallest pool of
companies, tracking the most sustainable 30% of the largest 200 Korean companies.
The Dow Jones Sustainability Korea Index (DJSI Korea) was launched in October
2009, along with its subset the Dow Jones Sustainability Korea 20 Index (DJSI Korea
20). As of this date, 41 companies were included in the DJSI Korea. DJSI Korea 20
encompasses the largest 20 sustainable leading companies in the region. The index
encompasses a smaller region than the other indexes resulting in a higher percentage
of companies analyzed and a lower number of companies that are reviewed in the
subset. The DJSI Korea is also reviewed on an annual and quarterly basis whereas the
DJSI Korea 20 is reviewed annually.
Assessment
A defined set of criteria is used to assess the economic, social, and environmental
opportunities of the companies that the DJSI has listed, which are chosen based on the
Corporate Sustainability Assessment by SAM Research. Information comes from the
annual SAM questionnaire, company transparency documentation, Media and
Stakeholder Reports, and personal contact with the companies. Industry leaders from
SAM Research‟s Corporate Sustainability Assessment are chosen to be listed on the
DJSI.
Once a company is listed on the DJSI, it is monitored daily for any critical arising
issues, which can lead to the exclusion of the company if deemed critical enough.
Examples of events that would lead to exclusion include: commercial practices,
human rights abuses, layoffs or worker
disputes, or catastrophic disasters. These companies are monitored through publicly
accessible information including media and company contact. If one of these critical
events happens, the situation is analyzed for the scope in which it reaches. If large
enough, the event will be analyzed further based on severity, media coverage, and
crisis management. SAM analysts decide from here whether the company will be
excluded from the DJSI. An assurance report is completed by
Deloitte to ensure the validity of the company‟s information.
In early 2009, an independent expert study commissioned by UNEP FI and presented
at the
World Economic Forum in Davos, highlighted the SAM assessment as “the most
rigorous in terms of the number of questions and depth of information requested".
In 2009, SAM carried out its 11th consecutive [Corporate Sustainability Assessment],
assessing more than 1,200 companies, an increase of 8% from 2008. At the onset of
DJSI‟s assessment criteria, SAM mainly focused on government compliance and
regulations. It has evolved to embrace Corporate Sustainability as a key competitive
advantage, taking into account nine specific criteria in addition to industry specific
criteria. Below are the criteria and weightings SAM uses to assess a company‟s
overall score
Criteria WeightingsEconomic Dimension: 33% Industry Criteria: 57%Environmental Dimension: 33%
General Criteria: 43%
Social Dimension: 33%
Note that these weightings are approximations, and actual weightings may differ
between industries. A Breakdown of these Dimensions is seen below
Economic dimension Weightings in
percentageCorporate
Governance
6.0
Risk and Crisis Management 6.0
Codes of Conduct/Compliance/Anti-Corruption & Bribery 6.0
Industry Specific
Criteria
Depends on Industry
Environmental dimension Weightings in
PercentagesEnvironmental
Reporting
3.0
Industry Specific
Criteria
Depends on Industry
Social dimension Weightings in
PercentagesHuman Capital
Development
5.5
Talent Attraction &
Retention
5.5
Labor Practice Indicators 5.0
Corporate Citizenship / Philanthropy 3.0
Social Reporting 3.0
Industry Specific Criteria Depends on Industry
Number of invited companies in 2010: [13 ]
Total Number Invited Companies = 2,617
DJSI World Universe = 2,500
DJSI Europe Universe = 600
DJSI North America Universe = 600
DJSI Asia Pacific = 600
DJSI Korea = 200
Companies analyzed globally = 1,393
Companies completing questionnaire = 698
Companies analyzed based exclusively on public information = 695
Some of the assessment criteria have varied slightly from year to year to reflect
growing information about particular issues such as water related risks, brand
management, corporate citizenship, risk and crisis management. Continuous
improvement allows for SAM to provide both relevant and current information.
Since 1999, SAM‟s Corporate Sustainability Assessment has increased in number of
assessed companies, number of sectors, number of questions to companies, average
totally sustainability score, and weight of sector-specific criteria in percentage total
weight. [14 ]
1999
2009Number of assessed Companies 4
6
8
1,2
37
Number of Sectors 6
8
58
Number of questions to companies 5
0
10
0Average Total sustainability score (out of 2 48
100) 7
Weight of sector-specific criteria (in % of total
weight) 30
57
Included in the most recent SAM questionnaire are more difficult to measure intangible
business attributes such as innovation and customer relationship management.
Questions are both directed at short-term risks and opportunities and sustainable long-
term value creation. [15] The intensity of the industry-specific criteria has continuously
increased. In 1999, industry-specific information accounted for only 30% of the overall
score, while now it accounts for nearly 60%.
From these questionnaires, each company can be awarded one or a combination of
the following status:. [16 ]
Sector Leader: In each sector, the SAM Sector Leader is identified as the company
best prepared to seize the opportunities and manage the risks deriving from
economic, environmental and social developments. The SAM Sector Leader is the
company with the best score of all companies assessed in this sector.
Sector Mover: Sector Mover is awarded to the company that achieved the
biggest proportional improvement in its Sustainability performance compared
with last year.
SAM Gold Class: To qualify for the SAM Gold Class, the SAM Sector Leader must
achieve a minimum total score of 75%. Peer group companies whose total score is
within 5% of the SAM Sector Leader are also awarded. SAM Gold Class. A score up
to 10% lower than the leader results in SAM Silver Class, a score up to 15% lower
than the leader results in SAM Bronze Class.
SAM Silver Class: To qualify for the SAM Silver Class, the SAM Sector Leader
must achieve a total score in the range of 70-75%. Peer group companies whose
total score is within 5%-10% of the SAM Sector Leader are also awarded SAM
Silver Class, while a score of 10% lower than the leader results in SAM Bronze
Class.
Sam Bronze Class: To qualify for the SAM Bronze Class, the SAM Sector Leader
must achieve a total score in the range of 65-70%. Peer group companies whose
total score is within 10%-15% of the SAM Sector Leader are also awarded SAM
Bronze Class.
Companies listed
The following lists are just a few of the more recognizable companies listed on the
Dow Jones Sustainability Indexes. It is not a complete list, however, this list is for the
2010-2011 year and updated as of October 2010.
DJSI World Index [17 ] DJSI Europe Index [18 ] DJSI Eurozone Index [19]
1
.
Adidas - Germany 1
.
Adidas AG - Germany 1
.
Abertis
2
.
BMW AG - Germany 2
.
Air France - KLM - Infraestructuras
S.A. –3
.
Coca-Cola Co –
United
France Spain
States 3
.
Astrazeneca PLC – 2
.
Adidas AG -
Germany4
.
Christian Dior S.A. - United Kingdom 3
.
ArcelorMittal -
FranceFrance 4
.
BMW AG- Germany 4
.
BMW AG –
Germany5
.
Halliburton Co. – 5
.
Coca-Cola Hellenic 5
.
Christian Dior S.A.
–United States Bottling Co. S.A. – France
6
.
Hewlett Packard Co.
–
Greece 6
.
Enel S.p.A. – Italy
United States 6
.
Deutsche Bank AG - 7
.
Finmeccanica
S.p.A. –7
.
Hyundai Engineering
&
Germany Italy
Construction Co. Ltd.
–
7
.
European Aeronautic 8
.
Fortum Oyj –
FinlandSouth Korea Defence & Space Co. 9
.
Indra Sistemas
S.A. –8
.
Intel Corp. – United EADS - France Spain
States 8
.
L„Oréal S.A. – France 1
0
.
Infineon
Technologies
9
.
Mitsubishi Corp. –
9
.
LVMH Moet
Hennessy
AG – Germany
Japan Louis Vuitton –
France
1
1
.
LeGrand S.A. –
France
1
0
.
McDonald ‟ s Corp. – 1
0
.
Nestle S.A. –
Switzerland
1
2
.
Puma AG Rudolf
United States 1
1
.
Siemens - Germany Dassler Sport –
1
1
.
Nokia Corp. -
Finland
1
2
.
ThyssenKrupp AG - Germany
1
2
.
Panasonic Corp. – Germany 1
3
.
Siemens AG –
Japan 13. Volkswagen AG Non- Germany1
3
.
Rolls-Royce Group Vtg Pfd. – Germany 1
4
.
Suez
Environement
PLC – United
Kingdom
14. AB Volvo –
Sweden1
4
.
Samsung Electronics 15. Wolters Kluwer
N.V. –
Co. Ltd – South
Korea
Netherlands
15. Siemens AG -
Germany
16. Xstrata PLC –
United1
6
.
Starbucks Corp. – Kingdom
United States17. Toshiba Corp. – Japan
18. Unilever -
United
Kingdom
19. AB Volvo - Sweden
20. Woodside
Petroleum Ltd -
Australia
S.A. – France
15. ThyssenKrupp AG
– Germany
DJSI
Nort
h
Ame
rican
I
n
d
e
x [2
0]
1. 3
M
C
o.
–
U
ni
te
d
S
ta
te
s
2. A
l
l
s
t
a
t
e
C
o
r
p
.
–
U
n
i
t
e
d
S
t
a
t
e
s
3. B
a
n
k
o
f
M
o
n
t
r
e
a
l
–
C
a
n
a
d
a
4. Campbell
Soup Co.
– United
States
5. Cater
pillar
Inc. –
Unite
d
State
s
6. Cono
coPhil
lips –
Unite
d
State
s
7. Dell
Inc. –
United
States
8. Ford
Motor
Co. –
United
States
9. Gap
Inc. –
United
States
10. H & R
Block
Inc. –
United
States
11. Kinross
Gold
Corp. –
Canada
12. Macy‟s
Inc. –
United
States
13. Micros
oft
Corp.
–
United
States
14. Nation
al
Bank
of
Cana
da –
Cana
da
15. Procter &
Gamble
Co.
– United
States
DJSI
Asia
Pacif
ic
Inde
x [21 ]
1. A
G
L
E
n
e
r
g
y
L
t
d
.
–
A
u
s
t
r
a
l
i
a
2. B
r
i
d
g
e
s
t
o
n
e
C
o
r
p
.
–
J
a
p
a
n
3. C
L
P
H
o
l
d
i
n
g
s
L
t
d
.
–
H
o
n
g
K
o
n
g
4. Daewoo
Securitie
s Co.
Ltd. –
South
Korea
5. Fujifilm
Holding
s Co.
Ltd –
Japan
6. Hitachi
Ltd. –
Japan
7. Hyundai
Engineeri
ng &
Constructi
on Co.
Ltd. –
South
Korea
8. Insuranc
e
Australia
Group
Ltd. –
Australia
9. Keppe
l Land
Ltd. –
Singa
pore
10. LG
Electron
ics Inc.
– South
Korea
11. Mitsubi
shi
Materia
ls Corp.
–
Japan
12. Nissan
Motor Co.
Ltd. –
Japan
13. Panasonic
Corp. –
Japan
14. Samsu
ng
Electro-
Mechan
ics Co.
Ltd. –
South
Korea
15. United
Microelect
ronics
Corp. –
Taiwan
DJS
I
Kor
ean
Inde
x [22 ]
1. A
s
i
a
C
e
m
e
n
t
C
o
.
L
t
d
.
–
S
o
u
t
h
K
o
r
e
a
2. A
si
a
n
a
A
irl
in
e
s
In
c.
–
S
o
ut
h
K
o
r
e
a
3. D
a
e
w
o
o
S
h
i
p
b
u
il
d
i
n
g
&
M
a
ri
n
e
E
n
g
i
n
e
e
ri
ng Co.
– South
Korea
4. Hyunda
i Steel
Co. –
South
Korea
5. KB
Financial
Group –
South
Korea
6. Kia
Motors
Corp. –
South
Korea
7. Korea
Electric
Power
Corp. –
South
Korea
8. Mirae
Asset
Securities
Co. Ltd. –
South
Korea
9. Nongshi
m Co.
Ltd. –
South
Korea
10. OCI Co.
Ltd. –
South
Korea
11. Samsung
Electronics
Co. Ltd. –
South
Korea
12. SK
Energy
Co. Ltd.
– South
Korea
13. S-Oil
Corp. –
South
Korea
14. Taihan
Electric
Wire Co.
Ltd. –
South
Korea
15. Woongjin
Chemical
Co.
Ltd. – South Korea
Reviews
The November 2010 DJSI Review includes a review of: key facts (showcasing recent
news and growth in asset management), 2010 assessment, Dow Jones Sustainability
World Index, Dow Jones Sustainability Europe Index, Dow Jones Sustainability Asia
Pacific Index, Dow Jones Sustainability North America Index, Dow Jones Sustainability
Korea Index, and Adjustments to Sustainability Index 2010. Each index on the review
includes an Index Range, Dow Jones Global Stock Market Index, Selection of
companies (percent of companies per sector, percent of market cap coverage), the
number of companies added and deleted from the DJSI, and component
selection (based on industry). All changes will take effect at the close of trading on
December
Criticism
In April of 2010, an explosion on BP‟s Deepwater Horizon oil drilling rig in the Gulf of
Mexico exploded, killing 11 crew members and injuring dozens more. Forty days later,
SAM removed BP from the DJSI thereby starting a global debate regarding the value
of rating agencies in assessing a company’s corporate sustainability.
It has been noted that because the DJSI mainly relies on data provided by the companies themselves, the credibility of the information may be questioned, given the self-interest of the companies to disclose favourable data. SAM uses four sources of information to assess corporate sustainability: company questionnaire, company documentation, media and stakeholder analysis, and contact with companies.
Using self-reported data as proxies for the social or environmental effects DJSI intends
to reflect leaves the index exposed to corporate biases and additional credibility risks. it
rewards companies with greatest capacity to respond to SAM's questionnaires and
information requests rather than those with the best socially responsible practices.
Secondly, relying on self-reported data carries substantial risks since information from
companies may not be completely credible. An index based on biased information often
underestimates real risk factors in the listed companies' operation, even in those
instances when submitted information if verified by an auditing firm such as
Pricewaterhouse Coopers. Ultimately, companies with challenging corporate
environmental and social issues are more likely to devote public relations resources to
minimize the perception of risk within their operations.
It has been also found that in the DJSI the three dimensions of sustainability are not
considered in a balanced way, being biased towards economic criteria to the
disadvantage of social and environmental ones. A further bias of the DJSI is that it only
includes large companies, whereas other indices include smaller companies as well.
As a consequence of these limitations, a survey conducted among sustainability
experts found that only 48% considered the DJSI as "highly trusted".