Monday, April 28, 2014

The Ethical Investor

Across the world, there are easily 100 million people who try to be ethical in their decisions. They are environmentalists, support human rights, and want to make a difference. There are many ways to make a difference, and they vary widely in their effectiveness. I consider myself one of these people. I favor legislation allowing unions to form, protecting workers, and regulations for businesses that strike a balance between protecting the environment and workers and allowing for innovation. These are based on the idea of equal opportunity for all, and the idea to not take advantage of people in callous ways, and pay people for their work.

When it comes to implementing these values, there is a lot that can be done to further these goals, and by far the easiest and theoretically most effective method to implement them would be to use our financial capital to improve working conditions at companies that abuse workers by buying them out. It will help us, and we can then use our power to help the world.

History has shown only investing in ethical companies (while they are on average more profitable) doesn't have the same zing as ending the unethical practices in companies which I believe if practiced would make a tremendous historical difference in how the world works.

Take the world's most profitable publicly traded company in the world, Exxon Mobil, which made over $32.6 billion in 2013 alone. This implies immense power, and if we chose to purchase their shares we could redirect company decisions to be more ethical for their employees and better for the environment. The decisions would have an immense impact. Their Market Cap (for people who don't know, Market Cap = number of shares x current price) is currently around $437 billion. No one on Earth could afford to buy every share of Exxon Mobil, but if 100 million ethical investors decided to gather together and purchase half the shares each investor would only need to put in $2,200 to own half the shares as a group. If they formed a mutual fund, or just purchased the shares themselves one by one, they could vote out Rex Tillerson and change the company in large ways to help the environment and average workers. Merely standing by the sidelines won't make such a large change, but literally replacing the CEO and Board of Directors with people who care about the world and holding them accountable by keeping our shares will make a radical change in company policy that will impact the world.

Other companies would work the same way. Buying out Apple ($511 billion Market Cap) and Nike ($63 billion Market Cap) to pressure them to monitor their factories more closely would make a significant difference. These companies could have pressure in China to blackmail them to increase human rights protections or move their factories to another country that improves worker's rights. We could buy out large banks, such as Bank of America ($157 billion Market Cap) to stop their predatory lending and force them to start lending the cash they are sitting on to small businesses. This would make an immediate difference to human rights that would require no regulation and be effective very quickly without needing to even consider political reprecussions in the next election that could unravel the progress.

This is the power of capitalism practiced ethically, which no other system in the world can do as well. This is direct action that could work in a matter of months, as opposed to centuries, and increase opportunity to all. This is what is possible, as soon as we realize how we can use the system we are in to improve human rights while improving our own well-being. We just have to realize how the system works.

We don't need radical change that hasn't succeeded despite being tried many times over (the definition of insanity according to Einstein is trying something again and expecting a different result). We need rational change that will work.

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