I sort of disagree. It should be tackled from both sides. Shareholders do have some culpability for investing in unethical businessed and not doing enough due diligence. Your average person saving for retirement probably did nothing wrong, dumped the money in an ETF or IRA or 401k and the investment company handled it, but the investment company should have been looking at business practices and not solely stock performance.
Jail time for the decision makers. We already have a way to punish shareholders: Fines on the company. They should just stop being small fines and start at the very least exceeding the amount the company made through crime.
Jailing the decision makers will discourage crime to some extent. The temptation will still be there to pump numbers and make a lot of money. Hitting investors and investment firms in the wallet will encourage a culture of giving a shit about where you’re putting your money.
Buying stocks is not wrong and never will be wrong. There’s nothing wrong about buying shares in an unethical company, it doesn’t provide them any money, it just pushes the stock price up slightly.
investment company should have been looking at business practices and not solely stock performance.
Investment companies should merely look at the strategy of the fund. If the fund’s goal is to match a benchmark index (e.g. S&P 500), it should only look at market cap. In most cases, the practices of the company are irrelevant, that’s why you’re buying a fund.
If you want, you can buy an ESG fund, which buy companies with a high enough ESG score. I personally think those aren’t the way to go, I think you’ll have far more impact by investing for return and buying products from ethical companies with the proceeds, assuming that ESG funds trail the overall market.
So I reject the notion of “ethical investing” and instead promote ethical consumerism.
Investing in a company is, in a real sense, providing them money. Stocks aren’t pretend money totally separate from corporate finances, they are intended to provide capital for expanding a business. If it goes well, the company makes money, the value goes up, and you can sell at a profit. If it goes poorly, you can lose up to 100% of the money you spent to buy the stock. That’s why it’s “investing.” You make it sound like a dog track where the money you put in has no actual effect on the outcome of the race, but that’s not true.
Even if it were true, where is the line? If I come to you with my meth business, a proven track record, and a high potential rate of return and I just want money to help expand, you would consider that a good business? What if it’s assassination? Suppose it’s a totally legal banana company but also they moonlight in overthrowing democracies?
It may be that my literal dollar bill that I invest does not end up in the hands of a guerilla, but in helping dump money into the company I am helping enable the behavior. In this scenario, I think figuring out who is legally culpable and should have known is impractical and the risk is too high of innocent people ending up in jail for us to lock up shareholders, but losing the money invested is absolutely a risk you take when investing, and if people lost their money more often they’d probably pay more attention and it would be a net good.
Companies only get money from stocks when they issue new shares, other than that, you buying a stock has no impact. If you spend $1000 on shares, maybe the stock price goes up by a penny or so, but the company gets none of that $1000 because you’re buying from another investor.
So no, it’s not giving them money in pretty much any sense at all unless you’re making a deal directly with the board to issue new stock at a certain price.
If I come to you with my meth business, a proven track record, and a high potential rate of return and I just want money to help expand, you would consider that a good business?
That’s completely separate from public shares.
If I buy a public share of your meth business, that doesn’t give you any new capital at all, it only gives capital to the seller. That sale has an infinitesimally small impact on the share price, so you’d see pretty much no impact unless I’m buying a very large quantity. My share is also likely not a voting share, so I have no say in how the company is run.
It’s closer to buying second hand products. It provides no direct revenue to the original manufacturer, though it does slightly increase demand for their products, which could mean they might make a little more money in the future, though most likely it’s not going to change anything at all. The main difference is that, instead of products, it’s a small piece of the company, so the market value should reflect the value of the company, not the market value of a single product.
Let’s say your meth company doubles in value because you’re a real Walter White. I could then sell my share and use the proceeds to buy ad space to oppose meth. The purchase and sale has no impact on your business, but my ad space absolutely does.
So me buying shares of an unethical company does pretty much nothing to their bottom line. If I bought a single product from them instead, it would have a much larger impact than spending the same amount on a share of their stock. So the best thing you can do is invest wisely (i.e. chase returns) to grow your money and spend your gains on ethical products.
losing the money invested is absolutely a risk you take when investing
Absolutely! That’s why I shouldn’t buy Enron stock or whatever. Due diligence is absolutely important, but the due diligence should be on future growth potential (well, market sentiment about long term growth, actual growth is less important), not in ethics. If a company is doing illegal stuff, that’s a risk to long term growth since the government will likely step in.
Invest to grow your capital, and spend ethically. There’s something cathartic about making a bunch of money investing in oil and then buying green products with the proceeds.
I sort of disagree. It should be tackled from both sides. Shareholders do have some culpability for investing in unethical businessed and not doing enough due diligence. Your average person saving for retirement probably did nothing wrong, dumped the money in an ETF or IRA or 401k and the investment company handled it, but the investment company should have been looking at business practices and not solely stock performance.
Jail time for the decision makers. We already have a way to punish shareholders: Fines on the company. They should just stop being small fines and start at the very least exceeding the amount the company made through crime.
Jailing the decision makers will discourage crime to some extent. The temptation will still be there to pump numbers and make a lot of money. Hitting investors and investment firms in the wallet will encourage a culture of giving a shit about where you’re putting your money.
Buying stocks is not wrong and never will be wrong. There’s nothing wrong about buying shares in an unethical company, it doesn’t provide them any money, it just pushes the stock price up slightly.
Investment companies should merely look at the strategy of the fund. If the fund’s goal is to match a benchmark index (e.g. S&P 500), it should only look at market cap. In most cases, the practices of the company are irrelevant, that’s why you’re buying a fund.
If you want, you can buy an ESG fund, which buy companies with a high enough ESG score. I personally think those aren’t the way to go, I think you’ll have far more impact by investing for return and buying products from ethical companies with the proceeds, assuming that ESG funds trail the overall market.
So I reject the notion of “ethical investing” and instead promote ethical consumerism.
Investing in a company is, in a real sense, providing them money. Stocks aren’t pretend money totally separate from corporate finances, they are intended to provide capital for expanding a business. If it goes well, the company makes money, the value goes up, and you can sell at a profit. If it goes poorly, you can lose up to 100% of the money you spent to buy the stock. That’s why it’s “investing.” You make it sound like a dog track where the money you put in has no actual effect on the outcome of the race, but that’s not true.
Even if it were true, where is the line? If I come to you with my meth business, a proven track record, and a high potential rate of return and I just want money to help expand, you would consider that a good business? What if it’s assassination? Suppose it’s a totally legal banana company but also they moonlight in overthrowing democracies?
It may be that my literal dollar bill that I invest does not end up in the hands of a guerilla, but in helping dump money into the company I am helping enable the behavior. In this scenario, I think figuring out who is legally culpable and should have known is impractical and the risk is too high of innocent people ending up in jail for us to lock up shareholders, but losing the money invested is absolutely a risk you take when investing, and if people lost their money more often they’d probably pay more attention and it would be a net good.
Companies only get money from stocks when they issue new shares, other than that, you buying a stock has no impact. If you spend $1000 on shares, maybe the stock price goes up by a penny or so, but the company gets none of that $1000 because you’re buying from another investor.
So no, it’s not giving them money in pretty much any sense at all unless you’re making a deal directly with the board to issue new stock at a certain price.
That’s completely separate from public shares.
If I buy a public share of your meth business, that doesn’t give you any new capital at all, it only gives capital to the seller. That sale has an infinitesimally small impact on the share price, so you’d see pretty much no impact unless I’m buying a very large quantity. My share is also likely not a voting share, so I have no say in how the company is run.
It’s closer to buying second hand products. It provides no direct revenue to the original manufacturer, though it does slightly increase demand for their products, which could mean they might make a little more money in the future, though most likely it’s not going to change anything at all. The main difference is that, instead of products, it’s a small piece of the company, so the market value should reflect the value of the company, not the market value of a single product.
Let’s say your meth company doubles in value because you’re a real Walter White. I could then sell my share and use the proceeds to buy ad space to oppose meth. The purchase and sale has no impact on your business, but my ad space absolutely does.
So me buying shares of an unethical company does pretty much nothing to their bottom line. If I bought a single product from them instead, it would have a much larger impact than spending the same amount on a share of their stock. So the best thing you can do is invest wisely (i.e. chase returns) to grow your money and spend your gains on ethical products.
Absolutely! That’s why I shouldn’t buy Enron stock or whatever. Due diligence is absolutely important, but the due diligence should be on future growth potential (well, market sentiment about long term growth, actual growth is less important), not in ethics. If a company is doing illegal stuff, that’s a risk to long term growth since the government will likely step in.
Invest to grow your capital, and spend ethically. There’s something cathartic about making a bunch of money investing in oil and then buying green products with the proceeds.