One problem with investing in “unethical” companies is that they face a greater risk of regulatory crackdown (and that can slam profits). I tend to be risk-averse, so I rarely take positions in such companies and am quick to sell when I do.

When I read “I don’t buy it…. since voting is statistically certain to make no difference at all” I thought it came across as saying that voting proxies was minimally imporntant.

I very much belive that even a very small investor has a far better chance to bend the course of a multi-national company than a single voter has on swaying the course of a regional or national election. The math David Neubert put forth is hard to argue with on that point.

There are obvious limits on small shareholders voteing power. An obvious example would be the case of the enviromental group trying to get a company in a globally competitive industry like oil refining to spend hundreds of millions of dollars to make a refinery more envriomentally sound and LESS financially sound. That trade-off has no place at the individual company level.

Publish a set of envriomental rules for all to follow and the companies who can achive the targets by spending the least will win in the marketplace.

So I’m quite sorry if I twisted your words in a way you did not intend and keep up the fantastic writing.

p.s. to bernakesbubble… the idea that you exposure to any one company is so small as to have no impact is an obvious falacy. Most mega-cap companies are so large that no single investor owns even 5%… but they are still governed by the collective voice of their shareholders.

In the near term those small voices will get much louder… soon any long-term investor group with a 3% stake will be allowed to nominate a diretor on the company proxy statement. I’m very hopeful that this will force directors to listen more intentlyly to shareholders and less intently to CEO’s.

Felix: Good topic. I’ve silenced my conscious by concluding that my exposure to any one company is infinitesimal in relation to outstanding shares. If refraining from buying a share in valero would have no impact, then buying a share would have no impact as well.

I also invest in an ethical fund that ensures that those in it are also doing some good. (no, not doing God’s work, but doing no harm)

You can choose a fund or group of funds that match your ethical standards. No animal testing, clean and green, ones with different hues of green, cleaner energy and technology, new energy and Local growth funds. The funds have performed well over the years, for those of us that had long term and diverse retirement funds with less risk. They did far better then my American funds.

It is nice to have the choice, but I doubt that my voting had any bearing on the ethical behaviour of companies/Banks who continue to act unethically. Voting en masse (vocally/structured) and Boycotts en masse are the only thing that will hurt a company enough to change.

I vote with my actual vote, my voicing, my written word and my feet. But then, that’s my standard of ethics. Am I making a big difference? Not so anyone else can tell, but it makes a difference to me.

* “Gotcha” fees that can run thousands of dollars for services that would be covered in the right “unlimited” plan for $60/month.

* Third-party billing that is passed along WITHOUT QUESTION and cannot be disputed through Verizon. You can attempt to resolve the matter with the third party, but you cannot refuse that portion of your bill. Any money you send to Verizon is applied to third-party charges first, giving lie to the statement “your service won’t be terminated for failure to pay these charges”.

* “Guaranteed lifetime” rates that steadily increase as they tack on additional fees (including charges that had previously been paid by Verizon).

The best way to invest ethically, if you wish to do so, is to start your own business and run it according to the highest standards. “Voting with your feet” is only effective if a substantial minority does so because the money is fungible. “Voting your proxy” faces a similar uphill battle.

Very true. The choice isn’t so much oil or no oil. It is Iranian jobs and cash or American jobs and cash.

As far as unethical companies, my I nominate Apple as public enemy number one for turning several hundred million iPOD-addicted youngsters worldwide into addled zombies so afflicted with ADD that they can barely make eye contact, let alone hold a conversation?

Then again, I sure do love the PC! Thank you Steve, for your past work!

My point was that even though voting proxies IS important, it’s not sufficient (even if it’s necessary) if you wish to be an ethical investor.

Hi Dan, that reminds me of the recent spat over “rare earth” mining. Seems that China has 30% of the world deposits, but 95% of the world production. The US has substantial deposits itself, but no domestic production at all. How can we justify importing 100% of our consumption of a resource that is so critical to the semiconductor industry?

Apparently rare-earth mining is messy, involving a variety of toxic and radioactive minerals mixed in. So we prefer to export the pollution to China (and then loudly complain when they object to meeting our demands for increased supply).

There are all kinds of issues here and much has been written about the relative merits of attempting to combine ethical decisions with investment ones — too much to deal with in a comment stream.

For now, I’ll recommend consideration of the @y2kurtus advice to vote in a fashion that increases shareholder value. One of the problems is that which seems additive to shareholder value today may be untenable corporate policy long term. Firms need to somehow be aware of the ethical dilemmas that they (and their shareholders) face and to consider the implications should they intensify.

Many business models have gone on the rocks due to the stubborn indifference of important social issues, whereas those that recognize them and come up with lasting solutions are the ones that deliver real long-term value.

http://www.felixsalmon.com/2009/04/pigs- head/