Josh Stern

Should One Invest in Unethical Companies?

Individual investors should avoid companies they find unethical because (among other things) that belief will tend to make them weak holders that sell at the wrong time. Similarly, someone investing a clients money should avoid the pressure of holding something you believe they will look askance at.

On the question of whether going long helps a company, I believe the correct answer is yes, by some tiny, immeasurable amount. The economic benefit of public offerings is access to capital and the equity market is a social organization that sets the valuation terms for a given company and others like it. Just like someone who invests in a holding company that buys mortgage backed securities is in some microscopic way helping somebody somewhere afford a house with an acceptable finance arrangement. On the other hand, the effect is so small that if you knew you were going to make $X more with that investment then the overall benefit of avoiding it would certainly be less than doing it and giving, say $X/10 to a worthwhile charity.

On the topic of Walmart, I don't think their business practices are unethical - they work within the system and the laws that exist, and nobody forces their workers to take those jobs or their customers to shop there. But people who support a combination of laws, economic, and educational policies that will clearly result in the long term destruction of economic security for current and future workers with median or lower levels of skills in demand and geographic access to commercial centers lack compassion. And people who deliberately confuse and mislead voters for the benefit of their own economic interests are unethical.