WWYD: Profiting From What We Morally Don’t Approve
This week’s question in our What Would You Do series borrows a dilemma from the rich. Case in point: Democracy Now recently reported, “The Bill and Melinda Gates Foundation makes millions of dollars each year from companies blamed for many of the same social and health problems the Foundation seeks to address.”
To bring the question closer to home… what do you do when you learn that your money is contributing to things that you might not morally approve? Perhaps this is through a purchasing decision, like Rich brought up awhile back in his WWYD post entitled, Boycotting Homophobia. He asks, “Would you avoid shopping or eating somewhere if you learned they had an anti-gay policy? Would you also avoid shopping or eating somewhere if you learned the company, or the company’s founder, gave millions of dollars to causes you were against?”
But for today’s question, let’s switch it from the dollar we are spending to the dollar we are investing. Is it easier to turn a blind eye? Just as with consumption choices, most investing decisions imply some moral choice.
Joshua Kennon at About.com talk about the ethics of stock, bond and mutual fund ownership. He writes, “Many people feel strongly about the political issues that confront the world today – abortion, environmental protection, and animal testing to name a few. Ironically, millions of investors are supporting companies that partake in activities and donate money to causes that are in direct conflict with their beliefs, ideals, and philosophies.”
Here are some examples about the choices we must make with socially responsible investing. Let us know what you think.
1. Many mutual funds have holdings in Altria Group (which includes Philip Morris, one of the biggie tobacco companies). The fund is making money but yet 1 our 3 smokers die from smoking. Are you okay with this? If not, what do you do?
2. Animal research has played a major role in many major medical advances of the last hundred years. Perhaps it’s okay when it comes to science. But animal testing is used on many of the products that we consume every day. Oral-B and Oil of Olay… ever used these brands. They’re owned by Gillette and Proctor & Gamble which are both blue chip companies and fair game when it comes to a stock portfolio. Or is it???
So when is this okay and when is it not? Enquiring minds want to know?!
This questions always just kills me. As someone who leaves the investing to my financial planner (I do monitor everything that goes on & am in line with the strategy…I can be a money micro manager) — I don’t necessarily know what “bad” things company in the mutual funds may be doing. And, there’s no way I’m turning to a portfolio of the “all social conscious” funds anytime soon.
I like to think that what I choose to purchase offsets any investing dilemmas (maybe I’m just making myself feel good, who knows). BUT, if people aren’t buying their animal tested product it doesn’t matter how many shareholders they have, they will have to change their stripes (pun intended, sort of).
As for #1 above, I’d say bring on the smokes. As long as there is a market for them, I don’t have a problem with them making a profit. That being said I think smoking is a choice. If you want to do it, you do so knowing the health risks. I am VERY glad to see more and more 100% smoke free establishments. Smoke really bothers me & I would’ve never survived a workplace full of smoke. I can’t even survive a bar full of smoke anymore, so I skip it entirely unless it is smoke free (and even then bars aren’t my thing).
I like to think the power is in the purchasing more than the investing side. If they aren’t making the profits because we stop buying then they will no longer be attractive investments and/or they will need to change to more acceptable business practices.
I certainly wouldn’t be an original investor in any company of which I did not morally approve. But most investments are bought from other investors who are unlikely to be part of the company. In that case, I still don’t invest directly in companies that strike me as overly scummy because I feel that scumminess does not make good long-term business sense.
For a while my mutual funds were all with a socially-conscious mutual fund company, but a) they’ve had consistently lower returns than other options I have and b) their morals don’t match mine. For example, I discovered that they give high ratings to a company which I despise for its extremely anti-competitive practices. This mutual fund company is still valuable because for those morals that we do share, they have a lot of clout with companies and can get them to make changes that I as an individual investor could not.
Still, I admit that overall, I am pretty good at ignoring all kinds of things of which I don’t approve. My money is invested, from most to least, in
1st) my house, which was built a little too close to the 100-year flood plain for my tastes and which requires me to pay taxes to a city which often makes extremely unwise decisions,
a distant 2nd) a small-cap mutual fund which probably owns plenty of stocks from companies doing things I wish they didn’t do,
a close 3rd) my company’s defined-benefit retirement plan which is fairly well run and relatively fair but which also probably invests in not-so-great companies,
a distant 4th) stock in companies I really like (I call this my “play money” because this seems risky),
5th) a money market account in a bank of probably typical sliminess.
In this week’s Carnival of the Capitalists:
http://davidmaister.com/blog/312/
(Here via Carnival of Ethics, Values, and PF)
I won’t ever forget the first time this question came up, because it represented one of the first times I realized that my wonderful, idealistic, environmentalist, lesbian, we’re-all-the-same-inside mother is just as hypocritical as everyone else. When I started reading about Socially Responsble Investing when I was about 20, I confronted about her investments and she basically shrugged. “I need my money to make money,” she said, and she left her investments in their blue-chip funds and continued to donate what I saw as guilt money to big environmental non-profits.
Am I perfect? No. When there are decent socially conscious alternatives in a sector I’m invested in, I choose those options, even if it means my returns will be lower. But I also own some mainstream funds, and like one of the other commenters said, it’s questionable whether my house is a completely ethical investment (my family and I are definitely harbingers of gentrification in my neighborhood).
I’m also okay with tobacco, alcohol and gambling. I’m not so keen on weapons, pollution, homophobic and racist policies, exploitation of third world workers, generally bad labor practices, etc. We all have our pet causes.
I do the best I can, and I try to remember not to throw stones. I still disagree with my mother’s attitude about it, but I also realize I can’t spend all my time researching every company I buy from and every company in every fund I own.