Corporate ethics

Companies, via their senior management, make strategic value judgments all the time about what type of activity the company should engage in and what sort of investments the company buys into. The filters of "corporate identity" and what constitutes "core business" apply quite strong biases to these decisions. It is likely that in some cases this results in a bias towards generally more profitable activities, but other times the bias may be generally towards less profitable activities. 

However, there is so much uncertainty about what affects overall long term corporate profitability that imposing essentially arbitrary limits on activity as part of corporate "strategy" or "core values" is typically regarded as good management practice, in order to simplify the complexity of activity options and decision making. It is unrealistic, and quite rightly not expected, that even though companies avoid activities that are legal and profitable, but not consistent with corporate strategy, they will neither disclose that fact and nor will they calculate approximate foregone profits. 

Making a decision to engage only in (more or less) "ethical" activities (according to a particular ethical perspective) is similar in principle to any other strategic filter. Estimating the "ethical impact" of any particular type of corporate activity is not a simple matter, but it's something that is possible to do. To believe that it is not renders the entire not-for-profit / charitable sector (and politics) entirely irrational.

While regulators and legislators define what is legal, it is not clear that everything that is legal is (or even ought to be) ethical within the mores of the time. (That is, not everything that is unethical is illegal). In fact it is often argued that it is inappropriate for legislators to be too prescriptive regarding what is ethical and what is not. It follows that there must be some role for the corporate sector to have an input into what type of activities are ethically acceptable. 

As investors, our activities have many consequences that impact on the real world (indeed, the utility generated for customers is typically provided as the ethical justification for free markets and the resulting rewards of profit to investors) and so we do, via our investment choices, have the ability to influence the sort of social and political world that we live in. As investors we have every right to spend our investment dollars where we want to and we might rationally wish to take particular ethical considerations into account in making those decisions. In the same way, we might decide where to spend our consumption dollars based solely on the goods or services that we directly receive, or alternatively we can choose to be influenced by whether or not we wish to support the activities in the corresponding supply chain. 

While it might be conceptually convenient to keep an intellectually purist separation between acting as a financially motivated profit maker as part of an economic sector, and acting a politically motivated person with a social consciences as part of the charitable sector, the distinction in practice is a little fuzzy. Principally economic activity has social impacts beyond the value enjoyed by customers, and charities need access to sufficient resources to be able to realise the social objectives that motivate their existence. 

Just as responsible donors to charities, when choosing to spend their charity dollars on particular charitable causes, will take into account their financially viability and financial efficiency, it doesn't require a radical change in perspective for investors, when choosing to spend their investment dollars on investments, to also take into account their wider social (and/or environmental) impact beyond that which is captured by the single measure of profit only.