Investment Ethics

By Russell Shaw
Herald Columnist
(From the issue of 1/23/03)

The stock market swoon and corporate scandals of the last few years have motivated many people to think again about their investments. As part of that rethinking, some may need to take a closer look at the ethics of investing. From that perspective, the central question isn't the bottom line but: What is my money helping to support?

Investors who pursue that question seriously may be in for surprises.

In early December Cardinal William Keeler of Baltimore and other religious leaders met with Attorney General John Ashcroft to urge tougher prosecution of companies involved in distributing illegal pornography. Meeting afterwards with the press, the Cardinal and his friends fingered three — AT&T, AT&T/Comcast, and General Motors — which disseminate pornography via cable TV and satellite operations.

These Fortune 500 firms aren't the only ones who make dirty bucks from pornography. Innumerable publishing, entertainment and communication enterprises like AOL Time Warner do the same. So do nearly all the big hotel chains, which routinely offer their guests filthy movies at a price.

But the problem of ethically-challenged corporations extends far beyond pornography.

Gambling, alcohol, tobacco and weapons manufacture, long recognized as raising ethical concerns, lately have been joined by new issues like human rights abuses and fetal stem cell research. Big pharmaceutical firms make big money on abortifacients and contraceptives. Many companies—American Express, Bank America, First Union, Disney, Microsoft, the New York Times, Radio Shack, Sun Microsystems and Wachovia, to name a few—give generously to Planned Parenthood, the biggest abortion provider there is.

"Tremendous damage" is done by investors who put money into such companies, whether from ignorance or in the belief that profit is the only thing that counts. That is the view of Michael Crofton, head of an investment management firm called the Philadelphia Trust Company and financial advisor to the Archdiocese of Philadelphia. His comments appear in Catholic Philanthropy and American Culture, a publication of the Washington-based Faith and Reason Institute containing papers from a conference on that theme.

Crofton cautions against taking so-called socially responsible mutual funds and investment strategies at face value. In the investment context, "socially responsible" often turns out to mean sensitivity to environmental concerns, a company policy of promoting women to executive jobs, and domestic partnership benefits for homosexual employees. And that's it. Equity mutual funds are a particular problem. The mix of stocks often changes, making it hard for small investors to keep up.

The odd thing, according to Crofton, is that investing in ways which really are ethically responsible is a financial winner. Portfolios that are "truly morally responsible" did about 20 percent better than the market in general in the decade past, he reports. "If you invest in good companies doing good things, you're going to do extremely well over the long term," he claims.

In the final analysis, though, ethical investing is about more than getting the highest return.

In Difficult Moral Questions, the third volume of his masterful treatment of moral theology The Way of the Lord Jesus, the distinguished American ethicist Germain Grisez deplores the "individualistic notion" that people are entitled to do whatever they please with their money and maximum profits are all that counts. "It would be preferable to invest in ways very likely to promote genuine human goods, even at the sacrifice of part of the profit," Grisez writes.

This is the real bottom line. What's an investor who wants to do the right thing supposed to do? For many, a serious talk with their broker would be a good place to start.

Shaw is a freelance writer from Washington, D.C.

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