Moral Screening for Investments (Part 1)
October 14, 2013
We Should Fight For The Least Among Us
What does the Bible have to say to owners of capital seeking to make a profit? Quite a bit, actually. For example, we are instructed to maintain honesty during our pursuit of wealth (Proverbs 16:11, 20:17, 21:6). We are also warned to never mistreat or oppress the poor (Proverbs 22:22-23). In Proverbs 1:19, and 10:2, we are instructed to avoid "ill-gotten gain" or "tainted wealth". Finally, there are at least eight scriptures which instruct us specifically regarding how we are to view and treat employees (Romans 4:4, Leviticus 19:13, James 5:4, Jeremiah 22:13, Malachi 3:5, 1 Timothy 5:17-18, Luke 10:7, Isaiah 58:3). Throughout the Bible, God appears to be very concerned with the least among us and how they are treated by those with wealth and influence. Proverbs 3:27 has broad application, but employers and owners of capital are among those addressed. Clearly, Christians are expected to maintain high standards in conducting their business. But do these instructions apply to investing in publicly traded companies, where the individual investor has no direct control over how the company is managed?
Affecting Change Is Better Than Arguing Over Differences
Before we dive further into that, consider that publicly traded corporations provide a lot of benefits to investors, employees, customers, other businesses, and society as a whole. Though some can also do harm, all successful businesses provide at least some benefit to society. Second, consider that most of them employ at least some Christians. Some of them may even have majority owners and managers that are Christians. However, they almost certainly have investors, managers, other employees, and customers who are not Christians. Therefore, we cannot expect company management to adhere to Christian standards of morality in all of their business activities. We should be careful not to push any gnat straining morality on a secular world, while ignoring issues such as fairness, love, and compassion. If you're not quite with me on that aspect of my approach, take some time to read Matthew Chapter 23.
It is upon these issues we can find our common ground and actually affect change in the world. Christians are called to good works. As well, people from all walks of life can agree that corporations should be expected to conduct business responsibly, honestly, and with fairness. For example, they should take good care of their employees. Beyond being the right thing to do, the company can also realize benefits from doing so. Employees who have an ownership stake, pay based on profitability of their unit or the company as a whole, safe and healthy working conditions, a path for personal progress, and who feel they are treated fairly, are going to produce better results for a company. This is the moral issue I find most compelling at present, in regard to investing in publicly traded U.S. companies. Taking care of its own employees is the easiest and most obvious good a company can do, and it actually benefits the company in the long run. If a company is denying their own workers' fair wages, what does that say about the values of the people running the organization?
If I'm to have an ownership stake, I would prefer to see companies not only paying healthy wages, but actually sharing the wealth in other ways. I advocate creating an ownership culture within the company that extends beyond senior managers. Oftentimes, if you look at the stock options or restricted stock awards given out to senior managers of a company, you really must ask yourself if at least some of those wouldn't be more effective being divided among the hands and feet, i.e. the "common" workers, of a company? When senior managers are paid massive salaries in addition to bonuses and stock awards, they win no matter what. At some companies, they win while the employees and shareholders lose. On the surface at least, it makes much more sense to drop the high salaries way down, and have senior managers rely on the long term economic performance of the company in order to gain their personal wealth. It also makes sense to have employees at all levels set up to automatically benefit, in a significant way, when the company prospers. With corporate profits at all time highs, and wages as a percentage of the economy at an all time low, it's way past time for U.S. corporations to begin sharing the wealth with their employees on a larger scale.
There's More To Business Than Profit
Companies have to move past the profit at any cost mentality and take a more long term, sustainable approach to prosperity in America and in the world. We've all seen firsthand the societal benefits of having a free and prosperous middle class. Therefore, it's very strange to me that certain people in power seem to be determined to eliminate the middle class. We can and we must do better.
As much as I hate to point the finger at one company, I feel it is important to give an example. Unless you've been hiding under a rock, you may be aware that Walmart has repeatedly been accused of unethical behavior in dealing with its workers. Most relevant to this discussion, they have been accused multiple times of denying workers' wages that were owed to the workers under law. Much of the time, the result is monetary settlement of a lawsuit in which Walmart admits no wrongdoing. However, on at least one occasion, Walmart was fined by the Department of Labor for denying workers overtime pay.
The message throughout the Bible is very clear: it is wrong in the eyes of God to deny laborers their wages. In fact, in biblical times, it was considered wrong to withhold due wages for a single day. There are serious warnings in the Bible against mistreating employees, or anyone God has given us the power to affect. The underlying principle is that God has given some of us power and authority over others. We can use it to do good, to be fair, and to be generous. Alternatively, power and authority can be used for completely selfish and greedy purposes. If I believe that Walmart's actions prove that they are more than happy to mistreat employees in order to save a few dollars, it's on them. If I think there is little to no chance of them ever changing their stance on such an issue, I might just look for other companies in which to invest. That's one approach.
But, it's not quite so cut and dried. Valid questions come up in this type of situation. If workers are allegedly mistreated in the United States, where there is good oversight and legal ramifications, how are workers being treated overseas in places which don't have such regulations? Was such an offense a one time event, or is there a long pattern of abuse? Has company management sincerely sought to correct any wrongdoing? Is this a reflection of a company's culture that says profits should be obtained at any cost? In Walmart's case, if that were true, why in the world would they give away $1 billion to charity last year? Regardless of corporate charity, would I be better off, from a moral standpoint, investing in a competing company which not only complies with employment law, but adheres to much higher standards in regard to the treatment of employees? Is it likely that the corporate culture and policies could be changed for the better through shareholder activism?
Christian Investors Shouldn't Turn A Blind Eye
As Christian investors, we shouldn't turn a blind eye. We should explore these types of issues and decide what we believe to be wise and morally sound courses of action. I believe that shareholder activism is the way to go in many of these types of situations. If company management were to get thousands of phone calls and letters from shareholders stating that it is more important to them to maintain integrity and fairness than it is to cut another 1% from this year's expense line by shortchanging employees, human nature would probably kick in and they would begin to change their policies. As an investor, I'm all for profits. But I'm not for profits at any cost. Businesses should be run with high ethical standards in order to do some good in the world, and also to be financially successful in the long run. So, to me at least, investing can and should be viewed as an opportunity to work together with company managers and directors. If we all focus on the things we can agree upon, maybe we can accomplish more good in the world. I'm sure Walmart investors and managers would agree that a full-time job should at least provide for basic living expenses. If they would start working together on the issue, I bet they could find a way to accomplish this.
In regard to Walmart and their company culture, there appears to have been, at least in the recent past, a company culture that says to cut expenses (increase profits) at almost any cost. I really like some things about Walmart. While the shopping experience is normally less than pleasant, I enjoy taking advantage of their low prices. I think they've done a lot of good in terms of raising the standard of living for consumers by cutting waste and inefficiency out of the sales and distribution process for the products that people depend on. Clearly, they are generous as a company. $1 billion is only about 6% of Walmart profits for last year, but it's still a billion dollars that went to help those less fortunate. I had to go to their own webpage to find that out. They aren't making headlines with their generosity, so there must be some other motive for doing it. For that, they should be commended. But they should also be encouraged by shareholders to extend the generosity to the people helping them to earn those massive profits. They should be encouraged by shareholders to find new ways to share the wealth with employees. Company management can find ways to share the wealth that will benefit the employees and the business in the long run. Shareholders, if they choose, have the power to focus on those areas in order to influence management and affect change.
While treatment of employees may be at the top of my list, there are plenty of other moral concerns when investing in publicly traded companies. For Part 2 of this discussion, click here.
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