Last spring I attended a breakfast meeting at which a Simon Graduate School of Business professor spoke on the economics of health care. After making an erudite statistical presentation, he drifted into personal opinions on health care policy. He had just spoken disparagingly of the Canadian health care system compared to ours, when I could be silent no longer. I raised my hand and asked a presumptuous question: How do the 44 million Americans with no health insurance fit into the equation when making such comparisons? He dismissed my inquiry by saying that was a "policy question," as if economists did not deal with such things. But had he not been talking policy while trashing the Canadian system? I'd never make it in the Simon School.
The point of this anecdote is not to criticize the professor or the Simon School, rated one of the top business programs in the country. Nor is it to compare the Canadian and American health care systems. It is to suggest that no part of our life is exempt from ethical and religious scrutiny. Policy issues inevitably have value dimensions; to ignore that reality is to abdicate our responsibility as religious persons.
It has been said that one can tell a person's character by looking at their check stubs. How we spend our money says a great deal about who we are. Today it might be said that we can also be evaluated by looking at our portfolios - how we invest our money.
Paul Hawken, a progressive economist, says that business is the only institution powerful enough to reverse global environmental and social degradation. Perhaps it will not surprise you to learn that annual Wal-Mart sales equal the Gross Domestic Product of Finland; or that economically Ford Motor Company is larger than Ireland, New Zealand and Hungary combined.[1] To a considerable extent - for good or ill - corporations increasingly rule the world.
Over half of all Americans invest in the stock market - I suspect the ratio is much higher in our congregation. My retirement is tied up in the market - lately I've been calculating how many more years I have to work to make up for recent losses. There are those who follow their stocks every day in the paper. Generally, I don't pay much attention. I do occasionally listen to National Public Radio's "Sound Money" and often hear "Marketplace." And once in a while I force myself to endure Louis Rukheiser's clever commentary on "Wall Street Week," until my interest lags when the talk gets technical. I agree with Woody Allen that "Money is better than poverty, if only for financial reasons."
My economic goal is not wealth, but sufficiency - not all I can get, but enough to live comfortably. Being rich does not intrigue me - not to worry. However, one dimension of investing does spark my interest: social responsibility. I am an ethics junkie. There is little in this world that does not have an ethical dimension - even - especially - the stock market. There is a history to the application of ethics to investing.
The modern corporation goes back to the Romans and Anglo-Saxons - corporations were established primarily to serve the public good, funding guilds and universities. Not until the 16th century were they organized for the express purpose of making money. There is no mention of the corporation in the Constitution. Gradually corporations were chartered by states for specific, socially useful purposes, but they were kept on a tight leash.
In New York State a corporation was authorized to construct and operate turnpikes with a warning that it would have its "turnpike gates thrown open . . . if the road is not kept easy and safe for public use." Corporations were time-delimited, and the rates they could charge were regulated. The 19th century was the turning point, as corporations tried to expand their rights and limit their obligations. In 1886 the Supreme Court ruled the corporation was a "natural person," entitled to protection of privacy and free speech. Justice William O. Douglas later said, "there was no history, logic or reason given to support that view."[2] Be that as it may, I conclude that if corporations have the rights and privileges of persons, they should be held morally accountable as persons.
Religious groups agree; they were early engaged in socially responsible investing. After all, Jesus tipped over the tables of the money-changers in the temple. The Quakers refused to invest in slave-related enterprises. Ben Franklin, among other entrepreneurs, was inspired by the Iroquois Indian principle that considers the effects of one's action on the seven generations to follow. In 1928 the church-sponsored Pioneer Fund was established to avoid alcohol, tobacco, gambling and firearms. It was cited as the "best fund ever" by Mutual Fund Magazine.
The 1970's and 1980's saw Socially Responsible Investing launched as a movement. The Dreyfus Third Century Fund, Calvert, Working Assets, New Alternatives, Parnassus, Citizens Fund, Pax World and Domini are the most familiar names among socially responsible investments. The South Shore Bank in Chicago was established to provide community development loans in places usually off-limits to traditional banks. As Bob Hope once quipped, "a bank is a place that will lend you money if you can prove that you don't need it."[3]
A Social Investment Forum was established in 1985 as a trade association for professionals interested in the ethics of investment. Now nearly 1 in 10 dollars is invested in explicitly socially and environmentally responsible portfolios. Even the great guru of Wall Street himself, Louis Rukheiser, had a manager of one of those funds as his guest. In addition to the usual criteria for investment - safety, income and growth - a fourth has been added - social responsibility.
There are four parts of the wheel of socially responsible investing: first, screening out investments one believes do not behave ethically. For example, I will not knowingly invest in the Nike corporation. Last summer at Chautauqua I heard Charles Kernaghan, executive director of the National Labor Committee, detail his sometimes surreptitious visits to sweatshops in China, Central America and Burma, among other places. He spoke of his confrontation with Kathy Lee Gifford, whose Wal-Mart-marketed clothing line factories exploit children in El Salvador. He told the moving story of bringing one of those children to meet her; how she cried and pledged to make amends; how Wal-Mart has interfered so that little has been done. The actual pictures of workplaces drove home the point that our often lucrative investments are hurting people and the environment.
I have seen this ugly face of globalization in my visits to the slums of the Philippines and the Maquiladoras of northern Mexico. International bodies like the World Trade Organizations, the World Bank, and the International Monetary Fund are apparently unwilling to do much about it - hence the angry protests in Seattle and Prague. One cartoon caricatures the problem: an older executive speaks to a younger one: From where I sit, young man, I see a world filled with foreboding, plunged into peril, on the rim of ruin, and fraught with profit."
I was stunned at the arrogance of Phil Knight, Nike CEO, as reported in Forbes magazine: "An unrepentant Phil Knight blasts his sweatshop critics: 'This isn't an issue that should even be on the political agenda today. It's just a sound bite of globalization.'"[4] Knight just doesn't get it. Neither does Tiger Woods, Nike pitchman, who will not discuss the moral issue. Nor does Nike promoter Michael Jordan who walked away when reporters queried him. Don't talk to me about Woods and Jordan as role models for youth. Not for me. None of these rich men get it - that there might be an ethical dimension in making money.
A second approach in ethical investment is an affirmative screening of companies or mutual funds that serve a public purpose. Our church investment committee has invested in the Domini Social Equity Fund, which has gone from $48,688 in 1995 to $95,297 as of July 2000; the Dreyfus Third Century Fund has gone from $49,200 in 1995 to $132,537. While the Wall Street Journal call these funds "touchy-feely portfolios that profess ideological purity,"[5] in many cases they outperform the traditional markets. As one tobacco analyst put it, "I'd invest in the devil himself if it made money."
The criteria for socially responsible funds usually include environmental responsibility, non-discrimination, good employee relations, avoidance of tobacco, alcohol, gambling and, in many cases, weapons manufacture. There are, of course, no perfect corporations, just as there are no perfect people. One develops reasonable ethical standards and seeks out companies most closely approximating them.
Take Eastman Kodak. It has a good record of employee relations, has been strong on affirmative action in recent history if not always, has supported domestic partnership benefits for its gay employees and has over the years been a good corporate citizen. Some of us, however, have faulted Kodak for its work with the Defense Department, its environmental record, and its dramatic impact on local health care when it decided to self-insure. On balance, it is a morally decent company, though far short of corporate sainthood.
There is a third way investments can help bring about social justice - community investment. The Calvert Fund, for example, sponsors the Grameen Investments begun in Bangladesh - Grameen means village. Microcredit in small loans is given to the poorest of the poor who need very little to establish a family-sustaining small business. In contrast with the massive development projects of the World Bank and transnational corporations, these investments go to the poorest entrepreneurs - some of the 1.3 billion people in the world whom the United Nations describes as living in "absolute poverty." The less you have the higher priority you receive.
Our church has in a small way followed that pattern. Our Social Investment Fund and our Paul Wenger Fund for Peace Through International Understanding have invested nearly $100,000 in our community over the past 15 years. One grant to the Progressive Neighborhood Credit Union helped jump-start an organization that has revitalized our city's Northeast section. Traditional investors shy away from such situations. We can be proud we played a small but vital role in this grass roots community development.
A final method of directing one's dollar toward justice is to be a vigorous and active stockholder. I am often tempted to toss my proxy ballots into the recycling bin, until Joyce calls me to responsibility. I support stockholder resolutions that criticize my company for environmental misdeeds, overcompensation of managers or some other action I consider unjust. I write letters of protest to accompany my proxy - though I have never received an answer. Corporate democracy is one dollar one vote - so my clout is limited no matter how profound my moral critique.
One of my first experiences with corporate social responsibility was at the 1980 annual corporation meeting of Eastman Kodak at Kodak Park. I was representing the Unitarian Universalist Association to support a stockholder resolution calling on Kodak to leave South Africa and put pressure on that racist government. The auditorium was full and I was nervous. As it turned out there were no less than three speakers from this church on the issue. Typically, we disagreed. One spoke against it; one other spoke for it.
As I moved to the mike, I could feel the hostility. While I may have been paranoid, some of my fellow stockholders were out to get me, judging from their derogatory comments. Clearly, the bulk of the people in that room resented what I was doing. They had come to hear how their company was doing in the marketplace, and those who raised such extraneous issues as the moral implications of doing business in South Africa were at best a nuisance, and at worst, troublemakers.
As I warmed to my speech, I was interrupted by Chief Executive Officer Walter Fallon, who asked me to finish. I concluded, to an underwhelming ovation. Here I was, a pipsqueak of a preacher, bearding the lion in its den. I was David facing Goliath, without even a few smooth stones, only a sense of moral urgency. Needless to say, our defeat was overwhelming. We did not expect to win, but we had raised the issue and launched the dialogue. Subsequently, we met with a few corporate executives, though nothing really changed - at first. Not long after, however, Kodak left South Africa. Had we made a difference? I don't know, but I like to think we hastened Kodak's departure, which in the long run contributed to the collapse of apartheid in South Africa.
These, then, are the dimensions of socially responsible investing. I try to be consistent with them in my own portfolio, but I know I have to be even more ethically vigilant. There is in traditional investing the "prudent man rule," that requires fund trustees to invest in a way that a prudent man would find reasonable. I suggest the "prudent person principle" - we ought to invest in a way that is morally responsible over the long term - unto the seventh generation. As investors we must make corporate America accountable for its ethics, just as any other group or person.
I am reminded of a PBS-TV feature on Andrew Carnegie. As a rising industrialist he mercilessly exploited his workers and broke unions by force. After he made his fortune, he became a leading philanthropist. How do we judge him ethically? He was a conflicted man. The young Andrew Carnegie once wrote: "To continue much longer with most of my thoughts wholly upon the way to make more money in the shortest possible time, must degrade me beyond hopes of permanent recovery."[6]
I conclude with another story - about 19th century Wisconsin State Senator Timothy Howe who "vigorously opposed measures to restrict logging in Wisconsin's northern forests." Chided for his lack of concern for posterity, he replied, "The generation yet unborn have (sic) done nothing for me, so I do not care to sacrifice too much for them."[7] But the story does not end there. Severn Suzuki, the pre-adolescent daughter of a Canadian ecologist, in 1989 had visited the Brazilian rain forest with her family and could see its devastation by gold miners and others who were exploiting it.
Severn indicated she and some of her friends wished to attend the 1991 Rio Earth Summit because, in her words, "I think all those grownups will be talking about our future and they need us there to act as their conscience." Ultimately $20,000 was raised, enabling the group to go as a non-governmental organization, the Environmental Children's Organization. Severn was invited to address one of the plenary sessions where she said in part:
"You teach us how to behave in the world. You teach us not to fight with others; to work things out; to respect others; to clean up our mess; not to hurt other creatures; to share; not to be greedy. Why, then, do you go out and do the things you tell us not to do?" In the words of an old Kenyan proverb, "Treat the earth well. . . it was not given to you by your parents. It was loaned to you by your children."
How do I want my money to represent me in the world? Can we do well by doing good? Can we make a profit while making a difference? Can we help promote "the goal of world community with peace, liberty and justice for all" and still prosper? I believe we can. But only if we have the courage to do a moral audit of our investments, only if we consult our broker - and our conscience.
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