When Does Ethical Divestment By Shareholders Make Sense?

Should shareholders sell their shares in companies that are behaving badly? Divestment of this kind is a blunt tool. In many cases it may not be effective, and in many cases it may not be ethically warranted. The argument below explores the terrain. The first two of the author’s “three reasons we should limit divestment” are weak, and need to be reconsidered, but the author’s advice on “When divestment is justified” and “A well-structured campaign” is solid. >>>

LINK: Money talks, but when is divestment a good option? (by Scott Wisor for The Ethics Centre)

Divestment is now seen as a popular tool for social change. Divestment campaigns have targeted companies involved in tobacco, arms trading, apartheid, fossil fuels, and offshore detention. This makes sense, as shareholders do not want to be complicit in the moral wrongdoings of companies they invest in, even if the investment choice was made by a third party fund manager such a superannuation body.

However, despite being well-motivated, the use of divestment is likely to be justified in a limited number of situations. Because of the various duties facing corporations, there should be a general presumption against institutional shareholder divestment to prevent well-intended but ultimately ill-fated campaigns…..

What do you think?

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