I wrote the following for Buy Blue. I know it is not my normal subject matter here (so shoot me for trying to branch out) and may be considerably less popular than criticizing Wal-Mart. Nevertheless, I still think this an important message that needs to be heard.
If you are interested in Buying Blue, you are probably interested in investing in a socially responsible manner. If so, there was an article in last Sunday's New York Times that you really ought to read. The article is about Smith & Hawken founder Paul Hawken's contention that most of the socially responsible mutual funds out there are really no different than regular funds:
"The 30 top holdings of North American socially responsible funds are almost identical to the Dow Jones" industrial average, which tracks 30 blue-chip stocks, he said. "Why do I need the socially responsible funds to buy the Dow Jones?"
Funds in the socially responsible category typically screen out companies they consider bad apples. They often exclude entire industries like tobacco, alcohol or gambling. Mr. Hawken found in his study of 600 socially responsible funds around the globe that all but seven of the Fortune 400 companies were held by at least some of these funds.
Using info I picked up from the article, I went to the website where Hawken's work is posted: http://www.responsibleinvesting.org. I registered (at no cost) to use their database, and then typed in "Wal-Mart." There are 19 so-called "socially responsible" investment funds that hold Wal-Mart. Wal-Mart, scourge of unions everywhere (except for China and other countries where they are forced to recognize them by law), king of corporate welfare and suburban sprawl...I'd go on, but I actually want to consider a different company in this post.
In response to Hawken's criticism, the reporter interviewed Amy Domini, who runs one of the more prominent of these funds:
The Domini Equity fund, which tracks the Domini Social index of 400 companies, includes stocks of the Gap and McDonald's, to which Mr. Hawken objects. In designing the index, the fund's founder and chief executive, Amy Domini, included what she thought were the better half of companies in the Standard & Poor's 500-stock index, plus 150 smaller names.
"I personally may prefer slow food to fast food. I personally prefer the ambiance of organic over nonorganic," Ms. Domini said. "But I don't have a mandate from the public to avoid fast food." Ms. Domini said that McDonald's had responded to calls to switch to napkins made of recycled paper, use soy-based ink and avoid antibiotics in beef.
"When I look at McDonald's versus the fast-food industry, I see them on a path toward human dignity and environmental sustainability," Ms. Domini said. "I can live with myself for investing in McDonald's."
Well, she might, but I can't. The easiest place to find problems with McDonald's is over at McSpotlight, the website set up by supporters of two British Greenpeace Activists who McDonald's sued for libel. The company won years later, but took a huge beating in the court of public opinion.
Here's McSpotlight on the quality of jobs at McDonald's:
The McDonald's Corporation has pioneered a global, highly standardised and fast production-line system, geared to maximum turnover of products and profits. McDonald's now employ more than a million mostly young people around the world: some say a million people who might otherwise be out of work, others however consider that they are in fact a net destroyer of jobs by using low wages and the huge size of their business to undercut local food outlets and thereby force them out of business. Is McDonald's a great job opportunity or are they taking advantage of high unemployment to exploit the most vulnerable people in society, working them very hard for very little money? Complaints from employees range from discrimination and lack of rights, to understaffing, few breaks and illegal hours, to poor safety conditions and kitchens flooded with sewage, and the sale of food that has been dropped on the floor. This type of low-paid work has even been termed 'McJobs'.
Here's McSpotlight on the environmental effects of McDonald's:
We share our planet with a myriad of creatures and plants - an interdependent yet fragile web of miraculous complexity and diversity. People of all ages and walks of life enjoy reading about, observing and appreciating wildlife and the countryside.But in the last 100 years the modern industrial system in general, and transnational corporations in particular, have ruthlessly exploited natural resources all around the world, inflicting damage on forests and other eco-systems, reducing biodiversity, causing land, sea and air pollution and even adversely affecting the global climate.
McDonald's contribution to this destruction is mainly through the effects of cattle ranching (as the world's foremost promoter of a beef-based diet and the largest user of beef), through the growing and transportation of cash crops, and through the production and disposal of thousands of tonnes of packaging materials.
I'm not a vegetarian in any way shape or form, but where you get your beef from does matter to the future of this planet. Recycled napkins can't make up for that.
And notice I haven't even written anything about the effects of the food on your health? Just watch Morgan Spurlocks's movie "Supersize Me" and see if you can ever go to that restaurant again. [If you get the DVD, go to the bit in the extras about the shelf life of a McDonald's french fry. It is absolutely incredible!]
If this isn't enough for you to forego investing or eating at McDonald's, I just saw that the company's Buy Blue rating is deep red: an extraordinary 4%. Why do you think they make all those political contributions anyway?
[By the way, I'm told that Buy Blue is working on its own ratings system for socially responsible investing (using politics and other criteria) with the intention to publish them later this year. As this article has made me much more cautious of my own portfolio, I'll try to track this and report back when possible.]
JR