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What has "Ethical Investing" to do with
Ethics? |
Other ethical traditions and EI
So far I have been mainly concerned with that Christian ethical tradition which makes use of product the central ethical matter. What happens when we turn to other related traditions? One central strand in Western ethical thinking places the virtues at the defining heart of ethics. Ethical action is the cultivation of virtues. These often turn out to be a mixture of Christian, classical, (e.g., often Greco-Roman, stoical etc.), and bourgeois virtues. They include honesty, charity, perseverance, fortitude, chastity, fidelity, courage and many others. But when we look at the characterization of both products and processes as ethical in the EI literature, what is striking is the sheer absence of such virtues. The exception again might be pornography and arguably some forms of gambling. But again, the key word is 'arguably'. Gambling is not obviously, clearly and always and gravely a departure from the virtues.
These two items apart, it is the sheer absence of the traditional virtues in EI literature which is striking. And that goes for processes too. Are EI activists concerned to distinguish firms which reward employee loyalty from those which do not? Companies which advantage employees of good character at the expense of those of poor character? They show little such interest. If they are interested in virtue at all it is in certain virtues which have to do with vogueish conceptions of "justice" and revolve around a very narrow obsession with allocational rights. As with all highly selective approaches to ethics, the question to ask is "What is the principle of selection?" Why, for instance is there much concern about disparities of pay between men and women but so little concern about honesty, duty, service, fortitude, or any one of two dozen other virtues-- and their rewards.
To take an instance in which two actions are both about allocational justice. Much EI literature is concerned with equal rewards for equal work. A company which pays women less than men for the same work might fall foul of some EI guidelines. But what of a company that does not discriminate when it should, which pays two persons the same wage when one has worked harder than the other, that too breaks a principle of justice that rewards should be different according to contributions made. It is difficult not to see the selection of one ethical/justicial concern and the neglect of the other about just desserts as governed by a further principle, that of socialism/egalitarianism.
Virtue ethics see ethics as rooted in the intentions of people. 'Consequentialist' ethics define right and wrong actions by their consequences. Thus, in the latter, actions are good or bad according to whether they lead to good consequences. These are often but not always some variant on an increase in the sum total of human happiness. There are ethicists who would argue that happiness distribution is nothing to do with ethics in the proper sense. But even if we permit that it is, once again, whether something adds to the total of human happiness or detracts from it is, in the case of nearly all products and most processes, a matter to be calculated on the evidence concerned. Decent persons of contrasting views can and do debate whether alcohol adds to the sum of human happiness. Clearly it is associated with misery for a few people, those whose lives are ruined by alcohol-related disease or drunken-driving. It also gives pleasure to many. Is the misery of the few greater than the pleasure of the many? And what of the benefits conferred to those who receive health services or schools paid for by alcohol taxes? I do not see how such a debate can ever be finally concluded. It depends on yet further judgments and values. But at least it is a debate. What is not warranted is the assumption that alcohol is associated with net harm. And still less warranted is the assumption that any harm is the fault of the producer rather than that of the drunken driver or excessive drinker.
To sum up so far: it is a bizarre ethics which places at its centre the idea that certain products are ethical or unethical. It is not bizarre to suggest that certain processes such as employment practices may be ethical or unethical but it is eccentric to use a highly selective list of virtues as criteria to decide whether they are ethical or unethical. It is worse than eccentric to be coy--in much of their public literature--about revealing the principles on which such selections are made. It may even be unethical.
In the few cases when it might be arguable that a product--bby foreknowledge of its unethical use--makes the producer culpable. It actually has to be argued with appropriate evidence that such foreknowledge exists and that the use did indeed result in net harm or wrong. The same goes for other categories such as companies operating under oppressive regimes. It cannot be assumed. In fact to assume it without evidence and argument is itself unjust, that is, unethical.
The environmental anathema: no limits to scrupulosity
If Ethical Investment organizations are selective in their use of virtues, they are also selective in their use of products. The watcher of the EI scene cannot but observe that the list of potentially "unethical" products seems to get longer by the day. It received an enormous boost, of course, when the environmental anathemas were added. Now several funds promise that nothing will be invested in which exploits or damages the environment. These environmental anathemas raise all the questions above about whether they necessarily have anything to do with ethics. And the reaction to the much longer list of unethical goods and processes in which they have resulted might prompt another question: is it ethics which drives these people or a more general distaste for the modern world, especially the Western economy? For example, they are against carbon dioxide emission, and therefore coal power stations, and also they are against nuclear power stations. Since these are two of the main energy sources, how do they propose to obtain electricity?
Yet before they are awarded any prizes for asceticism, it should be noted that they do indeed keep investing. They do find certain products and processes which are acceptable. How? The interesting question is how such scrupulous people justify the products they do invest in? If they are as scrupulous as they claim about product A--and they are scrupulous-- they don't mildly disapprove of A, they want to be assured that their investment has nothing to do with it--then why do they not scrutinize B more carefully?
Weapons are made out of metals. They are designed with the aid of computers and funded by banks. They are delivered by lorries. The weapons workers are fed by coffee machines and delivered sandwiches. How then can the EI purist invest in such banks, computer companies, and mining and metal processing companies, lorry makers, sandwich companies and coffee dispenser manufacturers. Are these people not like the modern fashionable half-vegetarian whose meatless diet is only for weekdays and who defines chicken, suitably concealed in sauce, as non-meat? The charge of cynicism and hypocrisy is made against the companies. Is it not better leveled at some EI activists?
Again, EI activists are not the only activists to class products as good and bad. There are, for instance healthy eating activists, breast feeding activists, toy safety activists, anti-sunbathing activists. medicine side-effects activists. anti-firework activists, anti-roads activists, anti-advertising activists. The hated objects of many of these groups do not appear on the EI index of unethical goods. Why not? Do the EI activists imagine they are morally more perceptive than these other activists? By what judgment do they justify their complacent restriction of their own anathema list merely to arms, tobacco, alcohol, gambling, anti-environmental processes, politically correct employment and the other half-dozen? Why should patients suffer side effects of drugs, sunburn, or children injure themselves on toys all because EI activists are reluctant to do the logical thing and extend the list to everything?
The question is not asked in jest. The sheer length of the ethical investment list, and the fact that the logic behind it could result in even longer lists, suggests that ethical investment may not just be scrupulous in the ordinary sense of the word, i.e. morally carefully, but scrupulous in the theological sense. The scrupulous conscience is traditionally seen as an obstacle, even an instrument of the devil, in Christian moral theology. The scrupulous man is tormented in every action, even the most harmless, with the thought that he may be doing something wrong when he is not. Or that he is doing something much worse than he is. Scruples, say Henry Davis SJ in his Moral and Pastoral Theology,8 may arise from melancholy, fickleness, timidity, want of a well-balanced judgment, pride and obstinacy, or adherence to a species of rigorism. Clearly many of these far from being "ethical" in common parlance, i.e. good, are indeed bad. This traditional Christian understanding that it is bad to find too much wrong with the world has been lost to progressive thought. Yet sophisticated ethical systems cannot endorse the funding of evil everywhere. It not only paralyzes action but distorts the whole moral system itself. And yet there is this sense of exaggerated concern in some ethical investment. What traditional theology reminds us is that seeing more evil than there is is not a zeal to be commended but itself a fault. Thus if ethical investors see great evil where there is none or only a little, they are not acting ethically, quite the reverse. Perhaps ethical investment should be called "scrupulous investment", leaving it ambiguous as to whether that word be used in its common or its theological sense.
Is EI use of questionnaires ethical?
A final concern is about the way some of the ethical investment information activists work. Some work by sending questionnaires to companies informing them that refusal to disclose will itself be disclosed. A suggestion might be inferred that failure to disclose will itself be taken as a black mark, that is, as unethical. Now, suppose a company executive receives a questionnaire which he thinks poorly framed, to which the answers will give an inaccurate picture of the company; suppose he thinks the ethical categories and assumptions poor; suppose he does not think highly of the competence of CERES or EIRIS or other third parties used so uncritically. In short, suppose he thinks that filling in the questionnaire will do neither company or investor or either of their ethical purposes any good, what is he to do? Answer and be damned or not answer and be damned? No doubt those who ask the questions do so out of enthusiasm for their cause but have they thought of the position in which they put the respondent? Is it of the highest ethical standards to put someone in that position? And this all supposes no other reasons for declining such as the release of information to competitors, the maintenance of existing confidences or simply a distaste for what other persons beyond the inquirers might do in distorting further versions of the information once it is initially published. Is that a fair choice; an ethical choice?
And what is the effect if the company complies? Minogue suggests 'The effect of this on business firms is undoubtedly to increase costs: compliance costs in the responses required to the forms sent out by ethical investment "consultants", and often much larger costs involved in defensibly pursuing the policies advocated by EI groups. In this sense, EI harms the ordinary consumer by raising costs.'
Conclusion: ethical investment and the lesser of evils
The overall objection to ethical investment codes is their aggressive simplicity. It is a simplicity which ill fits them for ethical work. Moral choices often involve balance and judgment. To be sure, that fact is often used by immoralists to justify their immoralism. But it remains true. Professor Anthony O'Hear puts the point succinctly: 'Investing ethically is not a straightforward matter. The issues involved are often disputed, and almost always complex. The danger with an ethical investment movement is that it will focus on particular causes, and elevate them into absolutes, disregarding difficulties and counter-arguments.'
Ethical investment as currently codified gives a heroes and villains picture of the economic world with some investments portrayed as ethical and others portrayed as not. As such it actually subverts moral education and the cultivation of fine moral sensibility. Instead it offers what look like slogans, and slogans which seem highly selective in their ideological provenance. That, of course, may be what those people EIRIS calls its 'customers' want. And there is no reason why it and the various investment institutions should not continue to serve them and their preferences. The only objection this report makes is that they should not describe what they are doing as ethical investment.
If this Report is correct in its conclusions, then the proponents of 'ethical' investment should cease to trade on this controversial term 'ethical' and describe their favoured activities more neutrally. It also means that the companies besieged with questionnaires by the 'ethical' investment activists should consider themselves under no automatic moral obligation to reply.
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