What can we do?
There are two major paths that investors can take. First, you could pretend that investing is somehow different from everything else you do in your life. You can say that you’re not going to give that homeless guy a dollar because he might buy booze and then turn around and drop two grand into Wal-Mart Stores, Inc. (NYSE:WMT) because you can’t be sure they’re culpable in human rights violations. That’s the first path — let’s call it the “self-deluding” path.
The second path — let’s just call it the “better” path — is to invest only in things that you can see from start to finish. While few publicly traded retailers fall into this category, there are some winners. One of the most interesting examples of transparency that I’ve seen comes from NIKE, Inc. (NYSE:NKE).
The apparel company took heat for years due to its association with sweatshops. In an effort to fix what ailed it, the company increased oversight and started publishing a list of every factory that it works with. It now hosts a website where concerned consumers can click through a map of the globe and see each and every factory, what’s produced there, and what the gender division is among workers.
Does that mean that abuses don’t happen or that NIKE, Inc. (NYSE:NKE) is saintly? Of course not. What it means is that I feel good giving my money to a company that’s trying to do it right, and that is working to do better. Admittedly, you could make the same claim about Wal-Mart Stores, Inc. (NYSE:WMT). That’s the nature of the gray area: There are no well-defined lines. Even so, we all need to draw one for ourselves and we have to stop pretending that none exist.
For companies, the risks are high when litigation comes into play, but the rewards for cleaning up your act can be high, as well. NIKE, Inc. (NYSE:NKE) has had an excellent run (ha!) since it made the shift to transparency. The company broke its silence in 2005, opening up about its manufacturing and supply chain. Since then, it has beaten out the S&P 500 by almost 200 percentage points. On the other side of the coin, you only need to look to the litigation costs involved in the banks’ recovery from the crisis. The current tab sits at over $65 billion. If the dichotomy between the two approaches doesn’t convince you, nothing will.
The article A Case for Morality in Investment originally appeared on Fool.com and is written by Andrew Marder.
Fool contributor Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends Nike and Wells Fargo. The Motley Fool owns shares of Nike and Wells Fargo.
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