The Corporate Social Responsibility Appeasers Are Probably Long-Term Market Underperformers

Nick Nichols at Townhall.com has a must-read column for investors who think that the companies they have put their hard-earned money into are all looking to do what they’re supposed to do — maximize shareholder value:

(I learned from WorldChanging.com that) 34 companies listed on the S&P 100 (have) issued Corporate Social Responsibility (CSR) reports based on a third-party standard - the Global Reporting Initiative’s Sustainability Reporting Guidelines.

As an investor and a long-time critic of corporate socialism, my curiosity was piqued. Surely, 34 blue-chip companies would not embrace these so-called Sustainability Reporting Guidelines without first determining with whom they were getting in bed. Was this Global Reporting Initiative a counter-balance to the whacky, anti-free enterprise dogma preached by the kill-kapitalism crowd that launched the CSR movement in the first place? Was industry finally getting its act together? I fired up my turbo-charged laptop to find the truth.

Truth be told, the 34 companies that have adopted the reporting guidelines advanced by the Global Reporting Initiative (GRI) are either blissfully ignorant or they have joined the ranks of corporate appeasers and capitulators in the Neville Chamberlain Club.

It turns out that GRI is run by Ernst Ligteringen, a former Executive Director of Oxfam International and a past consultant to the International Labor Organization. The U.S. representatives on GRI’s board are Sean Harrigan, who previously served as an official with the United Food and Commercial Workers Union, and Joan Bavaria, who has served as President and CEO of the Trillium Asset Management Corporation, a social investment firm. For the record, Ms. Bavaria also sits on the boards of Earthjustice and the Earth Day Network. She is on the advisory boards of the Union of Concerned Scientists and the Greening of Industry Network.

Of particular note is that Ms. Bavaria is also the Founding Chair of CERES, a national network of investment funds, environmental organizations and other activist groups. Why is this noteworthy? Well, according to its website, GRI started as a project of CERES. So, who runs CERES? Does its governing board include representatives from the blue chippers of the S&P 100? No. Not one. Zero. Zip. Nada. The CERES board is a who’s who of the anti-free enterprise lobby, including the executive director of Friends of the Earth, and officials from the Sierra Club, Natural Resources Defense Council, World Wildlife Fund, AFL-CIO, AFSCME and, yes, the Screen Actors Guild.

As an investor, it’s important to know that the Social Investment Research Analyst Network (SIRAN) has provided a useful service by profiling the S&P 100 companies in their performance against seven “corporate social responsibility” benchmarks (example here).

You can simply look at this page, scroll down a bit, and count the number of orange circles by each company’s name. The larger the number of orange circles, the more “socially responsible” SIRAN believes the company is. If you believe as I do, and as Nichols does, that companies wasting time, energy, and resources trying to please SIRAN are more likely to underperform the market, you’ll have a good idea of which stocks to consider avoiding.