UnThreaded | Threaded | Whole Thread (13) | Ignore Thread Prev Thread | Next Thread
Author: IGotRich One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 2247  
Subject: Divestment vs. customer boycotts Date: 11/3/2000 12:17 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Hi,

I am not a regular on the board, but I figure if anyone on TMF will know the answer to this question, the SRI board will. I understand that some people adopt SRI as a kind of moral stance, but from a practical standpoint, has anyone found any data to suggest that divestment from offensive companies actually causes them harm and thus gives them an incentive to change? I know that boycotts and strikes have had such measurable effects, and I try to support these. But I haven't seen any hard data that shows that divestment has worked, even in the case of South Africa. Please don't flame, I am really interested in this question and hope you folks can help.

Thanks,

IGotRich
Print the post Back To Top
Author: scdII Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1254 of 2247
Subject: Re: Divestment vs. customer boycotts Date: 11/4/2000 9:01 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 3
Hi "Rich",
I think you're correct that consumer boycotts probably have a greater impact on companies' bottom line than stock divestment, however you might want to check out this thread http://boards.fool.com/Message.asp?mid=13330147 for a couple of arguments in favor of the idea.

In addition, some very smart investors like TMFGrape's "Fisher Kings" view corporate culture and business ethics as essential barometers of a stock's investment-worthiness. http://boards.fool.com/Message.asp?mid=13583539 Investors who look merely at a company's financial statements and neglect to check the moral compass of those in charge do so at their peril.

Still, IMHO, refusing to own stock in irresponsible companies is more about personal character issues than corporate ones. Having stock in a corporation with abhorant policies makes one complicit in their activities. To me, it's a simple matter of putting my money where my mouth is. :0) Besides, there are so many good and profitable companies one can invest in, there's no reason to put oneself in that kind of ethical dilemma.

Of course, there is always the prospect of shareholder activism. And there is evidence that stock holders can influence errant companies for the better. (see http://greenpeace.org/pressreleases/arctic/2000apr13.html and http://www.unionlabel.org/donotbuy/updates.htm#pace2 for two noteworthy examples. See also the handbook on shareholder activism put out by Friends of the Earth http://www.foe.org).

I hope this helps,
Susan


Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post Back To Top
Author: IGotRich One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1300 of 2247
Subject: Re: Divestment vs. customer boycotts Date: 11/10/2000 11:33 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Susan,

Thanks for your info in response to my question. I think if more people own stocks directly rather than through mutual fund managers, shareholder activism could become a very effective tactic, but I don't see that achieving critical mass soon.

As far as the ethical arguments, I must confess that I find the terms "socially responsible" and "investing" to be mutually exclusive. The people who actually work at your "good" companies could really use the extra money that you pocket instead.

IGotRich

Print the post Back To Top
Author: scdII Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1304 of 2247
Subject: Re: Divestment vs. customer boycotts Date: 11/10/2000 1:22 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 7
Hi again Rich,

Rich wrote: "I think if more people own stocks directly rather than through mutual fund managers, shareholder activism could become a very effective tactic...
I hate to disagree with you, but until the earth's people embrace each other in a multi-ethnic, mono-lingual, Star Trek like geopolitical untopia OR something drastic happens to alter the way MNCs do business, I doubt that individual shareholders will ever wield a great deal of power except collectively. Now, that can happen if a few highly motivated individuals get organized and mount a massive campaign. But, by and large, mutual funds are (and I suspect will remain) the most potent corporate lobbying tools simply because they concentrate the two essential elements of shareholder action (monetary clout and issue-specific motivation) in one convenient package. As the number of shares held in SRI funds grows, corporations will increasingly have to look to them for approval. Still, let me reiterate that I still advocate individual stock ownership as a means of controlling one's own ethical impact.

You also wrote: I must confess that I find the terms "socially responsible" and "investing" to be mutually exclusive. The people who actually work at your "good" companies could really use the extra money that you pocket instead.
Are you suggesting that it is more responsible to give away money directly than it is to invest it with care? Sure. Why don't I just give away all of my possessions and go live naked in the woods, eating nothing but wild nuts and berries? That would be more responsible than sitting here in my gas-heated home typing on my silicon-filled computer that's powered by a coal-fired plant, wearing a shirt that may not be made entirely of organic cotton, sipping coffee that was probably made from beans picked by underpaid workers on an eroding hillside that was once a rainforest. I should at least stop showering, since that's a waste of water. And I definitely can't wait to tell my daughter that she won't get to go to college but will still have to support me in my old age because I gave away all our savings to some assembly line workers in California who make a heck of a lot more money than I do.
Gimme a break.
Susan (who doesn't mean to be cranky, but is a little tired of arguing with paper tigers)



Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post Back To Top
Author: IGotRich One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1306 of 2247
Subject: Re: Divestment vs. customer boycotts Date: 11/10/2000 2:29 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Susan said,

"But, by and large, mutual funds are (and I suspect will remain) the most potent corporate lobbying tools simply because they concentrate the two essential elements of shareholder action (monetary clout and issue-specific motivation) in one convenient package. "

When mutual fund managers can be found who are not sharks, please let me know. Managers are rewarded only for maximizing profits, usually only short-term ones. Corporations, including mutual funds, are money-maximizing machines, specifically engineered to remove non-financial issues like ethics from the decision making process. Since even "socially responsible" funds are evaluated on the basis of returns, and found wanting, I doubt they can buck this trend.

"Gimme a break.
Susan (who doesn't mean to be cranky, but is a little tired of arguing with paper tigers)"

Susan, I wasn't attacking you personally, so I would have expected the same treatment. I don't advocate the nuts-and-berries existence that you elaborate on. I just advocate honesty, and let's face it: all of us investors are thieves, pure and simple. Theft is not socially responsible. Let's not polish our halos about how we are exploiting workers only at "good" companies. Let's admit that, since food, clothing, heat, health care, running water and college tuition are only for the privileged few in this world, we are stealing to have them. And let's also work on gettting them provided to all on some minimal decent basis. Otherwise, we are much worse than paper tigers, we are hypocrites.

I won't continue the thread because I'm sure it's not welcome here. I didn't intend to get into this argument, but also I didn't ask for a lecture on phony morality, just *historical data*. If you attack, expect to defend.

An honest thief,

IGotRich

Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post Back To Top
Author: scdII Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1309 of 2247
Subject: Re: Divestment vs. customer boycotts Date: 11/11/2000 3:22 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 7
Rich,
It was your argument that SRI is a contradiction in terms -- which seemed to be the kind that exists solely for argument's sake but has no intellectual backing -- that I meant to characterize as a paper tiger, not you personally. Although I realize that this is a fine distinction, personal attacks (as you noticed) have no place here, and they're not my style anyway. In any event, I truly apologize for being testy. However, I seriously do find the proposition that one can not be socially conscious and an investor at the same time without being a hypocrite tedious to say the least.

Is the question of whether or not the stock market as we know it is a positive societal force one worth exploring? Certainly. Do we live in a flawed, capitalist country? Sure. Is there vast injustice, disparity of wealth, discrimination, environmental degredation, and outright evil doings out there -- particularly among the huge MNCs that fuel the market and hence make possible the standard of living that offers us the luxury of saving for a rainy day? Undoubtedly. But in my view (let me stress this) there is everything commendable and absolutely nothing hypocritical about seeking to reward the best, avoid the worst, and match our investments with our values. Nothing. I may have over stated my case a bit with the nuts and berries thing, but I will defend to my last breath the concept that great things can come from small beginnings. If everyone in this country recycled just a little, if we all gave just a little to charities each year, if we all used just a little less water and created a little less waste, drove a little less, gave just a little more of our time to community service, and paid a little more attention to complex political issues than we do to sound bites, the end result would be a lot of change for the better. And if ALL of us investors paid just a little more attention to the social and environmental policies of the companies we invest in, they in turn would have no choice but to pay a lot more attention to us. That would ultimately help make the world better. Period.

Sure, it would be fantastic if everyone gave 100% all of the time, and wouldn't it be great if we were all able to live up to our own standards and be the people that we wish we could be every day. But we're not saints. We're just people, Rich, who have families and lives and jobs and mortgage payments and bills and problems and futures to plan for, and we do the best we can. We can care about those less fortunate than we and care for ourselves at the same time. That doesn't make us hypocrites. It makes us human.

In fact, the paramount hypocrisy, IMO, is pretending to give a d*mn about social issues then throwing up your hands and saying its impossible to put your money where your mouth is so why even try. I've seen few people come to this board looking to "polish their halos." I see a lot of people come here looking for ways to resolve the ethical dilemmas forced upon us by our culture and our way of life, searching for a way to be true to the values they hold most dear. Those values happen to include a somewhat secure financial future. Ridicule if you like, but I happen to think that even if the journey isn't straight and the end result is imperfect, it matters to try, and it matters to refuse to give in to cynicism.

Susan (who apologizes for the sermon and promises to try and stick to facts from now on)

Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post Back To Top
Author: DeadheadFool Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1310 of 2247
Subject: Re: Divestment vs. customer boycotts Date: 11/11/2000 1:20 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Awesome Susan. Well said!!

Chris

Print the post Back To Top
Author: BankerNoMore Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1311 of 2247
Subject: Re: Divestment vs. customer boycotts Date: 11/11/2000 6:34 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 2
IGotRich,

RE: "When mutual fund managers can be found who are not sharks, please let me know. Managers are rewarded only for maximizing profits, usually only short-term ones. Corporations, including mutual funds, are money-maximizing machines, specifically engineered to remove non-financial issues like ethics from the decision making process. Since even "socially responsible" funds are evaluated on the basis of returns, and found wanting, I doubt they can buck this trend."

As someone who started investing in SRI mutual funds roughly 13 years back, I'd say look at the New Alternatives Fund (NALFX) for one example.
I would say the fund managers there are not sharks and most definitely not particularly concerned with nor incented by shortterm performance.
While other funds run by large fund companies may have some of the problems you mention, it would be incorrect to characterize them all this way.
Believe it or not, some folks in the financial service industry are not driven by shortterm profits.

If SRI funds or any other funds are "evaluated on the basis of returns" solely, who's doing this evaluating?
I'd say you have the choice on how you evaluate a fund and I'd even say that the term "returns" might involve matters other than simply more cash.

And some corporations believe that ethics can enhance return and therefore actively include ethics in their decision-making rather than remove them.
I'm no pollyanna who thinks that most corporations do this. I don't. But at the same time I do think many are learning (or have already learned) that good ethical behavior does enhance a company over the longterm.

Dave

Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post Back To Top
Author: IGotRich One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1332 of 2247
Subject: Re: Divestment vs. customer boycotts Date: 11/15/2000 6:55 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Dave,

Interestingly enough, I talked to a friend this past weekend about a start up company whose 5th employee was a staff ethicist. I say great and more power to 'em!

But I think we all know what usually happens to start ups when they go public and the investment houses take greater control of decision making. I hope your optimism is correct, that corporations will become more ethical even though it won't make them more money. But unfortunately, I don't see SRI funds or SRI through direct ownership giving them any significant financial incentives to do so. The critical mass is not there, nor are fundholders willing to take a major hit in their own savings to "punish" larger stockholders for misbehavior.

Coordinated boycotts, on the other hand, have been shown to work in countless labor disputes, as well as the anti-apartheid campaign. They also cost the consumer little. Since most of us have limited time and energy, it would seem that a strategy that is good only for (limited) guilt relief is not as good a use of our time as a proven strategy that can make corporations behave.

And that's my 2 cents worth,

IGotRich

Print the post Back To Top
Author: IGotRich One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1333 of 2247
Subject: Re: Divestment vs. customer boycotts Date: 11/15/2000 7:16 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Susan gave another diatribe, no doubt born of great concern about social issues, and great levels of guilt over her part in it all. And I sympathize. But if we feel less guilty or more guilty, that doesn't protect any old growth forests from the ax or any children from child labor. Even if we don't own stock in sweatshops, people will die in sweatshop fires until sweatshops are abolished.

If you have the energy to reduce guilt by SRI and still do something that will actually help, by all means don't think I am opposed. Everyone should have a hobby. But I don't delude myself that my personal level of financial morality helps anyone but me, and I don't have time to actually help people and also reduce my guilt. So I will continue to feel guilty as I steal from employees who do evil at work as well as those who do good, because it takes less time. Then I can devote the time saved to actually fighting some of the abuses using means that work: boycotts, support for litigation, and so on.

There, now I guess we are done with the sermons. Now to find some data.

IGotRich

Print the post Back To Top
Author: BankerNoMore Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1334 of 2247
Subject: Re: Divestment vs. customer boycotts Date: 11/16/2000 3:18 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
IGotRich,

After more thought and reading the posts of others here (thank you all) I'm more resolved and am going to have to disagree with your assertion that being ethical won't make a company more money.

For example, diversity in management vs. lack thereof.

1) Diversity of viewpoints from folks with disparate backgrounds/cultures/experiences/etc often yields a broader range of ideas.
This broader range will in turn generally yield a better set of solutions to tasks at a corporation.
A company managed mainly by old, white, men will most probably be unable to come up with the same range of ideas that a more diverse company that values diverse options will think of.

2) Lawsuits, especially class-action ones, can be quite costly, time-consuming, and distracting to a business.

While I know there are examples to the contrary, I believe that oftentimes the more ethical decision will also be the more profitable decision over the long-run.

Likewise, SRI funds and shareholders are having impacts probably daily through their stock ownership.
For example, in this past year's batch of proxies that landed on my desk there were quite a few shareholder proposals attempting to force corporations into ethical behavior.
As a shareholder I had the option to place a proposal on the proxy and I had the right to vote on it.
Whether it passed or not, the corporations are forced to look at these issues and evaluate their practices.

Beyond this, I imagine a fair number of corporations have adopted ethical policies at the suggestion of SRI funds and shareholders without the use of proxies because the ideas simply make good sense/cents.

Dave

Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post Back To Top
Author: scdII Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1336 of 2247
Subject: Re: Divestment vs. customer boycotts Date: 11/16/2000 12:09 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 1
Great points, Dave!

I apologize if I've mentioned this before, but a fellow Fool recently introduced me to the ideas of investment guru Philip Fisher. In his book Commons Stocks and Uncommon Profits, Fisher sets forth 15 points for choosing a solid company. (In fact, due to his wholistic approach to investment analysis, Fisher focuses much more on companies than he does on stocks.)
Four of Fisher's points in particular back up the argument that responsible corporations can often make the best investments. (You can see all 15 of the Fisher criteria here http://boards.fool.com/Message.asp?mid=11567895)

Point 7 = Does the company have outstanding labor and personnel relations?

Point 12 = Does the company have a long-range outlook with regard to profits?

Point 14 = Does the management talk freely to investors about its affairs when things are going well but “clam up” when troubles and disappointments occur?

Point 15 = Does the company have management of unquestionable integrity?


I think these points pretty much speak for themselves. In fact, judging from the size of Fisher's following, I'd say the principle that ethics=profits is rapidly becoming part of conventional wisdom.

Oh happy day,
:0) Susan



Print the post Back To Top
Author: adsach Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1337 of 2247
Subject: Re: Divestment vs. customer boycotts Date: 11/16/2000 11:30 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Susan posted:
I apologize if I've mentioned this before, but a fellow Fool recently introduced me to the ideas of investment guru Philip Fisher. In his book Commons Stocks and Uncommon Profits, Fisher sets forth 15 points for choosing a solid company. (In fact, due to his wholistic approach to investment analysis, Fisher focuses much more on companies than he does on stocks.)
Four of Fisher's points in particular back up the argument that responsible corporations can often make the best investments. (You can see all 15 of the Fisher criteria here http://boards.fool.com/Message.asp?mid=11567895)



In case anyone was wondering if Philip Fisher's theories have ever been put to the test, Warren Buffett credits his multi-billion dollar investing success to the theories of Phillip Fisher & Benjamin Graham.

Ad Sach - who owns a few small slices of Warren Buffett's company

Print the post Back To Top
UnThreaded | Threaded | Whole Thread (13) | Ignore Thread Prev Thread | Next Thread
Advertisement