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

Question

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.

Answer 1

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.

Answer 2

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.

Answer 3

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.

Answer 4

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.

Answer 5

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.

Answer 6

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.)

Answer 7

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.

Answer 8

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.