The Downside of Divesting Stock

Sometimes ICCR hears from individual investors who for ethical reasons feel they should no longer continue
to be shareholders in a company. Divestment, the act of selling off stocks, can be a useful tool in dealing with companies. Many will remember that it was used to good effect in the struggle to end apartheid in South Africa.

However, through ownership, you can make a difference. Owning shares entitles you to vote for shareholder resolutions, and therefore make changes in company policies. While ICCR recognizes the dilemma faced by some, we encourage every investor to see the positive value of share ownership.

Some companies would love nothing more than for "nosy" shareholders to sell their stock and go away, effectively dropping the issues that concern them. Also, unless you own an enormous amount of stock, and divest all at once, you will not be able to have a measurable impact on a company's share price.

For those institutions controlling large amounts of stock, such as pension funds, there are additional complications. Managers have a fiduciary duty to protect the resources of pension participants. Many interpret this as an obligation to maximize returns for policyholders or fund participants. If not done prudently,
divestment can leave managers open to costly litigation.

This year, ICCR-member religious investors raised numerous, critical issues by submitting 257 social issue shareholder resolutions to 181 companies. Companies were challenged on their behavior towards the environment, on sweatshops, workplace inequality, and more. None of this, of course, would have been possible had our members divested.