Where do you draw the line when investing in “unethical” companies?

By: ispeculatornew
Date posted: 02.28.2011 (6:04 am) | Write a Comment  (8 Comments)

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I have written about social investing in the past and the trend is certainly becoming very popular as investors try to do their part in making the world a better place. I certainly consider it as part of my investment process and would generally prefer investing in local/green/fair companies. It is however only one thing that I look at and for the moment I can admit that I have never excluded a company entirely or at least for most I can see how I could consider them at some point if changes were made.

Comes in AshleyMadison.com

If you have never heard of this website, it might not be very long before you see some mainstream advertisements for this website. What is the company? It is a dating website for married adults seeking adventure. So yes, a company whose whole purpose is to help individuals deceive their spouses and potentially end a marriage that worked perfectly well.

Some industries such as the tobacco industry are certainly very much debated but few come close to being as controversial and morally questionable as AshleyMadison. The company is not listed on any exchanges yet and after reading a recent piece in BusinessWeek, it’s not clear when or if they will succeed in doing so.

Government

My point of view is generally that legal businesses should be able to operate and individuals and businesses should then determine if they want to do business with a company like AshleyMadison. The company was recently denied a spot in the Super Bowl ads and I’m not sure you could blame Fox for avoiding being associated with AshleyMadison, it could have turned into a disaster.

What if it turns into a great investment opportunity?

If you were offered being to buy shares of the web company at a great price, would you jump in? Personally, I did think about it and concluded that I couldn’t. For me, wedding is a critical value. Sure I understand that those using AshleyMadison might have been using other ways prior to that, that they are never forced and are making their own decisions, it is still a line I would not personally cross. Why? Because if AshleyMadison helped in any way to break the wedding of a friend, a family member or even my own, I would be ashamed of being associated and even making money off of it.

It might be a great business opportunity but it’s not one I could sleep well at night taking advantage of.

That being said, I’m the first one to admit that it’s very difficult to draw such a line and it’s not necessarily logical to stay away from AshleyMadison while being ok with an investment in a tobacco company, one that had issues with child labor or that is destroying the environment.

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8 Comments

  1. Comment by Sophie — February 28, 2011 @ 7:42 am

    I think it is easier to draw a line when NOT investing in unethical companies. I know my values and I value myself enough to abide by them. So I tend to avoid company that doesn’t fit my values…

  2. Comment by Chris — February 28, 2011 @ 8:51 am

    I don’t think there’s anything unethical about the company itself. If there wasn’t a market demand, they wouldn’t exist. You say that this company could “potentially end a marriage that worked perfectly well” – a marriage where one partner signs up on a website with the sole purpose of finding an affair is certainly not working “perfectly well”. Also, some couples have a pretty open sex life (which works if there’s a mutual agreement) and might just use this website to spice things up a little 😉

  3. Comment by IS — February 28, 2011 @ 7:12 pm

    @Chris – In a way, I agree, but if a company offering to sell drugs, or take care of your enemies, etc.. There would be demand as well.

    And no doubt, this might be a very ok company for a lot of individuals, depends whho I guess.

    So would there be a line for you?

    @Sophie – And which companies fit that criteria?:)

  4. Comment by Open source portfolio — February 28, 2011 @ 8:08 pm

    The difference of course being that killing your enemies and selling drugs is actually illigal and could land you in jail. Nobody is going to arrest you for cheating on your girlfriend. Thus; I really gotta agree with Chris on this one.

    Of course I this company was in the business of torturing puppies in Bangladesh I’d probably reconsider

  5. Comment by IS — February 28, 2011 @ 8:11 pm

    @Open Source Portfolio – Fair enough, I see your point. So anything legal goes then I guess? What about green vs “dirty” companies?

  6. Comment by Chris — March 1, 2011 @ 9:03 am

    Many “green” companies aren’t actually that green if you look at the bigger picture. A Toyota Prius is much more harmful to the environment than any Ford or Chevy sedan, just because of the materials in its batteries. Solar panels have similar issues. I don’t think it’s that easy to differentiate between “green” and “dirty” companies.

    I have a problem investing in a company when that company engages in abusive activities and people actually get harmed.

    People are killing themselves in FoxConn factories because they see it as the only way to inform the rest of the world about the circumstances inside.

    WalMart signs life insurance policies for almost all employees as a standard practice, having the company as a beneficiary. At the same time, the health insurance that the employees get is very minimalistic.

    Those are examples of where I draw the line.

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