So many times I read/hear about “greedy corporations” doing bad things, but then I start to think about the following.
Public companies (which are mostly what people mean when they call out corporate greed) are owned by shareholders. The executives of those companies have a responsibility to earn money for those shareholders, which is why so many of these “greedy things” happen: execs make decisions based on the bottom line. (Yeah, those execs are also earning money (a LOT of money) for themselves, as well. They are hired to make money for the company (a.ka. the shareholders) and if they meet the goals/targets for sales, etc. they get lots of money and bonuses. But that’s a sideline here.)
However, just who are these shareholders who are ultimately behind this drive for making profits and increasing the value of their shares? Why…it’s us! We’re the ones putting money in our 401(k)s, 403(b)s, and/or state and private pension funds, which are comprised of shares in these “greedy corporations.” Right?
And if I’m not misunderstanding it…holy hell, isn’t this a moral dilemma for people who care about values and issues, such as the environment, human rights, and social justice? How many of us who say (for example) we abhor Walmart’s employment practices and/or boycott shopping there, are actually shareholders in Walmart? Or if we hate frakking, yet are also shareholders in companies that do so?
Ethical investing is HARD when you have a limited set of funds to choose from. I’ve poured over the prospectuses of my Vanguard 401(k) funds and shut that information away in my brain so I can pretend I don’t know what’s in those funds and that life is all sunshine, blue skies, kittens, and puppies.
Am I totally misunderstanding how my 401(k) works? Or is there really a utopia of steady investment growth for a comfortable retirement (one where I don’t have to live in a box and eat cat food) that doesn’t exploit others?
You would probably be interested in looking into SRIs (Socially Responsible Indices) within your retirement plan.
For the most part though, those of us doing broad-based index investing aren’t paid attention to by companies. We’re neutral– sinning by omission, not by commission. We’re not forcing them to change their behavior and we’re not causing them to have the bad behavior. We’re not the people who move the markets because we’re not paying attention to individual companies. Yes, we could do better by doing as you say, picking funds that are socially conscious companies and when we do that we miss out on Exxon’s growth or Phillips 66’s dividends. We could do even better, if we’re wealthy, by buying huge amounts of stock and going to share-holder meetings to make our social justice positions known. But of course that adds risk, and most of us aren’t that wealthy.
An alternative, of course, is to keep your money in the broad-based indices and invest your extra returns in charities that you care about.