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2013 Winter Issue 8 (March 8, 2013)

The Fundamental Assumption of Divestment

March 10, 2013
By Ben Strauss

In last week’s “Defense of Divestment” article, Patrick Burke, Zachary Levonian and Isaama Stoll wrote, “unethical investment is the product of the greater corrupt, capitalist system, deeply rooted in some of the ideals of the United States.” The assumption that we exist in a corrupt, unresponsive capitalist system is both deeply misguided and wrong. The capitalist system works; divestment does not.

First, I would like to examine the foundation of the capitalist system: corporations. A corporation is a group of people authorized to act as a single entity. According to NBC, half of the American workforce works for a corporation. These people who work for corporate America don’t just want to provide money to their families; they also want to leave the world a better place.

Even the highest-ranking people in Corporate America try to leave the world a better place or at the very least maintain the reputation of their companies. When a company gains a bad reputation, the company has increasing difficulty doing business. There are enough alternatives to any company’s product that consumers can easily turn to a more ethical alternative. Subsequently, the company’s profits will plummet. Thus, corporations have a huge incentive for ethical behavior: customers want to buy from ethical businesses, not unethical ones.

However, what is an unethical corporation? I find last week’s attack on Nestle illustrative of the problems in divesting from supposedly unethical companies. The authors offhandedly remark that the relevant scandal occurred in the 1970s—over thirty years ago. Furthermore, in 1981, the World Health Assembly adopted an International Code to regulate Baby Formula. Yes, Nestle may continue to secretly or more likely, inadvertently commit violations of the code, but there exists no substantive evidence of Nestle’s wrongdoing.

Still, you may distrust Nestle’s good faith and desire to help customers, so instead of past scandals in the 1970s, what has Nestle done in the last year?

During the recent horsemeat scandal in Europe, Nestle immediately withdrew products that contained traces of contaminated meat. In addition, Nestle recalled its chocolate milk powder for a possible contamination by Salmonella even when no cases of the illness had been reported. In both cases, Nestle’s actions demonstrate good faith and fair business practices.

The authors boldly claim of their posters “these are facts, displayed in abbreviated form on posters hanging in Sayles.” However, one poster states simply “Carleton Invests in Nestle, Therefore Carleton Kills Babies.” However, did Carleton invest in Nestle in the 1970s during the scandal? I don’t know. I do know that Carleton investing in 2013 will not lead to babies in the 1970s dying and there exists little evidence that Nestle has not continued upholding the law about marketing baby formula since 1981 when the law was ratified.

So, is Nestle an unethical company? A scandal occurred in the 1970s but Nestle seems ethical right now. But how do we define an ethical company? Is it companies that have never committed any wrongs? Is it companies who do no wrong right now? What about companies who admit current mistakes and show progress?

This example of Nestle applies to the broader corporate world. Companies value their reputation and will work to ensure that their products are uncontaminated and that they follow both domestic and international law. I do not deny that some corporations may have unethical business models but that most of the companies in which Carleton invests do not. Corporations should not be penalized for actions over twenty years ago when their business practices are open and fair right now; nor should they be penalized if they work to improve their currently insufficient business standards.

By investing in companies that cannot perform the best actions all of the time, Carleton shows its commitment to improving those companies and proactively seeks to make the companies even better for the world. When companies do commit unethical actions, Carleton must have the monetary influence to convince them to improve. What will occur if Carleton divests?

Companies will not change their practices, because Carleton’s divestment will not hurt profits. Other colleges may feel some inclination to divest, but they will almost certainly just continue to buy influence in companies due to the counterproductive nature of divestment.

Companies care about shareholders who have financial value to the company or show commitment to their business. Carleton may have a small investment in a company but it still operates as ‘a foot in the door’ in influencing them. Through its investment, Carleton shows that it has the company’s best interest at heart when it advocates for a company practicing its business fairly and ethically.

I agree that we can’t simply accept the status quo. However, I would like Carleton students to become more engaged in investment not divestment.  While divestment contains numerous inaccurate assumptions exemplified by the evil, “unwilling to change” corporation stereotype, investment can be a proactive approach to make companies better that will actually work and affect positive change in the world.

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