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Wal-Mart Stores, Inc. (WMT), Wells Fargo & Co (WFC), NIKE, Inc. (NKE): A Case for Morality in Investment

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In 2010, 4,157 people died in workplace incidents in the U.S. That was a good year — from 1993 to 2007, we lost more than 5,000 workers every year. Earlier this year, 1,100 people died in one incident in a factory in Bangladesh. Three months of American death in a matter of hours.

As investors we have a seemingly never-ending list of responsibilities to ourselves, our children, our communities, etc., but the obligation — and it is an obligation — to moral investing often gets left out. That’s bad news.

Wal-Mart Stores, Inc. (NYSE:WMT)The black-and-white cases
Morality plays a clear role in our investments, even if we don’t believe it. We’ll talk about the gray areas in a second, but first let’s make the broader point. Suppose you’re approached by a terrorist operative in the U.S. tomorrow. He says he needs a bit of cash and he’s willing to pay for the use. You just need to lend him some cash and he’ll pay you back, plus top it off with 20% at the end of the week.

You’re turning that down. There’s not enough interest in the world to tempt you into intentionally funding international terror cells. That’s a clear-cut case where morality trumps economics. No sane person is going to say, “Well, they’re going to get the money anyways, so I might as well make a cut.” That’s not how it works.

On the other hand, let’s think charity. There is something near and dear to you — for me it’s children’s hospitals — that you’ll give money to regardless of the personal monetary outcome. Again, our personal economics are trumped by moral decisions. Those seem like good baselines to dive into the gray from.

It only gets more difficult
The problem with retailers is that their supply chains often extend to lengths that make it difficult to ever say where something ultimately comes from. Just looking at an investigative report done by Al Jazeera into Wal-Mart Stores, Inc. (NYSE:WMT)’s involvement with factories in Bangladesh brings the problem into focus.

(Run-on sentence warning… ) As far as anyone can tell, Wal-Mart Stores, Inc. (NYSE:WMT) contracts with suppliers who contract with representatives who work with factories that are supposed to be registered with Wal-Mart Stores, Inc. (NYSE:WMT) but that sometimes send work out to other factories without telling the suppliers or without the suppliers telling Wal-Mart, or maybe Wal-Mart Stores, Inc. (NYSE:WMT) is simply being willfully ignorant. Because there are so many steps between an order being placed and products arriving, it’s almost impossible to assign blame for anything.

Do investors take the risk that the company is complicit? Would it matter to investors if the potential problem wasn’t child labor violations but funding terrorism instead?

Before it was consumed by Wells Fargo & Co (NYSE:WFC), Wachovia was so lax in policing its own accounts that it ended up being a thruway for Mexican drug cartels who needed to launder money. The company processed hundreds of billions of dollars of transactions between 2004 and 2007 in a manner that gave “international cocaine cartels a virtual carte blanche to finance their operations,” according to a federal prosecutor. The bank is not the first to be involved in illegal and immoral trading, nor will it likely be the last.

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