Adam’s Blog

That’s my thing, keepin’ the faith, baby. –Joe Friday

Should Idaho Divest?

Posted by Adam Graham on February 22, 2007

Boise Weekly has an article on Idaho’s decision not to divest itself of stocks belonging to businesses that invest in the Sudan:

Imagine for a moment that you are the custodian of, say, $11 billion in public employee retirement funds. Someone comes to you with documentation showing that eight of the companies you hold are buttressing state-sponsored terror in western Sudan, a conflict characterized as genocide by the Bush administration.

Imagine you are an investment manager, scanning your oversized computer monitor for the best returns for state employees. Buying pesos here and selling widget conglomerates there. You come across a great prospect, a Chinese or Brazilian oil prospector with contracts in largely untapped and unregulated Sudan. What factors do you consider before shouting “buy?”

Imagine you are the governor of a state, elected by the people, or a legislator elected by some of those people, and you get the same information: Idaho has at least $41.4 million invested in a genocidal regime.

What do you do with that information?

If you are New Jersey, you drop $2.16 billion in such investments. Five other states have agreed to approach the offending companies with threats of divestment, and more than 20 state legislatures are considering action right now. Venture capitalists in the Sudan now face a sea of bad PR, downward market trends and actual economic pressure.

But in Idaho, the answer is less dramatic.

You pass the buck. To the fund administrator. To the investment technician with the weight of the world on her shoulders.

Julie Fanselow adds:

Read it all here. And kudos to Sens. Diane Bilyeu, Mike Burkett, Joe Stegner, and Elliot Werk, who at least tried to introduce Idaho to the concept of socially responsible investing.

Now, my first reaction was that this was a horrible situation. Certainly, the government shouldn’t be supporting a genocidal regime, but it was then that I realized that supporters of this legislation were committing a serious crime and an error: they were pretending that this would actually do some good for Darfur.

It won’t. Idaho divesting about $5.5 million per company will not change the situation on the ground. The biggest misnomer in “Socially Responsible Investing” (also known as Virtue Investing in Christian circles.) is that companies profit from you holding their stock. Not really. What happens when you or I sell our stock is that other people buy the stock. The company may get a drop in shares, but for most companies, $8 million worth of stock will be a blip on the screen.

Still, I’m not happy with the idea of profiteering from people who do business with Sudan, but there’s a far better way to deal with this rather than divesting. If the State of Idaho is a direct shareholder then have the legislature pass a bill ordering a proposal be issued that all business with Darfur stop, to be voted on at the annual shareholder’s meeting. If a lot of municipalities and states are uncomfortable dealing with Sudan, then a vote may work or it may not. But over time, it will gather momentum until it passes, or the company’s board of directors decides to do so to avoid embarassment of future votes.

This would work far better than merely having us dump stock, as this would actually accomplish something.

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