Question Today you can read a lot about ethical and unethical doing and specially about companies that do act unethically or unfair. For a public person it's not always easy to determine if such accusations are righteous or not. My question: Is it unethical to invest in shares of companies, whose reputations are not that good because they are accused of repression of employees or groups (or supporting such repression), exploitation of nature and human, etc.?

Accepted:
February 3, 2006

Comments

An interesting and very timely question. It seems to me that it breaks down into several parts.

First, we need to ignore the problem that what one person believes is unethical corporate behaviour another believes is appropriate competitive behaviour. For example, much of the current trend in ethical investing stems from religious groups, many of whom refuse to invest in companies that produce alcohol, as well as those that produce and sell arms to oppressive regimes. Many would for good reasons count the latter as a more important oversight than the latter. Let us assume that we are all agreed that behaviour X (using your example, treating the workforce in some particular way) is unethical.

Second, your question assumes that if a company were in fact guilty of X, then that alone would preclude investment in it. However, corporate activities are complex; one might be inclined to take a holistic view of their activities and ignore one thing because of activities you feel are generally beneficial in other areas. Relatedly, many ethical investment fund managers look for responsible behaviour relative to the industry (e.g. within arms manufacture, which companies are doing most to ensure responsible use?).

Third, there is the problem of evidence and proof. Of course, one should always interrogate the provenance of the accusation and thus the quality of the evidence. But more significant that this is that within criminal law there seems general agreement that the principle of 'innocent until proven guilty' is a good one. But, there are at least three differences. (i) We are not speaking here of criminal law but of ethical judgements. Accordingly, it might be appropriate to apply different procedures. (ii) Because of the complexity mentioned above, it may be years if ever that adequate evidence surfaces. (iii) We are speaking of investments by private individuals. You have the right to invest or withdraw your investments for any reason you choose, which is quite unlike the ability of the legal system to imprison.

Let's assume, then, that one has taken into account the first and second points above (is it really unethical? and is that company 'on the whole' for good?). On that basis, there might be a good case for the conclusion that not investing, on the back of an evidenced but as yet unproven unethical behaviour, is the proper course of action.