Is it immoral to buy / own / sell stock in an evil company?

7

2

Scenario. I have decided that I should not buy widgets from Company X because I do not want to support various immoral things Company X does to produce said widgets.

Claim. It is nonetheless morally permissible for me to buy stock in Company X, as long as I am buying that stock from a third party (ie, not from Company X itself or any subsidiary).

Argument. First, let's ask: what should I do if I happen to already own stock in Company X? As a shareholder, I regularly receive money from Company X as dividends. Since Company X is evil, this money I receive seems "tainted." What can I do?

Action: Sell the stock to someone else (or give it to them for free).

Result: Someone else now receives the "tainted" dividends. This seems to be a morally neutral outcome.

OR

Action: Refuse the dividends, or give the stock back to Company X, or sell the stock back to Company X at a discounted value. (Assume for the sake of argument that Company X is not interested in buying the stock for its true value.)

Result: Company X gets to keep more of their money. This is like giving them free money (even worse than buying their widgets!).

Comment. When Company X first went public and put its stock for sale, it was immoral to buy that stock (since Company X would receive the money). Some people bought the stock, anyway, and that's a done deal. Now, I argue, there is no moral difference between one person owning the stock and a different person owning the stock, and it is morally negative to return the stock back to Company X. Therefore, it is permissible for me to buy stock from a third party.

Possible objection. Suppose 50% of people scrupulously refuse to buy stock in Company X, even from third parties, and 50% act out of self-interest and do not worry about supporting evil companies. When Company Y (also evil) goes public, the scrupulous 50% refuse to buy stock; the self-interested 50%, who would have been willing to buy, are then more likely to instead buy stock in non-evil Company Z (also going public), since there are twice as many potential buyers of that stock should they decide to sell it in the future. Thus, while buying stock in Company X from a third party does not benefit Company X, it does benefit rising new evil companies that have yet to go public.

Thoughts?

EDIT. I think most people's (myself included) gut reaction is to say that buying Company X stock or holding Company X stock that one already happens to own is morally negative, while selling it is morally positive. As an objection to this position, consider the following:

Scenario. 50% of investors decide to be scrupulous and follow this position, while 50% follow self-interest only.

Result. Whatever Company X stock is currently held by the scrupulous 50% will eventually be sold to people among the self-interested 50%, because every scrupulous person will feel obligated to sell (positive) and not hold (negative) or buy (negative).

Comment. When scrupulous people were shareholders of Company X, they had more power to demand change in Company X's behavior. Now the shareholders are self-interested people who are less likely to demand change. Thus, the outcome is morally negative.

user10476

Posted 2014-10-19T22:43:46.520

Reputation: 71

2Related: If your government has recently turned your country into a torture regime, ratified now by two successive administrations, is one immoral for not immediately renouncing citizenship? Please hurry with your answer, I'm personally in emotional distress from this. As to your question, you should never do anything that contradicts your moral principles. – user4894 – 2014-10-19T23:19:09.440

3I think you're forgetting supply and demand. You want to have no demand for shares of X. That means you don't buy them, and sell them (at market price, or a touch lower) when you come upon them accidentally. This depresses the price of X (a tiny bit), which reduces their financial power, which reduces their ability to do harm. If many people do this, X's stock price is considerably lower than it would be otherwise. If, however, you buy X's stock just not directly, the effect is much weaker (with the fraction weaker dependent on how much of X's stock would typically be held by individuals). – Rex Kerr – 2014-10-20T00:06:02.947

As Rex suggested best is to try to devaluate the company's assets. One way would be to find enough like-minded stockholders and threaten to dump the stock! You may also need publicity about the company's criminality so that more people join or support your cause. – infatuated – 2014-10-20T05:48:32.827

1@user4894 This is not the same question, to me, at all. One's relationship to a government is more complex than fiduciary holding, even if that government is superficially democratic. Tradition and identity, and one's obligation to share the debts of your forebears' chosen allegiances, are tied up in it in a different way. Why not ask it as a question of your own and see what folks have to say? – None – 2014-10-20T16:45:15.940

@Rex Kerr You say that if I happen to have some Company X shares, I should sell them "at market price, or a touch lower." If I sell them, someone is buying them - let's say, Person A. Reversing the roles of "me" and "Person A," does it not follow that it is permissible for me to buy Company X shares from Person A "at market price, or a touch lower"? – user10476 – 2014-10-23T01:38:33.670

@user10476 I guess the point I was trying to make is that it would not prevent an IPO from company Y, although it may reduce the amount they receive. On the other hand, company Z may have many eager buyers, but the underwriters will not be willing to "place" (offer) their shares at an inflated price for fear of being left holding a lot of unwanted shares. – Nick – 2014-10-23T01:50:29.617

@Nick R It seems like you agree that the knowledge that scrupulous investors exist makes evil Company Y earn less in its IPO. Does it not follow that we have a moral imperative to be scrupulous investors (ie, by never buying Company X)? Also, I do not understand what you said about Company Z. Company Z is the non-evil one that no one is morally opposed to buying - wouldn't the fear of "being left holding a lot of unwanted shares" be greater in the case of Company Y? – user10476 – 2014-10-23T02:01:28.713

@user10476 I'd say morally inclined investors have a moral imperative to be scrupulous by not buying either company X or Y. Regarding company Z, I was saying (poorly) that company Z would not benefit financially because of company Y's problems. If company Z tried to benefit by demanding a premium, then underwriters risk being left holding unsold shares. So underwriting the offering would be more expensive and less certain of success. So company Z could only expect to receive "market value", regardless of superior morals. – Nick – 2014-10-23T02:13:46.653

@Nick R It seems quite possible to me that Company Z could benefit financially from Company Y's problems. Suppose both are biotech companies. Maybe some people who think biotech is the best field to invest in will be turned off by Company Y's liquidity issues and pick Company Z, instead? – user10476 – 2014-10-23T02:29:30.700

@Nick R Also, I think it may be a bit misleading to say that the price of (say) Company Z will be "market value, regardless of superior morals." The point is that the existence of scrupulous investors can (I am suggesting) change what "market value" is. – user10476 – 2014-10-23T02:32:57.273

@user10476 Fair enough. Personally, I think that there is so much liquidity in the markets these days that being liquid can add no "alpha". Also, while company Z may raise comparatively more, it does no alter the prospects for success (in its biotech programme for example) - the technical demands are still the same. It is selling its prospective success priced for full funding. – Nick – 2014-10-23T02:48:17.793

@Nick R Sorry to beat a dead horse here, but it seems to me that the fact that good Company Z raises more money may indeed increase its chances of business success. With more money, they can buy top-of-the-line lab instruments instead of cheaper ones, attract top talent by offering high salaries, etc. – user10476 – 2014-10-26T02:25:12.337

@user10476 Hi. I've posted a summary of my reasoning as an edit to my original answer. Have a look. – Nick – 2014-10-26T02:58:43.730

Answers

10

The "Claim" makes little sense from a purely theoretical basis:

People forget what fiduciary action is. The leadership of a corporation whose stock you hold is legally bound to make you money when that is permissible, reasonable and within their charter. If they are getting away with behaving outside those bounds, they are nonetheless doing so on behalf of their owners. Mitt Romney aside, they are not people, they have no will of their own, their will is your will.

The purpose of a corporation is to earn for its stockholders, to be as valuable as possible in the long run. If you buy stock in the corporation, it is then acting on your behalf. By choosing agents you already know to be corrupt, with no intention of directly acting to reform them, you are choosing to profit from evil doing.

Where you buy the stock is irrelevant. In itself the stock represents approval of the company and acceptance of its leadership. What is relevant is how long you hold it, and what you do with any increase in its value.

I understand that in practice, people see investing as loaning money, and one does not accept the moral burdens of one's creditors. But that is not really what is going on, and I think we would all do better to see fiduciary agency as what it is.

user9166

Posted 2014-10-19T22:43:46.520

Reputation:

I understand that profiting from evil-doing feels wrong. But I do not think you addressed my argument. I am essentially saying that if I already own Company X stock, then selling it is morally neutral (a purely symbolic gesture, if you like). Can you please clarify your position --- do you agree that it's morally neutral for me to sell the stock, but claim that it is wrong for me to buy more of it? – user10476 – 2014-10-23T01:47:12.033

Selling stock that is already held strategically, at market is by definition always a morally neutral act. You would need to sell spontaneously and non-strategically, purposely sell under the market, or sell into an ongoing downturn. – None – 2014-10-23T17:07:41.153

But holding a stock long-term supports its value, so selling, even at an advantage, and encouraging others to follow suit, will reduce the number of people willing to hold the stock long-term, and so is positive. Holding a stock long-term makes the company into your agent, and makes you responsible for their actions. It does not just feel wrong. It is wrong. – None – 2014-10-23T17:13:03.060

If you coordinate selling off a stock with other disgruntled holders, you can depress its value in a way that could get the attention of the voting holders and lead to a productive censure of the company leadership. – None – 2014-10-23T17:17:06.717

I guess my main point is that you (and a majority of others) seem to be taking a speculator's view of the market. That is itself already morally negative. You need to evaluate actions on the market from an investor's view and not a speculator's view. Your decisions need not to be about the timing and flow of transactions, but about what you hold, and how that supports voting holders' returns. – None – 2014-10-23T18:44:07.913

(1) "Selling a stock that is already held strategically, at market is by definition always a morally neutral act." In other words --- action: Person A sells stock at market value to Person B; moral evaluation: neutral. It seems to me that I could play the role of either Person A or Person B; that is, it is morally neutral for me to buy or sell Company X stock at market value. – user10476 – 2014-10-26T02:07:47.833

(2) "holding a stock long-term supports its value, so selling, even at an advantage ... is positive." In other words --- *action:* Person A sells Company X stock to Person B; moral evaluation: positive. Again, I do not see why I cannot play either the role of Person A or Person B. – user10476 – 2014-10-26T02:11:02.143

(3) For what it's worth, my own views on this question are not settled. My gut says its wrong to profit from "evil" stock, but sometimes reasoning overrules gut reactions. The position that makes the most sense to me now is that one should keep whatever Company X stock one has, but not buy any more, for the reason I mentioned in the original post as a Possible Objection. If 50% of people stopped buying or selling Company X stock, that would send the message that evil company stocks have poor liquidity. – user10476 – 2014-10-26T02:15:01.000

If you are playing the role of person B in (2), and you hold the stock, you are doing evil. The action of selling is positive. Only if there is more pressure to sell than to buy does the company get a message to clean house. This is not ambiguous, and no one else supports your chosen position, I fear you are not listening, and I am going to stop talking. – None – 2014-10-26T14:33:21.893

(1) I am listening... I am really trying to understand the logical arguments for and against the "claim" in my original post. – user10476 – 2014-10-26T18:34:55.437

(2) Perhaps in my previous comments I was overlooking the action of holding the stock. If I understand you correctly, your position is: buying Company X stock is morally negative, holding it is negative, and selling it is positive. – user10476 – 2014-10-26T18:36:46.483

(3) My objection to this position is the following. Suppose 50% of people decide to be scrupulous and follow your position, while 50% follow self-interest only. Whatever Company X stock is currently held by the scrupulous 50% will eventually be owned by people among the self-interested 50%, because every scrupulous person will feel obligated to sell (positive) and not hold (negative) or buy (negative). – user10476 – 2014-10-26T18:42:28.860

(3, continued) The outcome, in short, is that a different set of people (the self-interested 50%) now receives the dividends from Company X. Continuing to play Devil's Advocate here, let me suggest that this outcome is either morally neutral or morally negative. When scrupulous people were shareholders of Company X, they had more power to demand change in Company X's behavior. Now the shareholders are self-interested people who are less likely to demand change. – user10476 – 2014-10-26T18:50:23.550

(4) Alternatively, we can suppose that 100% of people (outside of Company X, which continues to be evil) decide to become scrupulous and follow the position mentioned in (2). In that case, the people who currently own Company X stock are in a tough position --- they feel obligated to sell (positive) and not hold (negative), but no one is willing to buy (negative). I have no logical objection to this outcome at the moment... Let me ask, what should the owners of Company X stock do in this scenario? – user10476 – 2014-10-26T18:58:39.000

The last consideration is silly. Who cares whether one can sell something of no value? If the stock has reached a value of zero, you have done all you can, and there is no moral burden. There is probably also no company – None – 2014-10-27T15:20:53.630

I have been assuming this is non-voting stock, or you are outnumbered by the voting majority. If it is voting stock, and you have power, your course should probably be to consolidate that voting stock to the point you can use that power. So there should still be as few moral holders of the stock as possible, to increase the odds they can vote. But preferred stock in 'evil' companies is generally quite hard to come by in amounts that give you effective votes. The only power non-voting stock has is to influence voting-stock holders by manipulating their share price. – None – 2014-10-27T15:24:14.137

You can complain that this last comment creates some sort of 'prisoners dilemma' where, selling is moral, but buying is also moral. But that is a red herring because actors are not required to fail to communicate. Selling to an identified protest voter is even better than just selling in general. And that person is in a privileged position of "shooing the moon", where his strategy reverses the rules. – None – 2014-10-27T15:25:59.353

4

Firstly, the possible objection you raise does not really hold up since the market should price in such perceived liquidity issues, forcing the initial offer price of company Y to be as attractive as company Z.

There is a third scenario which you do not mention. Buying shares in evil company X allows you to do two things :

  • Invest dividends receivable into organizations which counter the activities of company X
  • Attend annual meetings and vote on company proposals in such a way as to encourage company X to change its ways, or at least minimize its negative impact.

EDIT

Following our comments, here is my view of the situation.

Both companies will achieve full funding, it is just that the owners of evil company Y may need to give up more equity (a larger share) to prospective share holders than will good company Z. Both companies will be able to fully their planned activities.

Let's say company Y and company Z have similar prospects and similar funding requirements. Let's say the owners of both companies wish to issue 30% of equity in the IPO in order to achieve full funding. Now the underwriters say, wait a second company Y, your poor reputation may result in fewer buyers for your shares so we are going to demand a 15% discount (or something similar). To cover this shortfall the owners of company Y would be forced to issue 34.5% of equity ( 34.5% = 30% + 15% of 30% ) while company Z only needs 30% of equity. This makes the owners of company Y slightly less well off (retaining just 65.5% of equity compared to company Z's owners retaining 70%) but in no way does this change their company's prospects for success.

Evil company Y and good company Z will each succeed according to their own merits and their market value will ultimately depend on this success. They will both be fully funded following the IPOs.

I am assuming Y and Z are competitors within the same industry.

Nick

Posted 2014-10-19T22:43:46.520

Reputation: 3 370

I would agree with your second point, but no the first. The vast majority of owners of stock are in it for stock gains or stock dividends. They are simply amoral to the outcomes of the company's actions. Being a stockholder means that you are an 'owner' of the business; albeit you may be a small owner or a large owner, but still an owner. – Swami Vishwananda – 2014-10-22T04:06:43.283

@SwamiVishwananda The first point is made in the context of an Initial Public Offering. Such an offering requires underwriters, and no underwriter will take on stock that they do not believe that they can sell. It really is a simple as that. I afraid I do not understand your objection. It does not take the context of the question into account. – Nick – 2014-10-22T04:37:28.400

My understanding of your answer is that the dividends being received are from 'evil company X' - doesn't matter if an IPO or not. If yes, then my comment stands. – Swami Vishwananda – 2014-10-22T11:31:38.437

@SwamiVishwananda The OP asks two different questions. One concerning owing shares in an evil company X. The other concerns what effects company X has on an Initial Public Offering involving two companies; one evil, the other good. The comment you object to relates to the second. – Nick – 2014-10-22T13:03:27.360

@Nick R Can you elaborate on your first comment? It seems to me that "the market should price in such perceived liquidity issues" is exactly the point I was trying to make. If 50% of people are known to be scrupulous, then evil Company Y's IPO is less attractive to investors, so Company Y makes less money in its IPO. – user10476 – 2014-10-23T01:33:45.727

@Nick R Interesting point. I wonder if there is any basis for arguing that Company Y will either be (a) less likely to succeed as a business, or (b) less likely to do immoral things, if a greater percentage of their company is owned by public shareholders? – user10476 – 2014-10-26T19:08:38.927

@user10476 I'm assuming that co. Y's activities are not so morally improper as to be absolutely unacceptable. For example, clothing companies that exploit 3rd world labour to enhance profitability are morally offensive. But it doesn't stop us from buying all those cheap clothes. However, plainly consumer oriented companies are more vulnerable in this respect. Regarding your point (b), this is really the two highlighted points I made in my original answer. – Nick – 2014-10-26T19:34:05.837

2

The argument seems to lump all behaviors into one of three groups: moral, immoral, or neutral. It also assumes a tremendous amount of isolation. All of the decisions are based on dollars. Very little went to the question of what it means to own stock in X in the first place.

I do not see any reason why a person needs to be "consistent" in their attitude towards a company's products and their stock, though consistency does make defending a moral position much simpler. I can think of a few positions where morality makes sense, even when it appear inconsistent when viewed in a vacuum:

  • I may not like company X's process to produce widgets, so I don't buy them, but they provide me the best ROI for the creation of wealth for me to use for good.
  • I may not like Company X's process to produce widges, but they're part of the SP500, and its hard to invest in "SP500 - Company X," so the strain of avoiding company X on the stock market limits the energy I have to do good with the results of my investments.
  • I'll use company X's widgets, because they're the best on the market, but I wont take ownership of the company (which is what stock implies).
  • I have company X's stock because I'm engaging in a hostile corporate takeover to change their practices.

In all of those cases, the larger complex of interactions starts to make the measure of morality more complicated.

Cort Ammon

Posted 2014-10-19T22:43:46.520

Reputation: 16 681

1

The answer to the main question is yes. It is immoral for an individual to buy stock from a company that, he knows, does "immoral" things.

The "claim" is false. It is not morally permissible to go through third parties to try to escape personal responsibility!

If you happen to own the stock of said immoral company, you need to sell it immediately. I disagree that such action is morally "neutral." Since the person buying your stock is already immoral (by default), you would decrease the total existing immorality by one (you are no longer immoral). If enough people do likewise, the number of immoral people holding the company's stock will decrease. If they end up selling less and less widgets, they will soon be out of business.

Guill

Posted 2014-10-19T22:43:46.520

Reputation: 1 686

1Just to clarify, are you saying that I should sell the Company X stock specifically to someone who already owns some stock in Company X? If I sell it to my friend who doesn't own any stock, then the number of immoral people does not change: I become moral, my friend becomes immoral. – user10476 – 2014-10-23T01:06:46.097

0

It can be worse than immoral. It can be immoral and hypocritical, for example when an organisation like the Church of England invests money in a company whose whole purpose is to cynically exploit the poorest citizens of the country with all means, legal or illegal, as the "payday loan" company Wonga.

And I mean "invest money". If you just buy or sell shares of a company on the stock market, the company itself is very little affected by that purchase. However, in this case the Church of England actually gave money to this evil company so they could build their business.

gnasher729

Posted 2014-10-19T22:43:46.520

Reputation: 3 297

I think what you are saying is exactly what I was driving at in the original post under Comment: "When Company X first went public and put its stock for sale, it was immoral to buy that stock (since Company X would receive the money). Some people bought the stock, anyway, and that's a done deal. Now, I argue, there is no moral difference between one person owning the stock and a different person owning the stock." That seems to echo your statement: "If you just buy or sell shares of a company on the stock market, the company itself is very little affected by that purchase." – user10476 – 2014-10-26T19:02:16.403

0

If you think a company is behaving unethically, buying stock can be the most ethical and practical solution.

Executives of publicly traded companies work for the owners, the stock owners. By buying stock, you gain influence and control over the operations of the company. If the current stockowners are requiring or tolerating unethical behavior by the executives, then buy stock transfers that control to you.

If you used any returns from the stock to buy more stock and gain more influence, you would not yourself directly benefit from owning the stock. (If for some reason you had to cash out, you could donate any profits to charity and still do some good.)

Depending on the size of the company, you would likely have to coordinate with a rather large group of other individuals with the same goals. Still over a period of years, your group could accumulate enough power to get a board seat and at that point you could begin to substantially alter the companies operations or in extreme case, get access to the internal documentation necessary to bring the board and executives to justice.

In the most probable scenario, you take over the company, make it behave ethically and make a handsome profit besides. Now, you have even more ability to act morally. (This is highly likely because, despite the utterly self-interested proclamations of people who know nothing about business or business history, ethics and integrity pay big time in business. Business relationships at all levels are voluntary, business have to build trusted reputations or people stop dealing with them. It's not like politics and government were the corrupt can force people, literally at gun point, to do what you want.)

Best of all, from a moral standpoint, you've got skin in the game. Your not just some whiny backseat driver self-rightously casting moral aspiration right and left at everyone while paying absolutely no penalty for being wrong regardless of the degree of harm they cause. You've put money on the table, money your not going to get back unless make things better.

Doesn't get more moral than that.

(All this assumes of course, that it is as easy to identify immoral companies as many self-interest and/or ignorant parties like to suggest. Large companies deal with the most complex set of tradeoffs in human existence. Few outsiders have more than a fraction of the information necessary to judge the overall moral balance of their actions.)

TechZen

Posted 2014-10-19T22:43:46.520

Reputation: 189

0

If, as you stated, "Company X is evil", then you should not buy shares in that company, because to do so would ally you with evil.

However, your claim and argument are very loosely, even sloppily worded.

"various immoral things Company X does to produce said widgets", in the Scenario suddenly transforms to "Since Company X is evil" in the Argument.

These two things are not even remotely alike, and draws my attention to the practical matter of opportunity.

But first, let's take a look at at "evil". It is a four letter Anglo-Saxon word, and for nearly a thousand years its meaning has been generally agreed upon. Have a look at Wikipedia: http://en.wikipedia.org/wiki/Evil

Note: "complete opposite of good" and "profound immorality". Also, "supernatural".

In a practical sense, there is no "Company X" with (a) shares that can be purchased by citizens of North America, and (b) is "evil" in any general sense.

The only Company X's that would meet your conditions are companies that are "evil" in a very particular, and very political sense.

Robert Blair

Posted 2014-10-19T22:43:46.520

Reputation: 1

0

First of all, I apologize if I sound dogmatic, but under the light of the Marxian analysis, the selling or buying stock itself is the abbreviated production process as is G ( gold ( input=investment )) --> W (=Work=Production process) --->G' ( Increased gold after selling the products ). So it does not matter if the subjective company is evil or not. It is jut a natural conduct under the capitalistic mode of the production ( Capital Vol 3 ). Simply saying it is **fetishism** to acquire more money ( or more simply saying pursuing more money under whatever circumstance it is. ). G ( Gold ) ---> G' ( more gold ). Only under the capitalistic mode of the production the stock market ( same with currency market, bond market, etc etc ) is the place where people pursuit abbreviating the work-production-process ( since here is the source of the wealth, but it takes time ) to obtain more money, thus called fetishism to money the mammon. So to me, if the nature of the company of the target stock is evil or not does not matter at all.

PS:Here, I would like to clarify by bringing about an example.

About the fetishism to the money the mammon. I mean here money ( or whatever the form it can be ( such as interest )) become the commodity.

Example: Option of stocks. Of option, there is a call option of for example, Dow Index. And there is a counterpart, the Put to the Dow Index call option. If the target price of the call option of Dow Index is 18,000, then more and more the Dow goes up near to 18,000, the less and less the premium of the counterpart Put will be. If the Dow hits above 18,000, the call option holder can exercise the right, while the holder of the Put owes incalculable debt. Then is there a problem of evil or good here? None. Just the matter of lose or win. Here the money can be the commodity.

user13955

Posted 2014-10-19T22:43:46.520

Reputation:

Since people know the trick by intuition, but do not speak, such a thing http://en.wikipedia.org/wiki/Libor_scandal happens at a time. And when it is prevailed, people bash the offenders.

– None – 2015-04-04T14:23:09.230