A BRIEF REVIEW: POLICY GOALS OF ADVOCATES FOR TERROR-FREE INVESTING™
& DIVESTMENT POLICIES
Leveraging corporate governance and shareholder activism to accomplish policy goals is a strategy that has been implemented across a number of issues. Among the highest profile cases, however, are those that have targeted companies that choose to conduct business in countries or with governments whose policies are found abhorrent by wide portions of the American public. This occurred in the 1980s campaign launched against companies with ties to South Africa under Apartheid and, over the past few years, at companies with ties to a regime in Sudan termed genocidal by the U.S. government and to Iran, North Korea and Syria, all three branded as state-sponsors of terrorism by the U.S. government and developers or proliferators of weapons of mass destruction. Today there are over 500 public companies doing business with state sponsors of terror.
The intent behind shareholder activism directed at these companies is to cause a sufficient amount of reputational damage by stigmatizing their willingness to support the economies of these countries as well as shareholder damage by foregoing their stock that these companies choose to exit these countries rather than endure such pressures. In turn, these countries largely dependent on foreign investment for a viable economy suffer financially and economically for a lack of foreign partners and, especially, western technology. These circumstances increase the pressure significantly for governments to alter their behavior in order to regain access to the international economy. The goal of shareholder activists is to pose a stark choice to these governments: either you can support terrorism or genocide or you can have foreign investment, but not both. For some countries dependent on foreign investment for economic survival, this question is particularly powerful.
In the case of South Africa, shareholder activism in the United States and the increasing stigma associated with doing business with South Africa led to a number of large companies pulling out. Combined with U.S. sanctions and international criticism, ethical investment led to the dismantling of the Apartheid regime. There is debate over which pressure point was most significant in this event, but excluding these companies from investment portfolios is widely regarded as having played a key role in embarrassing and injuring the government of South Africa.
Among the geopolitical efforts to pressure these countries to comply with international rules and regulations, divestment plays a small but powerful role. With over 50% of the world's investment capital, shareholder decisions in the U.S. carry significant weight. In such monies, the U.S. economy wields one of the few leftover levers of economic power and non-profit groups, shareholder activists, state legislatures and Treasurers are largely aware of this power, taking power in concert at once to reflect the values of their constituents and to leverage their assets under management to send a message to companies who, through their operations decisions, are sending a message to governments.
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