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Professor's Lounge: Moral Portfolio

By investing is about one's values which are shaped by our past experiences.



I agree with you that Wal-Mart (WMT) takes the sword for everyone's sins (or something like that). But they do seem to push the envelope every which way more than others.

I also agree with you that many (most) companies do some reprehensible stuff. I'd have to put my whole portfolio in Ben & Jerry's if I became a pure social investor.

But taking your 4 categories, I could create a portfolio if I wanted. Here's my personal take (off your list).

  • Political donations: I think this one is kind of misleading. Some companies are run by Democrats who make most of their donations to Republicans out of necessity. Amazon (AMZN), Disney (DIS) and Viacom (VIA) come to mind. Would it make sense to avoid AMZN, who would score well in every other category? No, but I would avoid companies that contribute to HAMAS however, lol.
  • Treatment of employees: With companies paying their CEO's like 500x what the lowest employee makes, yeah, I'd like to avoid companies that are bad abusers of this partly because it's probably a sign of a lax board condoning self-serving nonsense.
  • Labor practices: This would lock me out of certain industries more than anything else.
  • Environmental citizenship: Same as above

My conclusion is that if I followed all this, I'd probably eliminate every company but Google (GOOG), AMZN and Yahoo (YHOO), and maybe Starbucks (SBUX) and Borders (BGB) also. That would have worked out well, though. Maybe I should try it, lol.


Professor Adam Warner


I just love the diversity of that portfolio you suggested - it probably has a beta of 5 and correlation among the stocks of 0.95 (LOL). The issue of compensation (as well as board composition) is partly a fundamental analysis not because of some social aspects but because they are important for value creation. I agree HAMAS is a no go, but what about contributions to Green Peace or PETA (some consider it a terrorist-like organization)? Defense stocks are considered by some to be sin stocks. In my book, protecting our country and citizens from our enemies is not a sin, but then again, social investing is about one's values which are shaped by our past experiences. As I have mentioned many times before, my view of the world is shaped by my experience of being raised in socialist Russia. I have my own quirks; for example, I refuse to analyze funeral homes. Though in my case, it has nothing to do with social issues - I just find it depressing. I refuse to do that because it will impact my mood and thus hinder my analytical skills.



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