HOMEABOUTAD RATESLINKSARCHIVESTHIS ISSUE
The SRI Revolution
by Marco Procaccini
Socially Responsible Investment-SRI.
Socially Responsible Investment-SRI. Regarded with contempt and ridicule by the corporate capitalist establishment, and with some degree of scepticism by many socialistic and public interest forces, it seemed until recently SRI would remain a marginal player in the economy.
But that's changing, according to a new report by the US-based Organization for Social Investment. As more unions begin to demand democratic control and accountability of their pension and health and welfare funds and churches and social justice, ecological and community organizations discover the power of democratizing the control of capital, interest in SRI continues to grow.
"Socially responsible investment funds grew by over 75 per cent in 1998 and 1999, more than twice the growth rate of the mutual fund market as a whole," the report said. "Canada has a strong retail market for ethical funds."
The report also shows what it describes as a "boom" in ethical funds, labour sponsored venture capital agencies and other democratically controlled investment funds in the United States over the last three years. "One out of eight dollars (in the US) under professional management is invested according to social criteria."
SRI has been attacked by traditional capitalist agencies as being generally unprofitable or acting as a "feel good" measure with out any long-term consequence. However, repeated investment reports show that rates of return, especially in the long term, of ethical and social funds matches those of standard investment houses.
"Socially responsible companies are less likely to face litigation and scandals that could damage brand equity and hurt share prices," reports the Domini Social Index, which tracks the financial performance of companies with social and environmental screens. The Index says socially irresponsible companies often fail to consider the costs of labour disputes, pollution fines and human rights suits caused by shortsighted and overly capitalistic management practices.
The Investor, the official publication for Ethical Funds, the BC-based social investment agency started by VanCity and affiliated to BC's credit union movement, claims "firms with weaker shareholder rights earned significantly lower returns, were valued lower, had poorer operating performance and engaged in greater capital expenditures" than companies where shareholders have greater input into management.
It also says that company managers and senior bosses often suppress shareholder resolutions calling for ethical or social practices by blocking them from being presented at shareholder meetings.
Recent changes in federal legislation, thanks to intense lobbying by ethical investors, social justice organizations and labour activists, have given shareholders greater freedom to submit resolutions and access information of corporate activities.
Bob Monks, of the Institutional Shareholder Services, an agency that advocates for shareholder rights, has been at the center of these changes. Earlier this year, he worked with labour and non-governmental organizations to present a resolution to the shareholders meeting of the Hudson's Bay Company to stop carrying products from firms using sweatshop or child labour.
"Corporations are owned by pensioners who want to retire in a clean and safe civil world," he said.
Although the resolution was defeated, it did get over 36 per cent of support-far greater than anyone expected, considering it was the first resolution of its kind for Hudson's Bay. Monks says this shows a changing attitude among many minor and non-executive shareholders to take a more active role in corporate decision-making.
But what many ethical investors say is the most exciting part of the growing SRI movement is the interest in outright economic democracy among many shareholders, especially among union pension fund trustees.
Issues such as freedom of information, one-person one vote (as opposed to more shares more votes) and worker and consumer representation on corporate boards are becoming of interest to more people, according to Gil Yaron, of the Shareholders Association for Research and Education.
"Shareholder democracy is a real sleeping giant," he said. The practice of bring what could be considered basic Marxist thinking of democratic control of industry for the benefit of the community to the corporate world could become the next fundamental change in society.
The Columbia Journal
P.O. Box 2633 MPO,
Vancouver, British Columbia,
Canada V6B 3W8
Phone: 604-266-6552 Fax: 604-267-3342