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Dramatic under performance (lags average stock funds by 40 percent; 45 percent over 5 years) of so-called socially responsible funds

  • 1.  Dramatic under performance (lags average stock funds by 40 percent; 45 percent over 5 years) of so-called socially responsible funds

    Posted 09-12-2006 19:04
    So....when will Sandra Waddock and the like rewrite their past claims of equal or over performance by narcissistic, rainforest chic "socially responsible" funds?

    Those who 'bought into' that self-serving hyperbole in the face of empirical evidence should rightfully be ashamed of themselves.

    Jon Entine

    ******

              <http://online.wsj.com/home>    <http://ad.doubleclick.net/clk;15359957;6853491;b?http://copiers.toshiba.com/index.shtml>      
          September 12, 2006      
            


              
          SMARTMONEY FUND SCREEN   
                    
       
      

     http://online.wsj.com/article/SB115801824788560046.html?mod=googlenews_wsj

    Socially Responsible Funds


    By JOSHUA ALBERTSON
     September 12, 2006; Page D2

    It isn't easy being green -- or alcohol- and tobacco-free.


    In the past year (through the end of August), the average equity fund that employs some sort of "socially responsible investing" strategy has gained 6.68%, behind the 9.71% average for all equity funds, according to investment-research company Lipper Inc. The gap also is there over five years: 4.42% annualized for SRI equity versus 7.14% annualized for all-equity funds.


    Although criteria vary, SRI funds generally avoid sectors that go against certain ethical guidelines. The biggies are alcohol, tobacco, defense, pornography and gambling. As a group, SRI funds account for 0.5% of all fund assets. There are enough SRI funds -- 165 at last count -- that you could build a respectable portfolio that conformed to your particular moral standing.


    It is a romantic notion, investing with a conscience. But the cold, hard truth is that those who mix morals and money are probably going to pay for it with less-than-stellar returns. We would caution that social responsibility has nothing to do with investing blindly in a fund whose heart may be in the right place. So, if you must invest responsibly, choose carefully. The list below is a good place to start.


    This week, we asked Lipper for a list of all of the equity and mixed-asset funds with the socially responsible investing tag. From there, we filtered out those funds with five-year returns that didn't rank in the top 50% of their respective classification. We also eliminated load funds and those with expense ratios higher than at least half of their peers. Finally, each of the eight funds on our list is open to new investors, accepts minimum initial investments of $5,000 or less, and holds at least $50 million in total net assets.
      
    * * *



     


  • 2.  Dramatic under performance (lags average stock funds by 40 percent; 45 percent over 5 years) of so-called socially responsible funds

    Posted 09-13-2006 09:22
    Jon,
    I'm curious: how are socially responsible companies or people "narcissistic" any more than tobacco users (who offer illness from second-hand smoke to those around them), heavy drinkers (who cause a large portion of accidents and lost productivity), companies that only care about profits for their financial owners (regardless of their impacts on their employees, communities, world, or the environment), or those who create or support war (kill human beings) to maintain or enhance their wealth (most wars)?  If anything, it seems to me that socially responsible companies, investors, and individuals are focusing on broader, longer-term issues that enhance life for others, not just themselves.  This would seem to be the opposite of narcissism. Please help me understand this, since I like to avoid teaching narcissism to my MBA students as I teach them about running companies. 
    I agree with you that investments in these companies might not be the most "productive" investments from a pure monetary return standpoint.  However, it seems narcissistic to me to think that this is the only important criterion for an investment.  Many socially responsible investors are willing to forgo some of their personal investment return in return for an opportunity to possibly influence companies to behave less narcissistically (more socially responsible). 
    By the way, although I can't quote them off the top of my head, I've seen reports of studies that have shown that socially responsible funds do better than the average; I've also seen reports of studies that show they have done worse.  So if your thought about narcissism had to do with stating that such funds do better when they actually do worse, that doesn't hold water just because of one study.  We have the same "problem" knowing whether being environmentally sound (e.g., beign ISO14001 certified) has a positive or negative impact on a company.  Profit studies are all over the map so far.  The best argument in favor of being socially or environmentally responsible at the top of a company, I think, from a narcissistic view, is that it demands more thoughtfulness about managing the company thus enhancing management capabilities in general. 
    Len
    _________________________________

    Len Tischler, Ph.D.

    Associate Professor of Management

    Chair, Management/Marketing Department

    <st1:place w:st="on"><st1:placename w:st="on">Kania</st1:placename> <st1:placetype w:st="on">School</st1:placetype></st1:place> of Management

    <st1:place w:st="on"><st1:placetype w:st="on">University</st1:placetype> of <st1:placename w:st="on">Scranton</st1:placename></st1:place>

    <st1:place w:st="on"><st1:city w:st="on">Scranton</st1:city>, <st1:state w:st="on">PA</st1:state> <st1:postalcode w:st="on">18510</st1:postalcode></st1:place>

    Phone (570) 941-7782   Fax 941-4826

    len.tischler@scranton.edu

     


    Jon Entine wrote:
    25runjonrun@earthlink.net" type="cite"> So....when will Sandra Waddock and the like rewrite their past claims of equal or over performance by narcissistic, rainforest chic "socially responsible" funds?

    Those who 'bought into' that self-serving hyperbole in the face of empirical evidence should rightfully be ashamed of themselves.

    Jon Entine

    ******

              <http://online.wsj.com/home>    <http://ad.doubleclick.net/clk;15359957;6853491;b?http://copiers.toshiba.com/index.shtml>      
          September 12, 2006      
            


              
          SMARTMONEY FUND SCREEN   
                    
       
      

     http://online.wsj.com/article/SB115801824788560046.html?mod=googlenews_wsj

    Socially Responsible Funds


    By JOSHUA ALBERTSON
     September 12, 2006; Page D2

    It isn't easy being green -- or alcohol- and tobacco-free.


    In the past year (through the end of August), the average equity fund that employs some sort of "socially responsible investing" strategy has gained 6.68%, behind the 9.71% average for all equity funds, according to investment-research company Lipper Inc. The gap also is there over five years: 4.42% annualized for SRI equity versus 7.14% annualized for all-equity funds.


    Although criteria vary, SRI funds generally avoid sectors that go against certain ethical guidelines. The biggies are alcohol, tobacco, defense, pornography and gambling. As a group, SRI funds account for 0.5% of all fund assets. There are enough SRI funds -- 165 at last count -- that you could build a respectable portfolio that conformed to your particular moral standing.


    It is a romantic notion, investing with a conscience. But the cold, hard truth is that those who mix morals and money are probably going to pay for it with less-than-stellar returns. We would caution that social responsibility has nothing to do with investing blindly in a fund whose heart may be in the right place. So, if you must invest responsibly, choose carefully. The list below is a good place to start.


    This week, we asked Lipper for a list of all of the equity and mixed-asset funds with the socially responsible investing tag. From there, we filtered out those funds with five-year returns that didn't rank in the top 50% of their respective classification. We also eliminated load funds and those with expense ratios higher than at least half of their peers. Finally, each of the eight funds on our list is open to new investors, accepts minimum initial investments of $5,000 or less, and holds at least $50 million in total net assets.
      
    * * *



     

    --

    _



  • 3.  Dramatic under performance (lags average stock funds by 40 percent; 45 percent over 5 years) of so-called socially responsible funds

    Posted 09-13-2006 13:13
    I think the investing public should be ashamed and not Sandra Waddock. In
    the past Sandra was more or less right. With the current administrations
    twisting of the national economy, sin is in. So what? This too will ebb and
    flow. The reason for social investment is not to maximize returns, nor is
    it to achieve penury, but to feel good , which is a type of utility in
    itself. If virtue is fully rewarded then it is not purely virtuous but it
    is also not simply greed.



    Jon Entine
    <runjonrun@EARTHL
    INK.NET> To
    Sent by: ONE-L@AOMLISTS.PACE.EDU
    Organizations and cc
    the Natural
    Environment Subject
    Discussion Dramatic under performance (lags
    <ONE-L@AOMLISTS.P average stock funds by 40 percent;
    ACE.EDU> 45 percent over 5 years) of
    so-called socially responsible
    funds
    09/12/2006 06:04
    PM


    Please respond to
    Organizations and
    the Natural
    Environment
    Discussion
    <ONE-L@AOMLISTS.P
    ACE.EDU>






    So....when will Sandra Waddock and the like rewrite their past claims of
    equal or over performance by narcissistic, rainforest chic “socially
    responsible” funds?

    Those who ‘bought into’ that self-serving hyperbole in the face of
    empirical evidence should rightfully be ashamed of themselves.

    Jon Entine

    ******

    (Embedded image moved to file: pic00607.gif) (Embedded image moved to
    file: pic09099.gif) <http://online.wsj.com/home> (Embedded image moved to
    file: pic11600.gif)(Embedded image moved to file: pic29786.jpg) <
    http://ad.doubleclick.net/clk;15359957;6853491;b?http://copiers.toshiba.com/index.shtml
    > (Embedded image moved to file: pic41884.gif)
    September 12, 2006



    (Embedded image moved to file: pic51724.gif)
    SMARTMONEY FUND SCREEN




    http://online.wsj.com/article/SB115801824788560046.html?mod=googlenews_wsj


    Socially Responsible Funds


    By JOSHUA ALBERTSON
    September 12, 2006; Page D2

    It isn't easy being green -- or alcohol- and tobacco-free.


    In the past year (through the end of August), the average equity fund that
    employs some sort of "socially responsible investing" strategy has gained
    6.68%, behind the 9.71% average for all equity funds, according to
    investment-research company Lipper Inc. The gap also is there over five
    years: 4.42% annualized for SRI equity versus 7.14% annualized for
    all-equity funds.


    Although criteria vary, SRI funds generally avoid sectors that go against
    certain ethical guidelines. The biggies are alcohol, tobacco, defense,
    pornography and gambling. As a group, SRI funds account for 0.5% of all
    fund assets. There are enough SRI funds -- 165 at last count -- that you
    could build a respectable portfolio that conformed to your particular moral
    standing.


    It is a romantic notion, investing with a conscience. But the cold, hard
    truth is that those who mix morals and money are probably going to pay for
    it with less-than-stellar returns. We would caution that social
    responsibility has nothing to do with investing blindly in a fund whose
    heart may be in the right place. So, if you must invest responsibly, choose
    carefully. The list below is a good place to start.


    This week, we asked Lipper for a list of all of the equity and mixed-asset
    funds with the socially responsible investing tag. From there, we filtered
    out those funds with five-year returns that didn't rank in the top 50% of
    their respective classification. We also eliminated load funds and those
    with expense ratios higher than at least half of their peers. Finally, each
    of the eight funds on our list is open to new investors, accepts minimum
    initial investments of $5,000 or less, and holds at least $50 million in
    total net assets.

    * * *


    (Embedded image moved to file: pic60553.gif)


  • 4.  Dramatic under performance (lags average stock funds by 40 percent; 45 percent over 5 years) of so-called socially responsible funds

    Posted 09-13-2006 15:44

    I would strongly encourage everyone to ignore Jon's bait.  He has said nothing new and continues to ignore prior evidence given to him.  Jon "Everyone has an agenda but me" Entine has an unveiled agenda to discredit Sandra Waddock, for some reason.  This is hard to do, as she has published academically credible work, while Jon offers random, self-serving bits of data.  In the past, he has criticized SRI research for focusing on only a single time period.  Here, he offers a selected time period to make his case.  The odder thing is that he also provides a list of high-performing SRI funds.  So there are SRI funds that do well financially.  I could offer a list of non-SRI funds that do poorly.  That does not make investors in those funds narcissistic.  It just makes them folks with lower financial returns on their investments. 

     

    As I've pointed out to Jon in print and online in the past, looking at the financial performance of a group of SRI funds, and comparing their average performance against some market average, masks great variability in performance within SRI funds.  We should be looking at performance variability within SRI funds.  And when we do, we see that some do well, and some don't.  It's no different than comparing the average credibility of a right-wing think tank employee with the average credibility of an academic, and then dismissing Jon because right-wing think tank employees on average have less credibility.  There might actually be some right wing think tankers who have credibility, unlike Jon, and so one shouldn't dismiss Jon simply because of his membership in this group --  there are so many other reasons.  So look at these other factors that produce variability in performance, not at group averages.  As I've shown Jon several times, here's an empirical article that does just that for SRI funds:  http://www3.interscience.wiley.com/cgi-bin/abstract/112784242/ABSTRACT?CRETRY=1&SRETRY=0

     

    It's hard to argue with someone who doesn't listen, so don't waste your time.

     

    Best,

    Mike

     

     

    ***********************

    Michael L. Barnett, PhD

    <st1:place w:st="on"><st1:city w:st="on">University of South</st1:city> <st1:state w:st="on">Florida</st1:state></st1:place>

    <st1:place w:st="on"><st1:placetype w:st="on">College</st1:placetype> of <st1:placename w:st="on">Business Administration</st1:placename></st1:place>

    Department of Management & Organization

    <st1:street w:st="on"><st1:address w:st="on">4202 E. Fowler Avenue</st1:address></st1:street>, BSN 3213

    <st1:place w:st="on"><st1:city w:st="on">Tampa</st1:city>, <st1:state w:st="on">FL</st1:state> <st1:postalcode w:st="on">33620-5500</st1:postalcode></st1:place>

    Phone: 813-974-1727

    Fax: 813-974-1734

    E-mail: mbarnett@coba.usf.edu

    Webpage: http://www.coba.usf.edu/barnett

     

    View my research on my SSRN Author page:

    <http://ssrn.com/author=414796>

    **************************************************

    From: Organizations and the Natural Environment Discussion [mailto:ONE-L@AOMLISTS.PACE.EDU] On Behalf Of Len Tischler
    Sent: Wednesday, September 13, 2006 9:22 AM
    To: ONE-L@AOMLISTS.PACE.EDU
    Subject: Re: Dramatic under performance (lags average stock funds by 40 percent; 45 percent over 5 years) of so-called socially responsible funds

     

    Jon,
    I'm curious: how are socially responsible companies or people "narcissistic" any more than tobacco users (who offer illness from second-hand smoke to those around them), heavy drinkers (who cause a large portion of accidents and lost productivity), companies that only care about profits for their financial owners (regardless of their impacts on their employees, communities, world, or the environment), or those who create or support war (kill human beings) to maintain or enhance their wealth (most wars)?  If anything, it seems to me that socially responsible companies, investors, and individuals are focusing on broader, longer-term issues that enhance life for others, not just themselves.  This would seem to be the opposite of narcissism. Please help me understand this, since I like to avoid teaching narcissism to my MBA students as I teach them about running companies. 
    I agree with you that investments in these companies might not be the most "productive" investments from a pure monetary return standpoint.  However, it seems narcissistic to me to think that this is the only important criterion for an investment.  Many socially responsible investors are willing to forgo some of their personal investment return in return for an opportunity to possibly influence companies to behave less narcissistically (more socially responsible). 
    By the way, although I can't quote them off the top of my head, I've seen reports of studies that have shown that socially responsible funds do better than the average; I've also seen reports of studies that show they have done worse.  So if your thought about narcissism had to do with stating that such funds do better when they actually do worse, that doesn't hold water just because of one study.  We have the same "problem" knowing whether being environmentally sound (e.g., beign ISO14001 certified) has a positive or negative impact on a company.  Profit studies are all over the map so far.  The best argument in favor of being socially or environmentally responsible at the top of a company, I think, from a narcissistic view, is that it demands more thoughtfulness about managing the company thus enhancing management capabilities in general. 
    Len
    _________________________________

    Len Tischler, Ph.D.

    Associate Professor of Management

    <u1:p></u1:p>

    Chair, Management/Marketing Department

    <u1:p></u1:p>

    <st1:place u2:st="on"><st1:placename u2:st="on"><st1:place w:st="on"><st1:placename w:st="on">Kania</st1:placename></st1:place></st1:placename> <st1:placetype u2:st="on"><st1:placetype w:st="on">School</st1:placetype></st1:placetype></st1:place> of Management

    <u1:p></u1:p>

    <st1:place u2:st="on"><st1:placetype u2:st="on"><st1:place w:st="on"><st1:placetype w:st="on">University</st1:placetype></st1:place></st1:placetype> of <st1:placename u2:st="on"><st1:placename w:st="on">Scranton</st1:placename></st1:placename></st1:place>

    <u1:p></u1:p>

    <st1:place u2:st="on"><st1:city u2:st="on"><st1:place w:st="on"><st1:city w:st="on">Scranton</st1:city></st1:place></st1:city>, <st1:state u2:st="on"><st1:state w:st="on">PA</st1:state></st1:state> <st1:postalcode u2:st="on"><st1:postalcode w:st="on">18510</st1:postalcode></st1:postalcode></st1:place>

    <u1:p></u1:p>

    Phone (570) 941-7782   Fax 941-4826

    len.tischler@scranton.edu

    <u1:p> </u1:p>


    Jon Entine wrote:

    So....when will Sandra Waddock and the like rewrite their past claims of equal or over performance by narcissistic, rainforest chic "socially responsible" funds?

    Those who 'bought into' that self-serving hyperbole in the face of empirical evidence should rightfully be ashamed of themselves.

    Jon Entine

    ******

              <http://online.wsj.com/home>    <http://ad.doubleclick.net/clk;15359957;6853491;b?http://copiers.toshiba.com/index.shtml>      
          September 12, 2006      
            


              
          SMARTMONEY FUND SCREEN   
                    
       
      

     http://online.wsj.com/article/SB115801824788560046.html?mod=googlenews_wsj

    Socially Responsible Funds


    By JOSHUA ALBERTSON
     September 12, 2006; Page D2

    It isn't easy being green -- or alcohol- and tobacco-free.


    In the past year (through the end of August), the average equity fund that employs some sort of "socially responsible investing" strategy has gained 6.68%, behind the 9.71% average for all equity funds, according to investment-research company Lipper Inc. The gap also is there over five years: 4.42% annualized for SRI equity versus 7.14% annualized for all-equity funds.


    Although criteria vary, SRI funds generally avoid sectors that go against certain ethical guidelines. The biggies are alcohol, tobacco, defense, pornography and gambling. As a group, SRI funds account for 0.5% of all fund assets. There are enough SRI funds -- 165 at last count -- that you could build a respectable portfolio that conformed to your particular moral standing.


    It is a romantic notion, investing with a conscience. But the cold, hard truth is that those who mix morals and money are probably going to pay for it with less-than-stellar returns. We would caution that social responsibility has nothing to do with investing blindly in a fund whose heart may be in the right place. So, if you must invest responsibly, choose carefully. The list below is a good place to start.


    This week, we asked Lipper for a list of all of the equity and mixed-asset funds with the socially responsible investing tag. From there, we filtered out those funds with five-year returns that didn't rank in the top 50% of their respective classification. We also eliminated load funds and those with expense ratios higher than at least half of their peers. Finally, each of the eight funds on our list is open to new investors, accepts minimum initial investments of $5,000 or less, and holds at least $50 million in total net assets.
     
    * * *



     

     

    --

    <u1:smarttagtype namespaceuri="urn:schemas-microsoft-com:office:smarttags" name="PostalCode"><u1:smarttagtype namespaceuri="urn:schemas-microsoft-com:office:smarttags" name="State"><u1:smarttagtype namespaceuri="urn:schemas-microsoft-com:office:smarttags" name="PlaceType"><u1:smarttagtype namespaceuri="urn:schemas-microsoft-com:office:smarttags" name="PlaceName"><u1:smarttagtype namespaceuri="urn:schemas-microsoft-com:office:smarttags" name="City"><u1:smarttagtype namespaceuri="urn:schemas-microsoft-com:office:smarttags" name="place"> </u1:smarttagtype></u1:smarttagtype></u1:smarttagtype></u1:smarttagtype></u1:smarttagtype></u1:smarttagtype>

    _



  • 5.  Dramatic under performance (lags average stock funds by 40 percent; 45 percent over 5 years) of so-called socially responsible funds

    Posted 09-13-2006 20:42
    Michael,
     
    I did not claim and have not claimed that stocks that one or another so-called SRI firm underperform. (1) Different SRI firms claim different stocks, indicating the subjective nature of such designations; (2) the time frames used by self-proclamied ideological SRI advocates -- and Sandra Waddock is a leading person in that category--have been self-selected to buttress that argument.
     
    My point is, and has been, purely unideological. You've not read my peer reviewed critiques.  I don't believe stocks that some firms designate as SRI underperform. The universe of stocks is too big one to conclude that. I do state the obvious: claims of over performance by SRI stocks are based on ideological, not empiricism. If you read my published, and peer reviewed critiques, I've made that simple point. This date just reconfirms that. Sandra's data does not acknowledge 'time frame' over or under performance.
     
    Who is being ideological?
     
    For the record, once again, I belive that many of the SRI screens represent conservative, anti--progressive positions.
     
    And you know what: the SRI community is slowly being dragged into the 21st century.
     
    Guess who recently jettisoned its 'alcohol' screen because it (ridiculously) would have resulted in the elimination of Starbucks.
     
    And guess what--at least TWO of the very largest SRI organizations, and at least two well known very "progressive" (by reputation--not my characterization) environmental organizations are debating, and on the verge of approving, a new position vis a vis nuclear energy.
     
    Unfortunately, on some issues, the apologists for the SRI community represent the new right wing--defending the status quo in defiance of a changing reality.
     
    Think about it.
     
    Some of you ARE THE NEW RIGHT WING.
     
    Jon
     



     
    -----Original Message-----
    From: "Barnett, Michael" <mbarnett@coba.usf.edu>
    Sent: Sep 13, 2006 3:44 PM
    To: ONE-L@AOMLISTS.PACE.EDU
    Subject: Re: Dramatic under performance (lags average stock funds by 40 percent; 45 percent over 5 years) of so-called socially responsible funds

    <zzzhtml xmlns="http://www.w3.org/TR/REC-html40" xmlns:st1="urn:schemas-microsoft-com:office:smarttags" xmlns:w="urn:schemas-microsoft-com:office:word" xmlns:o="urn:schemas-microsoft-com:office:office" xmlns:v="urn:schemas-microsoft-com:vml"><zzzhead><zzzmeta content="text/html; charset=us-ascii" http-equiv="Content-Type"><zzzmeta content="Microsoft Word 11 (filtered medium)" name="Generator"><zzz!--[if !mso]=""> <zzz![endif]--><zzz!--[if !mso]=""> <zzz![endif]--> <zzz!--[if 9]="" mso="" gte=""><xml> </xml><zzz![endif]--><zzz!--[if 9]="" mso="" gte=""><xml> </xml><zzz![endif]--></zzz![endif]--></zzz!--[if></zzz![endif]--></zzz!--[if></zzz![endif]--></zzz!--[if></zzz![endif]--></zzz!--[if></zzzmeta></zzzmeta></zzzhead><zzzbody lang="EN-US" vlink="purple" link="blue" bgcolor="white">

    I would strongly encourage everyone to ignore Jon’s bait.  He has said nothing new and continues to ignore prior evidence given to him.  Jon “Everyone has an agenda but me” Entine has an unveiled agenda to discredit Sandra Waddock, for some reason.  This is hard to do, as she has published academically credible work, while Jon offers random, self-serving bits of data.  In the past, he has criticized SRI research for focusing on only a single time period.  Here, he offers a selected time period to make his case.  The odder thing is that he also provides a list of high-performing SRI funds.  So there are SRI funds that do well financially.  I could offer a list of non-SRI funds that do poorly.  That does not make investors in those funds narcissistic.  It just makes them folks with lower financial returns on their investments. 

     

    As I’ve pointed out to Jon in print and online in the past, looking at the financial performance of a group of SRI funds, and comparing their average performance against some market average, masks great variability in performance within SRI funds.  We should be looking at performance variability within SRI funds.  And when we do, we see that some do well, and some don’t.  It’s no different than comparing the average credibility of a right-wing think tank employee with the average credibility of an academic, and then dismissing Jon because right-wing think tank employees on average have less credibility.  There might actually be some right wing think tankers who have credibility, unlike Jon, and so one shouldn’t dismiss Jon simply because of his membership in this group --  there are so many other reasons.  So look at these other factors that produce variability in performance, not at group averages.  As I’ve shown Jon several times, here’s an empirical article that does just that for SRI funds:  http://www3.interscience.wiley.com/cgi-bin/abstract/112784242/ABSTRACT?CRETRY=1&SRETRY=0

     

    It’s hard to argue with someone who doesn’t listen, so don’t waste your time.

     

    Best,

    Mike

     

     

    ***********************

    Michael L. Barnett, PhD

    <st1:place w:st="on"><st1:city w:st="on">University of South</st1:city> <st1:state w:st="on">Florida</st1:state></st1:place>

    <st1:place w:st="on"><st1:placetype w:st="on">College</st1:placetype> of <st1:placename w:st="on">Business Administration</st1:placename></st1:place>

    Department of Management & Organization

    <st1:street w:st="on"><st1:address w:st="on">4202 E. Fowler Avenue</st1:address></st1:street>, BSN 3213

    <st1:place w:st="on"><st1:city w:st="on">Tampa</st1:city>, <st1:state w:st="on">FL</st1:state> <st1:postalcode w:st="on">33620-5500</st1:postalcode></st1:place>

    Phone: 813-974-1727

    Fax: 813-974-1734

    E-mail: mbarnett@coba.usf.edu

    Webpage: http://www.coba.usf.edu/barnett

     

    View my research on my SSRN Author page:

    <http://ssrn.com/author=414796>

    **************************************************

    From: Organizations and the Natural Environment Discussion [mailto:ONE-L@AOMLISTS.PACE.EDU] On Behalf Of Len Tischler
    Sent: Wednesday, September 13, 2006 9:22 AM
    To: ONE-L@AOMLISTS.PACE.EDU
    Subject: Re: Dramatic under performance (lags average stock funds by 40 percent; 45 percent over 5 years) of so-called socially responsible funds

     

    Jon,
    I'm curious: how are socially responsible companies or people "narcissistic" any more than tobacco users (who offer illness from second-hand smoke to those around them), heavy drinkers (who cause a large portion of accidents and lost productivity), companies that only care about profits for their financial owners (regardless of their impacts on their employees, communities, world, or the environment), or those who create or support war (kill human beings) to maintain or enhance their wealth (most wars)?  If anything, it seems to me that socially responsible companies, investors, and individuals are focusing on broader, longer-term issues that enhance life for others, not just themselves.  This would seem to be the opposite of narcissism. Please help me understand this, since I like to avoid teaching narcissism to my MBA students as I teach them about running companies. 
    I agree with you that investments in these companies might not be the most "productive" investments from a pure monetary return standpoint.  However, it seems narcissistic to me to think that this is the only important criterion for an investment.  Many socially responsible investors are willing to forgo some of their personal investment return in return for an opportunity to possibly influence companies to behave less narcissistically (more socially responsible). 
    By the way, although I can't quote them off the top of my head, I've seen reports of studies that have shown that socially responsible funds do better than the average; I've also seen reports of studies that show they have done worse.  So if your thought about narcissism had to do with stating that such funds do better when they actually do worse, that doesn't hold water just because of one study.  We have the same "problem" knowing whether being environmentally sound (e.g., beign ISO14001 certified) has a positive or negative impact on a company.  Profit studies are all over the map so far.  The best argument in favor of being socially or environmentally responsible at the top of a company, I think, from a narcissistic view, is that it demands more thoughtfulness about managing the company thus enhancing management capabilities in general. 
    Len
    _________________________________

    Len Tischler, Ph.D.

    Associate Professor of Management

    <u1:p></u1:p>

    Chair, Management/Marketing Department

    <u1:p></u1:p>

    <st1:place u2:st="on"><st1:placename u2:st="on"><st1:place w:st="on"><st1:placename w:st="on">Kania</st1:placename></st1:place></st1:placename> <st1:placetype u2:st="on"><st1:placetype w:st="on">School</st1:placetype></st1:placetype></st1:place> of Management

    <u1:p></u1:p>

    <st1:place u2:st="on"><st1:placetype u2:st="on"><st1:place w:st="on"><st1:placetype w:st="on">University</st1:placetype></st1:place></st1:placetype> of <st1:placename u2:st="on"><st1:placename w:st="on">Scranton</st1:placename></st1:placename></st1:place>

    <u1:p></u1:p>

    <st1:place u2:st="on"><st1:city u2:st="on"><st1:place w:st="on"><st1:city w:st="on">Scranton</st1:city></st1:place></st1:city>, <st1:state u2:st="on"><st1:state w:st="on">PA</st1:state></st1:state> <st1:postalcode u2:st="on"><st1:postalcode w:st="on">18510</st1:postalcode></st1:postalcode></st1:place>

    <u1:p></u1:p>

    Phone (570) 941-7782   Fax 941-4826

    len.tischler@scranton.edu

    <u1:p> </u1:p>


    Jon Entine wrote:

    So....when will Sandra Waddock and the like rewrite their past claims of equal or over performance by narcissistic, rainforest chic “socially responsible” funds?

    Those who ‘bought into’ that self-serving hyperbole in the face of empirical evidence should rightfully be ashamed of themselves.

    Jon Entine

    ******

              <http://online.wsj.com/home>    <http://ad.doubleclick.net/clk;15359957;6853491;b?http://copiers.toshiba.com/index.shtml>      
          September 12, 2006      
            


              
          SMARTMONEY FUND SCREEN   
                    
       
      

     http://online.wsj.com/article/SB115801824788560046.html?mod=googlenews_wsj

    Socially Responsible Funds


    By JOSHUA ALBERTSON
     September 12, 2006; Page D2

    It isn't easy being green -- or alcohol- and tobacco-free.


    In the past year (through the end of August), the average equity fund that employs some sort of "socially responsible investing" strategy has gained 6.68%, behind the 9.71% average for all equity funds, according to investment-research company Lipper Inc. The gap also is there over five years: 4.42% annualized for SRI equity versus 7.14% annualized for all-equity funds.


    Although criteria vary, SRI funds generally avoid sectors that go against certain ethical guidelines. The biggies are alcohol, tobacco, defense, pornography and gambling. As a group, SRI funds account for 0.5% of all fund assets. There are enough SRI funds -- 165 at last count -- that you could build a respectable portfolio that conformed to your particular moral standing.


    It is a romantic notion, investing with a conscience. But the cold, hard truth is that those who mix morals and money are probably going to pay for it with less-than-stellar returns. We would caution that social responsibility has nothing to do with investing blindly in a fund whose heart may be in the right place. So, if you must invest responsibly, choose carefully. The list below is a good place to start.


    This week, we asked Lipper for a list of all of the equity and mixed-asset funds with the socially responsible investing tag. From there, we filtered out those funds with five-year returns that didn't rank in the top 50% of their respective classification. We also eliminated load funds and those with expense ratios higher than at least half of their peers. Finally, each of the eight funds on our list is open to new investors, accepts minimum initial investments of $5,000 or less, and holds at least $50 million in total net assets.
     
    * * *



     

     

    --

    <u1:smarttagtype name="PostalCode" namespaceuri="urn:schemas-microsoft-com:office:smarttags"><u1:smarttagtype name="State" namespaceuri="urn:schemas-microsoft-com:office:smarttags"><u1:smarttagtype name="PlaceType" namespaceuri="urn:schemas-microsoft-com:office:smarttags"><u1:smarttagtype name="PlaceName" namespaceuri="urn:schemas-microsoft-com:office:smarttags"><u1:smarttagtype name="City" namespaceuri="urn:schemas-microsoft-com:office:smarttags"><u1:smarttagtype name="place" namespaceuri="urn:schemas-microsoft-com:office:smarttags"><zzz!--[if 9]="" mso="" gte=""><xml> <u1:documentproperties> <u1:author>Administrator</u1:author> <u1:template>Normal</u1:template> <u1:lastauthor>Administrator</u1:lastauthor> <u1:revision>2</u1:revision> <u1:totaltime>1</u1:totaltime> <u1:created>2006-01-25T18:06:00Z</u1:created> <u1:lastsaved>2006-01-25T18:06:00Z</u1:lastsaved> <u1:pages>1</u1:pages> <u1:words>46</u1:words> <u1:characters>263</u1:characters> <u1:company>University of Scranton</u1:company> <u1:lines>2</u1:lines> <u1:paragraphs>1</u1:paragraphs> <u1:characterswithspaces>308</u1:characterswithspaces> <u1:version>11.6568</u1:version> </u1:documentproperties> </xml><zzz![endif]--><zzz!--[if 9]="" mso="" gte=""><xml> <u2:worddocument> <u2:spellingstate>Clean</u2:spellingstate> <u2:grammarstate>Clean</u2:grammarstate> <u2:punctuationkerning> <u2:validateagainstschemas> <u2:saveifxmlinvalid>false</u2:saveifxmlinvalid> <u2:ignoremixedcontent>false<u2:alwaysshowplaceholdertext>false</u2:alwaysshowplaceholdertext> <u2:compatibility> <u2:breakwrappedtables> <u2:snaptogridincell> <u2:wraptextwithpunct> <u2:useasianbreakrules> <u2:dontgrowautofit> </u2:dontgrowautofit></u2:useasianbreakrules></u2:wraptextwithpunct></u2:snaptogridincell></u2:breakwrappedtables></u2:compatibility> <u2:browserlevel>MicrosoftInternetExplorer4</u2:browserlevel> </u2:ignoremixedcontent> </u2:validateagainstschemas></u2:punctuationkerning></u2:worddocument> </xml><zzz![endif]--><zzz!--[if 9]="" mso="" gte=""><xml> <u2:latentstyles deflockedstate="false" latentstylecount="156"> </u2:latentstyles> </xml><zzz![endif]--></zzz![endif]--></zzz!--[if></zzz![endif]--></zzz!--[if></zzz![endif]--></zzz!--[if></u1:smarttagtype></u1:smarttagtype></u1:smarttagtype></u1:smarttagtype></u1:smarttagtype></u1:smarttagtype>

    _

    </zzzbody></zzzhtml></mbarnett@coba.usf.edu>


  • 6.  Dramatic under performance (lags average stock funds by 40 percent; 45 percent over 5 years) of so-called socially responsible funds

    Posted 09-13-2006 20:52
    Len:

    Good question. My point is very straightforward.

    When one supports a position not because it is empirically verifiable but out of ideological vanity -- in other words, because it comports with one's political views, which makes one feel good about their view of the world--that's narcissism. After all, there is NO empirical evidence that buying and selling stocks based on one's political perspective in any way changes the behavior of corporations for the better, or worse for that matter. I think David Vogel disposed of that argument in his Brookings Instiution book.

    Those who chose to invest in stocks based on their anticipated return and not narcissists. You can call them opportunits; greedy; whatever. But they are not investing out of vanity. They are motivated to make money.

    Now, I'm not advancing that as a higher calling, or even endorsing the conservative belief in the wonders of the free market; my views on that issue are not an issue. It's not important that they are correct in their view of how capitalism and the stock market works. They may even be evil people. I am addressing their ethics or judging their motivations, as we cannot know them, as I know many people who are quite generous in every aspect of lives, yet invest in stocks that violate standard alchol screens (Starbucks in US; Whitbread in the UK) or other screens involving nuclear energy, or even tobacco.

    But by any reasonable definition, their stock market choices do not mark them as narcissists.

    Jon


    -----Original Message-----
    >From: Len Tischler <tischlerl1@SCRANTON.EDU>
    >Sent: Sep 13, 2006 9:21 AM
    >To: ONE-L@AOMLISTS.PACE.EDU
    >Subject: Re: Dramatic under performance (lags average stock funds by 40 percent; 45 percent over 5 years) of so-called socially responsible funds
    >
    >Jon,
    >I'm curious: how are socially responsible companies or people
    >"narcissistic" any more than tobacco users (who offer illness from
    >second-hand smoke to those around them), heavy drinkers (who cause a
    >large portion of accidents and lost productivity), companies that only
    >care about profits for their financial owners (regardless of their
    >impacts on their employees, communities, world, or the environment), or
    >those who create or support war (kill human beings) to maintain or
    >enhance their wealth (most wars)? If anything, it seems to me that
    >socially responsible companies, investors, and individuals are focusing
    >on broader, longer-term issues that enhance life for others, not just
    >themselves. This would seem to be the opposite of narcissism. Please
    >help me understand this, since I like to avoid teaching narcissism to my
    >MBA students as I teach them about running companies.
    >I agree with you that investments in these companies might not be the
    >most "productive" investments from a pure monetary return standpoint.
    >However, it seems narcissistic to me to think that this is the only
    >important criterion for an investment. Many socially responsible
    >investors are willing to forgo some of their personal investment return
    >in return for an opportunity to possibly influence companies to behave
    >less narcissistically (more socially responsible).
    >By the way, although I can't quote them off the top of my head, I've
    >seen reports of studies that have shown that socially responsible funds
    >do better than the average; I've also seen reports of studies that show
    >they have done worse. So if your thought about narcissism had to do
    >with stating that such funds do better when they actually do worse, that
    >doesn't hold water just because of one study. We have the same
    >"problem" knowing whether being environmentally sound (e.g., beign
    >ISO14001 certified) has a positive or negative impact on a company.
    >Profit studies are all over the map so far. The best argument in favor
    >of being socially or environmentally responsible at the top of a
    >company, I think, from a narcissistic view, is that it demands more
    >thoughtfulness about managing the company thus enhancing management
    >capabilities in general.
    >Len
    >_________________________________
    >
    >*Len Tischler, Ph.D.*
    >
    >Associate Professor of Management
    >
    >Chair, Management/Marketing Department
    >
    >Kania School of Management
    >
    >University of Scranton
    >
    >Scranton, PA 18510
    >
    >Phone (570) 941-7782 Fax 941-4826
    >
    >len.tischler@scranton.edu <mailto:len.tischler@scranton.edu>
    >
    >
    >
    >
    >Jon Entine wrote:
    >
    >> So....when will Sandra Waddock and the like rewrite their past claims
    >> of equal or over performance by narcissistic, rainforest chic
    >> "socially responsible" funds?
    >>
    >> Those who 'bought into' that self-serving hyperbole in the face of
    >> empirical evidence should rightfully be ashamed of themselves.
    >>
    >> Jon Entine
    >>
    >> ******
    >>
    >> <http://online.wsj.com/home>
    >> <http://ad.doubleclick.net/clk;15359957;6853491;b?http://copiers.toshiba.com/index.shtml>
    >>
    >> *September 12, 2006 *
    >>
    >>
    >>
    >>
    >> SMARTMONEY FUND SCREEN
    >>
    >>
    >>
    >>
    >> http://online.wsj.com/article/SB115801824788560046.html?mod=googlenews_wsj
    >>
    >>
    >> Socially Responsible Funds
    >>
    >>
    >> *By JOSHUA ALBERTSON
    >> /September 12, 2006; Page D2
    >> /*
    >> It isn't easy being green -- or alcohol- and tobacco-free.
    >>
    >>
    >> In the past year (through the end of August), the average equity fund
    >> that employs some sort of "socially responsible investing" strategy
    >> has gained 6.68%, behind the 9.71% average for all equity funds,
    >> according to investment-research company Lipper Inc. The gap also is
    >> there over five years: 4.42% annualized for SRI equity versus 7.14%
    >> annualized for all-equity funds.
    >>
    >>
    >> Although criteria vary, SRI funds generally avoid sectors that go
    >> against certain ethical guidelines. The biggies are alcohol, tobacco,
    >> defense, pornography and gambling. As a group, SRI funds account for
    >> 0.5% of all fund assets. There are enough SRI funds -- 165 at last
    >> count -- that you could build a respectable portfolio that conformed
    >> to your particular moral standing.
    >>
    >>
    >> It is a romantic notion, investing with a conscience. But the cold,
    >> hard truth is that those who mix morals and money are probably going
    >> to pay for it with less-than-stellar returns. We would caution that
    >> social responsibility has nothing to do with investing blindly in a
    >> fund whose heart may be in the right place. So, if you must invest
    >> responsibly, choose carefully. The list below is a good place to start.
    >>
    >>
    >> This week, we asked Lipper for a list of all of the equity and
    >> mixed-asset funds with the socially responsible investing tag. From
    >> there, we filtered out those funds with five-year returns that didn't
    >> rank in the top 50% of their respective classification. We also
    >> eliminated load funds and those with expense ratios higher than at
    >> least half of their peers. Finally, each of the eight funds on our
    >> list is open to new investors, accepts minimum initial investments of
    >> $5,000 or less, and holds at least $50 million in total net assets.
    >>
    >> ** * *
    >> *
    >>
    >>
    >>
    >
    >
    >--
    >
    >_
    >


  • 7.  Dramatic under performance (lags average stock funds by 40 percent; 45 percent over 5 years) of so-called socially responsible funds

    Posted 09-14-2006 09:14
    Jon,

    I have to agree with Len. I think that his point was that your use of the
    term "narcissistic" was a poor choice of a term to label the phenomenon you
    seem concerned with. Narcissism is considered a personality disorder and
    their are standard ways to diagnose the disorder. Here is an American
    standard which you can easily find by Googling "narcissistic."

    ****************************************
    A pervasive pattern of grandiosity (in fantasy or behavior), need for
    admiration, and lack of empathy, beginning by early adulthood and present in
    a variety of contexts, as indicated by five (or more) of the following:

    has a grandiose sense of self-importance (e.g., exaggerates achievements and
    talents, expects to be recognized as superior without commensurate
    achievements)
    is preoccupied with fantasies of unlimited success, power, brilliance,
    beauty, or ideal love
    believes that he or she is "special" and unique and can only be understood
    by, or should associate with, other special or high-status people (or
    institutions)
    requires excessive admiration
    has a sense of entitlement, i.e., unreasonable expectations of especially
    favorable treatment or automatic compliance with his or her expectations
    is interpersonally exploitative, i.e., takes advantage of others to achieve
    his or her own ends
    lacks empathy: is unwilling to recognize or identify with the feelings and
    needs of others
    is often envious of others or believes that others are envious of him or her
    shows arrogant, haughty behaviors or attitudes
    ***************************************

    Now, I am not an expert on SRIs and I don't invest as a matter of course in
    SRIs but nothing that you wrote convinces me that your labelling of people
    who invest in SRIs as narcissistic holds water. It would seem much more
    sensible that rather than jumping to conclusions about people's motivations
    that it would be more sensible to find a group of people who invest in SRIs
    and test to see if they have narcissistic personality disorders or invest
    based on purely ideological criteria rather than on the standard critierion
    of monetary self-interest or some other pragmatic motivation.

    As to whether investors have any direct effect on the behavior of firms, who
    knows. You seem to be relying solely on the authority of David Vogel. It
    is clear that he convinced you beyond a shadow of a doubt. I haven't read
    his book. But based on my experience with academic studies, I would be
    surprised if Vogel's argument is "indisputable."

    My guess (and this is the guess of someone who is too busy with other things
    to invest a lot of time in the argument) is that the situation is much more
    complicated than you describe. I suspect that you might find some "spoiled
    rich liberals" who invest out of "ideological vanity" but I suspect that
    there is much more diversity of motivation than you are willing to allow
    for. I also suspect that many people who invest in SRIs use indicators
    other than financial returns to judge the performance of their investments.
    So it might help to look to see what other criteria that people who invest
    in SRIs might choose. As to how much influence investors can bring to bear
    on the behavior of management, that question has been debated for many years
    and I suspect that it will continue to be. Saying that SRIs have absolutely
    no influence on business practices (and that is what people who invest in
    SRIs seem to want to effect according to the story that you are telling)
    seems like a questionable assertion to me. Following Popper, I think that
    it would be relatively easy to design an empirical test to attempt to
    falsify that claim.

    Anyway, like I said, I don't have any fish to fry in this particular
    argument. But I do have to say that for someone who wants to demonstrate
    the ideological vanity of others, you seem to protest too much.

    Best, Bill

    >From: Jon Entine <runjonrun@EARTHLINK.NET>
    >Reply-To: Organizations and the Natural Environment Discussion
    ><ONE-L@AOMLISTS.PACE.EDU>
    >To: ONE-L@AOMLISTS.PACE.EDU
    >Subject: Re: Dramatic under performance (lags average stock funds by 40
    >percent; 45 percent over 5 years) of so-called socially responsible funds
    >Date: Wed, 13 Sep 2006 20:51:39 -0400
    >
    >Len:
    >
    >Good question. My point is very straightforward.
    >
    >When one supports a position not because it is empirically verifiable but
    >out of ideological vanity -- in other words, because it comports with one's
    >political views, which makes one feel good about their view of the
    >world--that's narcissism. After all, there is NO empirical evidence that
    >buying and selling stocks based on one's political perspective in any way
    >changes the behavior of corporations for the better, or worse for that
    >matter. I think David Vogel disposed of that argument in his Brookings
    >Instiution book.
    >
    >Those who chose to invest in stocks based on their anticipated return and
    >not narcissists. You can call them opportunits; greedy; whatever. But they
    >are not investing out of vanity. They are motivated to make money.
    >
    >Now, I'm not advancing that as a higher calling, or even endorsing the
    >conservative belief in the wonders of the free market; my views on that
    >issue are not an issue. It's not important that they are correct in their
    >view of how capitalism and the stock market works. They may even be evil
    >people. I am addressing their ethics or judging their motivations, as we
    >cannot know them, as I know many people who are quite generous in every
    >aspect of lives, yet invest in stocks that violate standard alchol screens
    >(Starbucks in US; Whitbread in the UK) or other screens involving nuclear
    >energy, or even tobacco.
    >
    >But by any reasonable definition, their stock market choices do not mark
    >them as narcissists.
    >
    >Jon
    >
    >
    >-----Original Message-----
    > >From: Len Tischler <tischlerl1@SCRANTON.EDU>
    > >Sent: Sep 13, 2006 9:21 AM
    > >To: ONE-L@AOMLISTS.PACE.EDU
    > >Subject: Re: Dramatic under performance (lags average stock funds by 40
    >percent; 45 percent over 5 years) of so-called socially responsible funds
    > >
    > >Jon,
    > >I'm curious: how are socially responsible companies or people
    > >"narcissistic" any more than tobacco users (who offer illness from
    > >second-hand smoke to those around them), heavy drinkers (who cause a
    > >large portion of accidents and lost productivity), companies that only
    > >care about profits for their financial owners (regardless of their
    > >impacts on their employees, communities, world, or the environment), or
    > >those who create or support war (kill human beings) to maintain or
    > >enhance their wealth (most wars)? If anything, it seems to me that
    > >socially responsible companies, investors, and individuals are focusing
    > >on broader, longer-term issues that enhance life for others, not just
    > >themselves. This would seem to be the opposite of narcissism. Please
    > >help me understand this, since I like to avoid teaching narcissism to my
    > >MBA students as I teach them about running companies.
    > >I agree with you that investments in these companies might not be the
    > >most "productive" investments from a pure monetary return standpoint.
    > >However, it seems narcissistic to me to think that this is the only
    > >important criterion for an investment. Many socially responsible
    > >investors are willing to forgo some of their personal investment return
    > >in return for an opportunity to possibly influence companies to behave
    > >less narcissistically (more socially responsible).
    > >By the way, although I can't quote them off the top of my head, I've
    > >seen reports of studies that have shown that socially responsible funds
    > >do better than the average; I've also seen reports of studies that show
    > >they have done worse. So if your thought about narcissism had to do
    > >with stating that such funds do better when they actually do worse, that
    > >doesn't hold water just because of one study. We have the same
    > >"problem" knowing whether being environmentally sound (e.g., beign
    > >ISO14001 certified) has a positive or negative impact on a company.
    > >Profit studies are all over the map so far. The best argument in favor
    > >of being socially or environmentally responsible at the top of a
    > >company, I think, from a narcissistic view, is that it demands more
    > >thoughtfulness about managing the company thus enhancing management
    > >capabilities in general.
    > >Len
    > >_________________________________
    > >
    > >*Len Tischler, Ph.D.*
    > >
    > >Associate Professor of Management
    > >
    > >Chair, Management/Marketing Department
    > >
    > >Kania School of Management
    > >
    > >University of Scranton
    > >
    > >Scranton, PA 18510
    > >
    > >Phone (570) 941-7782 Fax 941-4826
    > >
    > >len.tischler@scranton.edu <mailto:len.tischler@scranton.edu>
    > >
    > >
    > >
    > >
    > >Jon Entine wrote:
    > >
    > >> So....when will Sandra Waddock and the like rewrite their past claims
    > >> of equal or over performance by narcissistic, rainforest chic
    > >> "socially responsible" funds?
    > >>
    > >> Those who 'bought into' that self-serving hyperbole in the face of
    > >> empirical evidence should rightfully be ashamed of themselves.
    > >>
    > >> Jon Entine
    > >>
    > >> ******
    > >>
    > >> <http://online.wsj.com/home>
    > >>
    ><http://ad.doubleclick.net/clk;15359957;6853491;b?http://copiers.toshiba.com/index.shtml>
    > >>
    > >> *September 12, 2006 *
    > >>
    > >>
    > >>
    > >>
    > >> SMARTMONEY FUND SCREEN
    > >>
    > >>
    > >>
    > >>
    > >>
    >http://online.wsj.com/article/SB115801824788560046.html?mod=googlenews_wsj
    > >>
    > >>
    > >> Socially Responsible Funds
    > >>
    > >>
    > >> *By JOSHUA ALBERTSON
    > >> /September 12, 2006; Page D2
    > >> /*
    > >> It isn't easy being green -- or alcohol- and tobacco-free.
    > >>
    > >>
    > >> In the past year (through the end of August), the average equity fund
    > >> that employs some sort of "socially responsible investing" strategy
    > >> has gained 6.68%, behind the 9.71% average for all equity funds,
    > >> according to investment-research company Lipper Inc. The gap also is
    > >> there over five years: 4.42% annualized for SRI equity versus 7.14%
    > >> annualized for all-equity funds.
    > >>
    > >>
    > >> Although criteria vary, SRI funds generally avoid sectors that go
    > >> against certain ethical guidelines. The biggies are alcohol, tobacco,
    > >> defense, pornography and gambling. As a group, SRI funds account for
    > >> 0.5% of all fund assets. There are enough SRI funds -- 165 at last
    > >> count -- that you could build a respectable portfolio that conformed
    > >> to your particular moral standing.
    > >>
    > >>
    > >> It is a romantic notion, investing with a conscience. But the cold,
    > >> hard truth is that those who mix morals and money are probably going
    > >> to pay for it with less-than-stellar returns. We would caution that
    > >> social responsibility has nothing to do with investing blindly in a
    > >> fund whose heart may be in the right place. So, if you must invest
    > >> responsibly, choose carefully. The list below is a good place to start.
    > >>
    > >>
    > >> This week, we asked Lipper for a list of all of the equity and
    > >> mixed-asset funds with the socially responsible investing tag. From
    > >> there, we filtered out those funds with five-year returns that didn't
    > >> rank in the top 50% of their respective classification. We also
    > >> eliminated load funds and those with expense ratios higher than at
    > >> least half of their peers. Finally, each of the eight funds on our
    > >> list is open to new investors, accepts minimum initial investments of
    > >> $5,000 or less, and holds at least $50 million in total net assets.
    > >>
    > >> ** * *
    > >> *
    > >>
    > >>
    > >>
    > >
    > >
    > >--
    > >
    > >_
    > >


  • 8.  Dramatic under performance (lags average stock funds by 40 percent; 45 percent over 5 years) of so-called socially responsible funds

    Posted 09-14-2006 12:06
    Jon,
    I understand your argument, but I think we are using narcissism differently.  You are focusing on its meaning as vanity.  I was focusing on its meaning as self-absorption, egotism, selfishness, conceit, or self-importance.  To me, investing only for your own profit is far more narcissistic than investing with the hope that your investment will at least not add to the damage being done by some companies.  So I agree that there can be some amount of vanity in thinking that your investment can have an impact, but there is a lot of self-absorption and egotism, etc. in only thinking about yourself. 

    I also agree that it is wrong to tout something as effective when there is no evidence for it or when the evidence is against it.  In this case, as I wrote earlier, I've read reports that research shows that socially responsible funds do better than average for mutual funds (I've never read the research papers themselves either way).  Based on those reports and the ones that contradict them I've reported both to my students.  However, it is possible for someone to read only one such report and then argue for the result they read about.  That would not be narcissistic.  Plus, research is often wrong.  Remember that margarine used to be bad for people, then it became better than butter (1970s), then butter was better (1990s), but with the newest margarines no one is exactly sure (2006).  And that's based on a lot of research over decades. 

    I'd like to pose a question: if someone holds the view that humanity is facing an environmental crisis in the near future, or that global companies on the whole, are taking more money out of poor countries than they are putting in (except for those few countries that have large foreign capital investments like China) - and that this is causing some of the massive human suffering in the world, what can an individual do about this? 
    ...my answer is: not much directly.  About the only thing I can think of is to raise one's own awareness of the issues and problems and through that to help raise others' awareness (until enough people think things need to change and can influence a change).  If you buy into this as a possible solution, then it might be possible to take the next step: purposely and publicly investing in environmentally or socially "good" companies (or at least not in "bad" ones) could be a way to increase others' awareness.  So, although such investing might not have more than minimal direct impacts on companies' behaviors, it could still have an impact in the long run that is not (yet?) measurable.  Please: shoot holes through this argument or train of thought.  I want to know whether or not I'm on (even somewhat) solid ground. 
    Thanks,
    Len



    Jon Entine wrote: 
    Len:  Good question. My point is very straightforward.  When one supports a position not because it is empirically verifiable but out of ideological vanity -- in other words, because it comports with one's political views, which makes one feel good about their view of the world--that's narcissism. After all, there is NO empirical evidence that buying and selling stocks based on one's political perspective in any way changes the behavior of corporations for the better, or worse for that matter. I think David Vogel disposed of that argument in his Brookings Instiution book.  Those who chose to invest in stocks based on their anticipated return and not narcissists. You can call them opportunits; greedy; whatever. But they are not investing out of vanity. They are motivated to make money.  Now, I'm not advancing that as a higher calling, or even endorsing the conservative belief in the wonders of the free market; my views on that issue are not an issue. It's not important that they are correct in their view of how capitalism and the stock market works. They may even be evil people. I am addressing their ethics or judging their motivations, as we cannot know them, as I know many people who are quite generous in every aspect of lives, yet invest in stocks that violate standard alchol screens (Starbucks in US; Whitbread in the UK) or other screens involving nuclear energy, or even tobacco.  But by any reasonable definition, their stock market choices do not mark them as narcissists.  Jon   -----Original Message-----   
    From: Len Tischler <tischlerl1@SCRANTON.EDU> Sent: Sep 13, 2006 9:21 AM To: ONE-L@AOMLISTS.PACE.EDU Subject: Re: Dramatic under performance (lags average stock funds by 40 percent; 45 percent over 5 years) of so-called socially responsible funds  Jon, I'm curious: how are socially responsible companies or people  "narcissistic" any more than tobacco users (who offer illness from  second-hand smoke to those around them), heavy drinkers (who cause a  large portion of accidents and lost productivity), companies that only  care about profits for their financial owners (regardless of their  impacts on their employees, communities, world, or the environment), or  those who create or support war (kill human beings) to maintain or  enhance their wealth (most wars)?  If anything, it seems to me that  socially responsible companies, investors, and individuals are focusing  on broader, longer-term issues that enhance life for others, not just  themselves.  This would seem to be the opposite of narcissism. Please  help me understand this, since I like to avoid teaching narcissism to my  MBA students as I teach them about running companies.  I agree with you that investments in these companies might not be the  most "productive" investments from a pure monetary return standpoint.   However, it seems narcissistic to me to think that this is the only  important criterion for an investment.  Many socially responsible  investors are willing to forgo some of their personal investment return  in return for an opportunity to possibly influence companies to behave  less narcissistically (more socially responsible).  By the way, although I can't quote them off the top of my head, I've  seen reports of studies that have shown that socially responsible funds  do better than the average; I've also seen reports of studies that show  they have done worse.  So if your thought about narcissism had to do  with stating that such funds do better when they actually do worse, that  doesn't hold water just because of one study.  We have the same  "problem" knowing whether being environmentally sound (e.g., beign  ISO14001 certified) has a positive or negative impact on a company.   Profit studies are all over the map so far.  The best argument in favor  of being socially or environmentally responsible at the top of a  company, I think, from a narcissistic view, is that it demands more  thoughtfulness about managing the company thus enhancing management  capabilities in general.  Len _________________________________  *Len Tischler, Ph.D.*  Associate Professor of Management  Chair, Management/Marketing Department  Kania School of Management  University of Scranton  Scranton, PA 18510  Phone (570) 941-7782   Fax 941-4826  len.tischler@scranton.edu <mailto:len.tischler@scranton.edu>     Jon Entine wrote:      
    So....when will Sandra Waddock and the like rewrite their past claims  of equal or over performance by narcissistic, rainforest chic  "socially responsible" funds?  Those who 'bought into' that self-serving hyperbole in the face of  empirical evidence should rightfully be ashamed of themselves.  Jon Entine  ******        <http://online.wsj.com/home>     <http://ad.doubleclick.net/clk;15359957;6853491;b?http://copiers.toshiba.com/index.shtml>          *September 12, 2006 *                       SMARTMONEY FUND SCREEN                          http://online.wsj.com/article/SB115801824788560046.html?mod=googlenews_wsj    Socially Responsible Funds   *By JOSHUA ALBERTSON  /September 12, 2006; Page D2 /* It isn't easy being green -- or alcohol- and tobacco-free.   In the past year (through the end of August), the average equity fund  that employs some sort of "socially responsible investing" strategy  has gained 6.68%, behind the 9.71% average for all equity funds,  according to investment-research company Lipper Inc. The gap also is  there over five years: 4.42% annualized for SRI equity versus 7.14%  annualized for all-equity funds.   Although criteria vary, SRI funds generally avoid sectors that go  against certain ethical guidelines. The biggies are alcohol, tobacco,  defense, pornography and gambling. As a group, SRI funds account for  0.5% of all fund assets. There are enough SRI funds -- 165 at last  count -- that you could build a respectable portfolio that conformed  to your particular moral standing.   It is a romantic notion, investing with a conscience. But the cold,  hard truth is that those who mix morals and money are probably going  to pay for it with less-than-stellar returns. We would caution that  social responsibility has nothing to do with investing blindly in a  fund whose heart may be in the right place. So, if you must invest  responsibly, choose carefully. The list below is a good place to start.   This week, we asked Lipper for a list of all of the equity and  mixed-asset funds with the socially responsible investing tag. From  there, we filtered out those funds with five-year returns that didn't  rank in the top 50% of their respective classification. We also  eliminated load funds and those with expense ratios higher than at  least half of their peers. Finally, each of the eight funds on our  list is open to new investors, accepts minimum initial investments of  $5,000 or less, and holds at least $50 million in total net assets.   ** * * *           
     --   _

    --

    __________________________________

    Len Tischler, Ph.D.

    Associate Professor of Management

    Chair, Management/Marketing Department

    <st1:place w:st="on"><st1:placename w:st="on">Kania</st1:placename> <st1:placetype w:st="on">School</st1:placetype></st1:place> of Management

    <st1:place w:st="on"><st1:placetype w:st="on">University</st1:placetype> of <st1:placename w:st="on">Scranton</st1:placename></st1:place>

    <st1:place w:st="on"><st1:city w:st="on">Scranton</st1:city>, <st1:state w:st="on">PA</st1:state> <st1:postalcode w:st="on">18510</st1:postalcode></st1:place>

    Phone (570) 941-7782   Fax 941-4826

    len.tischler@scranton.edu

     



  • 9.  Dramatic under performance (lags average stock funds by 40 percent; 45 percent over 5 years) of so-called socially responsible funds

    Posted 09-14-2006 20:03
    Len,
     
    I totally agree with you, and more. Social investing only becomes an exercise in vanity if you believe it is a subsitute for actual engagement  or even philanthropy. My beef has always been with the rainforest chic left -- the liberal left, rather than the radical left -- who is content with symbolism, such as eating 'rainforest crunch' ice cream and buying socially screened stocks and therefore absolving themselves of engaging in social change. Social change, like making a marriage work, requires lots of heavy lifting, and a lot of 'social liberals' I know and high on rhetoric and low on social commitment, etc.
     
    I do believe social investing serves other important purposes, however, beyond its calling card (changing the world by buying stocks). It serves as a way to crystallize public opinion on issues, for no other reason than the influence of the financial community on the media in general. If an SRI organization, or a coaliton of activist organizations including a SRI component, come out on an issue, it almost immediately has critical mass in the media, and therefore puts that issue in serious play in public policy circles. That's an immensely influential presence.
     
    I guess if social investing firms just dropped its pretenses--that buying/selling stocks means much or that social screens are 'objective' measures that equate with "progressive" policies--I wouldn't have a beef with it. I do believe the more thoughtful members of the SRI community, including some key people at large SRI firms, think very much along the lines I'm suggesting, as I've talked with many of them, endlessly, about just these issues. These are the real "social change" agents...not the hangers on in the academic community that seem intent on hanging their hat on pseudo data for ideological reasons (even if they may not be willing or sophisticated enough to acknowledge this).
     
    Thanks for the dialogue. Your thoughts?
     
    Jon


    -----Original Message-----
    From: Len Tischler <tischlerl1@scranton.edu>
    Sent: Sep 14, 2006 12:06 PM
    To: ONE-L@AOMLISTS.PACE.EDU
    Subject: Re: Dramatic under performance (lags average stock funds by 40 percent; 45 percent over 5 years) of so-called socially responsible funds

    <zzzhtml><zzzhead><zzzmeta content="text/html;charset=ISO-8859-1" http-equiv="Content-Type"></zzzmeta></zzzhead><zzzbody text="#000000" bgcolor="#ffffff">Jon,
    I understand your argument, but I think we are using narcissism differently.  You are focusing on its meaning as vanity.  I was focusing on its meaning as self-absorption, egotism, selfishness, conceit, or self-importance.  To me, investing only for your own profit is far more narcissistic than investing with the hope that your investment will at least not add to the damage being done by some companies.  So I agree that there can be some amount of vanity in thinking that your investment can have an impact, but there is a lot of self-absorption and egotism, etc. in only thinking about yourself. 

    I also agree that it is wrong to tout something as effective when there is no evidence for it or when the evidence is against it.  In this case, as I wrote earlier, I've read reports that research shows that socially responsible funds do better than average for mutual funds (I've never read the research papers themselves either way).  Based on those reports and the ones that contradict them I've reported both to my students.  However, it is possible for someone to read only one such report and then argue for the result they read about.  That would not be narcissistic.  Plus, research is often wrong.  Remember that margarine used to be bad for people, then it became better than butter (1970s), then butter was better (1990s), but with the newest margarines no one is exactly sure (2006).  And that's based on a lot of research over decades. 

    I'd like to pose a question: if someone holds the view that humanity is facing an environmental crisis in the near future, or that global companies on the whole, are taking more money out of poor countries than they are putting in (except for those few countries that have large foreign capital investments like China) - and that this is causing some of the massive human suffering in the world, what can an individual do about this? 
    ...my answer is: not much directly.  About the only thing I can think of is to raise one's own awareness of the issues and problems and through that to help raise others' awareness (until enough people think things need to change and can influence a change).  If you buy into this as a possible solution, then it might be possible to take the next step: purposely and publicly investing in environmentally or socially "good" companies (or at least not in "bad" ones) could be a way to increase others' awareness.  So, although such investing might not have more than minimal direct impacts on companies' behaviors, it could still have an impact in the long run that is not (yet?) measurable.  Please: shoot holes through this argument or train of thought.  I want to know whether or not I'm on (even somewhat) solid ground. 
    Thanks,
    Len



    Jon Entine wrote: 
    Len:  Good question. My point is very straightforward.  When one supports a position not because it is empirically verifiable but out of ideological vanity -- in other words, because it comports with one's political views, which makes one feel good about their view of the world--that's narcissism. After all, there is NO empirical evidence that buying and selling stocks based on one's political perspective in any way changes the behavior of corporations for the better, or worse for that matter. I think David Vogel disposed of that argument in his Brookings Instiution book.  Those who chose to invest in stocks based on their anticipated return and not narcissists. You can call them opportunits; greedy; whatever. But they are not investing out of vanity. They are motivated to make money.  Now, I'm not advancing that as a higher calling, or even endorsing the conservative belief in the wonders of the free market; my views on that issue are not an issue. It's not important that they are correct in their view of how capitalism and the stock market works. They may even be evil people. I am addressing their ethics or judging their motivations, as we cannot know them, as I know many people who are quite generous in every aspect of lives, yet invest in stocks that violate standard alchol screens (Starbucks in US; Whitbread in the UK) or other screens involving nuclear energy, or even tobacco.  But by any reasonable definition, their stock market choices do not mark them as narcissists.  Jon   -----Original Message-----   
    From: Len Tischler <tischlerl1@SCRANTON.EDU> Sent: Sep 13, 2006 9:21 AM To: ONE-L@AOMLISTS.PACE.EDU Subject: Re: Dramatic under performance (lags average stock funds by 40 percent; 45 percent over 5 years) of so-called socially responsible funds  Jon, I'm curious: how are socially responsible companies or people  "narcissistic" any more than tobacco users (who offer illness from  second-hand smoke to those around them), heavy drinkers (who cause a  large portion of accidents and lost productivity), companies that only  care about profits for their financial owners (regardless of their  impacts on their employees, communities, world, or the environment), or  those who create or support war (kill human beings) to maintain or  enhance their wealth (most wars)?  If anything, it seems to me that  socially responsible companies, investors, and individuals are focusing  on broader, longer-term issues that enhance life for others, not just  themselves.  This would seem to be the opposite of narcissism. Please  help me understand this, since I like to avoid teaching narcissism to my  MBA students as I teach them about running companies.  I agree with you that investments in these companies might not be the  most "productive" investments from a pure monetary return standpoint.   However, it seems narcissistic to me to think that this is the only  important criterion for an investment.  Many socially responsible  investors are willing to forgo some of their personal investment return  in return for an opportunity to possibly influence companies to behave  less narcissistically (more socially responsible).  By the way, although I can't quote them off the top of my head, I've  seen reports of studies that have shown that socially responsible funds  do better than the average; I've also seen reports of studies that show  they have done worse.  So if your thought about narcissism had to do  with stating that such funds do better when they actually do worse, that  doesn't hold water just because of one study.  We have the same  "problem" knowing whether being environmentally sound (e.g., beign  ISO14001 certified) has a positive or negative impact on a company.   Profit studies are all over the map so far.  The best argument in favor  of being socially or environmentally responsible at the top of a  company, I think, from a narcissistic view, is that it demands more  thoughtfulness about managing the company thus enhancing management  capabilities in general.  Len _________________________________  *Len Tischler, Ph.D.*  Associate Professor of Management  Chair, Management/Marketing Department  Kania School of Management  University of Scranton  Scranton, PA 18510  Phone (570) 941-7782   Fax 941-4826  len.tischler@scranton.edu <mailto:len.tischler@scranton.edu>     Jon Entine wrote:      
    So....when will Sandra Waddock and the like rewrite their past claims  of equal or over performance by narcissistic, rainforest chic  "socially responsible" funds?  Those who 'bought into' that self-serving hyperbole in the face of  empirical evidence should rightfully be ashamed of themselves.  Jon Entine  ******        <http://online.wsj.com/home>     <http://ad.doubleclick.net/clk;15359957;6853491;b?http://copiers.toshiba.com/index.shtml>          *September 12, 2006 *                       SMARTMONEY FUND SCREEN                          http://online.wsj.com/article/SB115801824788560046.html?mod=googlenews_wsj    Socially Responsible Funds   *By JOSHUA ALBERTSON  /September 12, 2006; Page D2 /* It isn't easy being green -- or alcohol- and tobacco-free.   In the past year (through the end of August), the average equity fund  that employs some sort of "socially responsible investing" strategy  has gained 6.68%, behind the 9.71% average for all equity funds,  according to investment-research company Lipper Inc. The gap also is  there over five years: 4.42% annualized for SRI equity versus 7.14%  annualized for all-equity funds.   Although criteria vary, SRI funds generally avoid sectors that go  against certain ethical guidelines. The biggies are alcohol, tobacco,  defense, pornography and gambling. As a group, SRI funds account for  0.5% of all fund assets. There are enough SRI funds -- 165 at last  count -- that you could build a respectable portfolio that conformed  to your particular moral standing.   It is a romantic notion, investing with a conscience. But the cold,  hard truth is that those who mix morals and money are probably going  to pay for it with less-than-stellar returns. We would caution that  social responsibility has nothing to do with investing blindly in a  fund whose heart may be in the right place. So, if you must invest  responsibly, choose carefully. The list below is a good place to start.   This week, we asked Lipper for a list of all of the equity and  mixed-asset funds with the socially responsible investing tag. From  there, we filtered out those funds with five-year returns that didn't  rank in the top 50% of their respective classification. We also  eliminated load funds and those with expense ratios higher than at  least half of their peers. Finally, each of the eight funds on our  list is open to new investors, accepts minimum initial investments of  $5,000 or less, and holds at least $50 million in total net assets.   ** * * *           
    --   _

    --
    <zzzmeta content="text/html; " http-equiv="Content-Type"><zzzmeta content="Word.Document" name="ProgId"><zzzmeta content="Microsoft Word 11" name="Generator"><zzzmeta content="Microsoft Word 11" name="Originator"><zzzlink href="Email%20Signature_files/filelist.xml" rel="File-List"><zzz!--[if 9]="" mso="" gte=""><xml> Administrator Normal Administrator 2 1 2006-01-25T18:06:00Z 2006-01-25T18:06:00Z 1 46 263 University of Scranton 2 1 308 11.6568 </xml><zzz![endif]--><zzz!--[if 9]="" mso="" gte=""><xml> <w:worddocument> <w:spellingstate>Clean</w:spellingstate> <w:grammarstate>Clean</w:grammarstate> <w:punctuationkerning> <w:validateagainstschemas> <w:saveifxmlinvalid>false</w:saveifxmlinvalid> <w:ignoremixedcontent>false <w:alwaysshowplaceholdertext>false</w:alwaysshowplaceholdertext> <w:compatibility> <w:breakwrappedtables> <w:snaptogridincell> <w:wraptextwithpunct> <w:useasianbreakrules> <w:dontgrowautofit> </w:dontgrowautofit></w:useasianbreakrules></w:wraptextwithpunct></w:snaptogridincell></w:breakwrappedtables></w:compatibility> <w:browserlevel>MicrosoftInternetExplorer4</w:browserlevel> </w:ignoremixedcontent></w:validateagainstschemas></w:punctuationkerning></w:worddocument> </xml><zzz![endif]--><zzz!--[if 9]="" mso="" gte=""><xml> <w:latentstyles deflockedstate="false" latentstylecount="156"> </w:latentstyles> </xml><zzz![endif]--><zzz!--[if !mso]=""><zzzobject classid="clsid:38481807-CA0E-42D2-BF39-B33AF135CC4D"></zzzobject> <zzz![endif]--> <zzz!--[if mso="" gte="" 10]=""> <zzz![endif]--></zzz![endif]--></zzz!--[if></zzz![endif]--></zzz!--[if></zzz![endif]--></zzz!--[if></zzz![endif]--></zzz!--[if></zzz![endif]--></zzz!--[if>

    __________________________________

    Len Tischler, Ph.D.

    Associate Professor of Management

    Chair, Management/Marketing Department

    <st1:place w:st="on"><st1:placename w:st="on">Kania</st1:placename> <st1:placetype w:st="on">School</st1:placetype></st1:place> of Management

    <st1:place w:st="on"><st1:placetype w:st="on">University</st1:placetype> of <st1:placename w:st="on">Scranton</st1:placename></st1:place>

    <st1:place w:st="on"><st1:city w:st="on">Scranton</st1:city>, <st1:state w:st="on">PA</st1:state> <st1:postalcode w:st="on">18510</st1:postalcode></st1:place>

    Phone (570) 941-7782   Fax 941-4826

    len.tischler@scranton.edu

     

    </zzzlink></zzzmeta></zzzmeta></zzzmeta></zzzmeta>
    </zzzbody></zzzhtml></tischlerl1@scranton.edu>


  • 10.  Dramatic under performance (lags average stock funds by 40 percent; 45 percent over 5 years) of so-called socially responsible funds

    Posted 09-14-2006 22:29
    Jon,
    i think we're generally in agreement. Thanks for the dialogue.
    Len

    ___________________
    Len Tischler, Ph.D.
    Associate Professor of Management
    Chair, Management/Marketing Department
    Kania School of Management
    University of Scranton
    Scranton, PA 18510
    len.tischler@scranton.edu
    570-941-7782


  • 11.  Dramatic under performance (lags average stock funds by 40 percent; 45 percent over 5 years) of so-called socially responsible funds

    Posted 09-15-2006 11:44

    I generally don't weigh in on these discussion threads (maybe I have taken the bait, who knows), but I am having a difficult time understanding the arguments around his debate and why this particular 5-year study is causing such a stir.  As far as I can tell, the only "heavy lifting" influencing this particular debate is that of lifting a pen.  I am not sure that Warren Buffet is lifting any less than Bill Gates even though he has chosen to merely right the checks.  Thus the issue is not one of motivations of investors or performance of a particular group of stocks over some arbitrary period of time.  Rather, the question is perhaps, more simply, "are these returns sustainable from a financial management perspective?"  Is performance sufficient to continue to attract additional capital, either from equity or debt mechanisms?  Whether shareholders invest in SRI firms out of a sense of philanthropy or whether the market is reacting to long-term risk-reduction strategies of these firms, or whether these differences are simply an artifact of the firmographic make-up of those in the index is perhaps outside of the scope of this particular study.  Hopefully, these issues are worth pursuing by those more sophisticated than I.

     

    ___________________________

    Timothy M. Smith

    Associate Professor and AT&T Industrial Ecology Fellow

    Environmental Science, Policy & Management

    Department of Bioproducts & Biosystems Engineering

    <st1:place w:st="on"><st1:placetype w:st="on">University</st1:placetype> of <st1:placename w:st="on">Minnesota</st1:placename></st1:place>

    <st1:street w:st="on"><st1:address w:st="on">2004 Folwell Ave.</st1:address></st1:street>

    <st1:place w:st="on"><st1:city w:st="on">St. Paul</st1:city>, <st1:state w:st="on">MN</st1:state> <st1:postalcode w:st="on">55108</st1:postalcode></st1:place>

    612-624-6755 (voice)

    612-625-6286 (fax)

    timsmith@umn.edu

    From: Organizations and the Natural Environment Discussion [mailto:ONE-L@AOMLISTS.PACE.EDU] On Behalf Of Jon Entine
    Sent: Thursday, September 14, 2006 7:03 PM
    To: ONE-L@AOMLISTS.PACE.EDU
    Subject: Re: Dramatic under performance (lags average stock funds by 40 percent; 45 percent over 5 years) of so-called socially responsible funds

     

    Len,

     

    I totally agree with you, and more. Social investing only becomes an exercise in vanity if you believe it is a subsitute for actual engagement  or even philanthropy. My beef has always been with the rainforest chic left -- the liberal left, rather than the radical left -- who is content with symbolism, such as eating 'rainforest crunch' ice cream and buying socially screened stocks and therefore absolving themselves of engaging in social change. Social change, like making a marriage work, requires lots of heavy lifting, and a lot of 'social liberals' I know and high on rhetoric and low on social commitment, etc.

     

    I do believe social investing serves other important purposes, however, beyond its calling card (changing the world by buying stocks). It serves as a way to crystallize public opinion on issues, for no other reason than the influence of the financial community on the media in general. If an SRI organization, or a coaliton of activist organizations including a SRI component, come out on an issue, it almost immediately has critical mass in the media, and therefore puts that issue in serious play in public policy circles. That's an immensely influential presence.

     

    I guess if social investing firms just dropped its pretenses--that buying/selling stocks means much or that social screens are 'objective' measures that equate with "progressive" policies--I wouldn't have a beef with it. I do believe the more thoughtful members of the SRI community, including some key people at large SRI firms, think very much along the lines I'm suggesting, as I've talked with many of them, endlessly, about just these issues. These are the real "social change" agents...not the hangers on in the academic community that seem intent on hanging their hat on pseudo data for ideological reasons (even if they may not be willing or sophisticated enough to acknowledge this).

     

    Thanks for the dialogue. Your thoughts?

     

    Jon

    -----Original Message-----
    From: Len Tischler
    <tischlerl1@scranton.edu>Sent: Sep 14, 2006 12:06 PM
    To: ONE-L@AOMLISTS.PACE.EDU
    Subject: Re: Dramatic under performance (lags average stock funds by 40 percent; 45 percent over 5 years) of so-called socially responsible funds

    <zzzhtml><zzzhead><zzzmeta content="text/html;charset=ISO-8859-1" http-equiv="Content-Type"></zzzmeta></zzzhead><zzzbody text="#000000" bgcolor="#ffffff">Jon,
    I understand your argument, but I think we are using narcissism differently.  You are focusing on its meaning as vanity.  I was focusing on its meaning as self-absorption, egotism, selfishness, conceit, or self-importance.  To me, investing only for your own profit is far more narcissistic than investing with the hope that your investment will at least not add to the damage being done by some companies.  So I agree that there can be some amount of vanity in thinking that your investment can have an impact, but there is a lot of self-absorption and egotism, etc. in only thinking about yourself. 

    I also agree that it is wrong to tout something as effective when there is no evidence for it or when the evidence is against it.  In this case, as I wrote earlier, I've read reports that research shows that socially responsible funds do better than average for mutual funds (I've never read the research papers themselves either way).  Based on those reports and the ones that contradict them I've reported both to my students.  However, it is possible for someone to read only one such report and then argue for the result they read about.  That would not be narcissistic.  Plus, research is often wrong.  Remember that margarine used to be bad for people, then it became better than butter (1970s), then butter was better (1990s), but with the newest margarines no one is exactly sure (2006).  And that's based on a lot of research over decades. 

    I'd like to pose a question: if someone holds the view that humanity is facing an environmental crisis in the near future, or that global companies on the whole, are taking more money out of poor countries than they are putting in (except for those few countries that have large foreign capital investments like China) - and that this is causing some of the massive human suffering in the world, what can an individual do about this? 
    ...my answer is: not much directly.  About the only thing I can think of is to raise one's own awareness of the issues and problems and through that to help raise others' awareness (until enough people think things need to change and can influence a change).  If you buy into this as a possible solution, then it might be possible to take the next step: purposely and publicly investing in environmentally or socially "good" companies (or at least not in "bad" ones) could be a way to increase others' awareness.  So, although such investing might not have more than minimal direct impacts on companies' behaviors, it could still have an impact in the long run that is not (yet?) measurable.  Please: shoot holes through this argument or train of thought.  I want to know whether or not I'm on (even somewhat) solid ground. 
    Thanks,
    Len



    Jon Entine wrote: </zzzbody></zzzhtml></tischlerl1@scranton.edu>

    Len:
     
    Good question. My point is very straightforward.
     
    When one supports a position not because it is empirically verifiable but out of ideological vanity -- in other words, because it comports with one's political views, which makes one feel good about their view of the world--that's narcissism. After all, there is NO empirical evidence that buying and selling stocks based on one's political perspective in any way changes the behavior of corporations for the better, or worse for that matter. I think David Vogel disposed of that argument in his Brookings Instiution book.
     
    Those who chose to invest in stocks based on their anticipated return and not narcissists. You can call them opportunits; greedy; whatever. But they are not investing out of vanity. They are motivated to make money.
     
    Now, I'm not advancing that as a higher calling, or even endorsing the conservative belief in the wonders of the free market; my views on that issue are not an issue. It's not important that they are correct in their view of how capitalism and the stock market works. They may even be evil people. I am addressing their ethics or judging their motivations, as we cannot know them, as I know many people who are quite generous in every aspect of lives, yet invest in stocks that violate standard alchol screens (Starbucks in US; Whitbread in the UK) or other screens involving nuclear energy, or even tobacco.
     
    But by any reasonable definition, their stock market choices do not mark them as narcissists.
     
    Jon
     
     
    -----Original Message-----
      
    From: Len Tischler <tischlerl1@SCRANTON.EDU>
    Sent: Sep 13, 2006 9:21 AM
    To: ONE-L@AOMLISTS.PACE.EDU
    Subject: Re: Dramatic under performance (lags average stock funds by 40 percent; 45 percent over 5 years) of so-called socially responsible funds
     
    Jon,
    I'm curious: how are socially responsible companies or people 
    "narcissistic" any more than tobacco users (who offer illness from 
    second-hand smoke to those around them), heavy drinkers (who cause a 
    large portion of accidents and lost productivity), companies that only 
    care about profits for their financial owners (regardless of their 
    impacts on their employees, communities, world, or the environment), or 
    those who create or support war (kill human beings) to maintain or 
    enhance their wealth (most wars)?  If anything, it seems to me that 
    socially responsible companies, investors, and individuals are focusing 
    on broader, longer-term issues that enhance life for others, not just 
    themselves.  This would seem to be the opposite of narcissism. Please 
    help me understand this, since I like to avoid teaching narcissism to my 
    MBA students as I teach them about running companies. 
    I agree with you that investments in these companies might not be the 
    most "productive" investments from a pure monetary return standpoint.  
    However, it seems narcissistic to me to think that this is the only 
    important criterion for an investment.  Many socially responsible 
    investors are willing to forgo some of their personal investment return 
    in return for an opportunity to possibly influence companies to behave 
    less narcissistically (more socially responsible). 
    By the way, although I can't quote them off the top of my head, I've 
    seen reports of studies that have shown that socially responsible funds 
    do better than the average; I've also seen reports of studies that show 
    they have done worse.  So if your thought about narcissism had to do 
    with stating that such funds do better when they actually do worse, that 
    doesn't hold water just because of one study.  We have the same 
    "problem" knowing whether being environmentally sound (e.g., beign 
    ISO14001 certified) has a positive or negative impact on a company.  
    Profit studies are all over the map so far.  The best argument in favor 
    of being socially or environmentally responsible at the top of a 
    company, I think, from a narcissistic view, is that it demands more 
    thoughtfulness about managing the company thus enhancing management 
    capabilities in general. 
    Len
    _________________________________
     
    *Len Tischler, Ph.D.*
     
    Associate Professor of Management
     
    Chair, Management/Marketing Department
     
    <st1:place w:st="on"><st1:placename w:st="on">Kania</st1:placename> <st1:placetype w:st="on">School</st1:placetype></st1:place> of Management
     
    <st1:place w:st="on"><st1:placetype w:st="on">University</st1:placetype> of <st1:placename w:st="on">Scranton</st1:placename></st1:place>
     
    <st1:place w:st="on"><st1:city w:st="on">Scranton</st1:city>, <st1:state w:st="on">PA</st1:state> <st1:postalcode w:st="on">18510</st1:postalcode></st1:place>
     
    Phone (570) 941-7782   Fax 941-4826
     
    len.tischler@scranton.edu <mailto:len.tischler@scranton.edu>
     
     
     
     
    Jon Entine wrote:
     
        
    So....when will Sandra Waddock and the like rewrite their past claims 
    of equal or over performance by narcissistic, rainforest chic 
    "socially responsible" funds?
     
    Those who 'bought into' that self-serving hyperbole in the face of 
    empirical evidence should rightfully be ashamed of themselves.
     
    Jon Entine
     
    ******
     
          <http://online.wsj.com/home>    
    <http://ad.doubleclick.net/clk;15359957;6853491;b?http://copiers.toshiba.com/index.shtml> 
         
      *September 12, 2006 *      
        
     
     
          
      SMARTMONEY FUND SCREEN   
                
       
      
     
     http://online.wsj.com/article/SB115801824788560046.html?mod=googlenews_wsj 
     
     
    Socially Responsible Funds
     
     
    *By JOSHUA ALBERTSON
     /September 12, 2006; Page D2
    /*
    It isn't easy being green -- or alcohol- and tobacco-free.
     
     
    In the past year (through the end of August), the average equity fund 
    that employs some sort of "socially responsible investing" strategy 
    has gained 6.68%, behind the 9.71% average for all equity funds, 
    according to investment-research company Lipper Inc. The gap also is 
    there over five years: 4.42% annualized for SRI equity versus 7.14% 
    annualized for all-equity funds.
     
     
    Although criteria vary, SRI funds generally avoid sectors that go 
    against certain ethical guidelines. The biggies are alcohol, tobacco, 
    defense, pornography and gambling. As a group, SRI funds account for 
    0.5% of all fund assets. There are enough SRI funds -- 165 at last 
    count -- that you could build a respectable portfolio that conformed 
    to your particular moral standing.
     
     
    It is a romantic notion, investing with a conscience. But the cold, 
    hard truth is that those who mix morals and money are probably going 
    to pay for it with less-than-stellar returns. We would caution that 
    social responsibility has nothing to do with investing blindly in a 
    fund whose heart may be in the right place. So, if you must invest 
    responsibly, choose carefully. The list below is a good place to start.
     
     
    This week, we asked Lipper for a list of all of the equity and 
    mixed-asset funds with the socially responsible investing tag. From 
    there, we filtered out those funds with five-year returns that didn't 
    rank in the top 50% of their respective classification. We also 
    eliminated load funds and those with expense ratios higher than at 
    least half of their peers. Finally, each of the eight funds on our 
    list is open to new investors, accepts minimum initial investments of 
    $5,000 or less, and holds at least $50 million in total net assets.
     
    ** * *
    *
     
     
     
          
    -- 
     
    _
     
       

     

    --

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    __________________________________

    Len Tischler, Ph.D.

    Associate Professor of Management

    <u1:p></u1:p>

    Chair, Management/Marketing Department

    <u1:p></u1:p>

    <u4:place u5:st="on"><u4:placename u5:st="on"><st1:place w:st="on"><st1:placename w:st="on">Kania</st1:placename></st1:place></u4:placename> <u4:placetype u5:st="on"><st1:placetype w:st="on">School</st1:placetype></u4:placetype></u4:place> of Management

    <u1:p></u1:p>

    <u4:place u5:st="on"><u4:placetype u5:st="on"><st1:place w:st="on"><st1:placetype w:st="on">University</st1:placetype></st1:place></u4:placetype> of <u4:placename u5:st="on"><st1:placename w:st="on">Scranton</st1:placename></u4:placename></u4:place>

    <u1:p></u1:p>

    <u4:place u5:st="on"><u4:city u5:st="on"><st1:place w:st="on"><st1:city w:st="on">Scranton</st1:city></st1:place></u4:city>, <u4:state u5:st="on"><st1:state w:st="on">PA</st1:state></u4:state> <u4:postalcode u5:st="on"><st1:postalcode w:st="on">18510</st1:postalcode></u4:postalcode></u4:place>

    <u1:p></u1:p>

    Phone (570) 941-7782   Fax 941-4826

    len.tischler@scranton.edu

    <u1:p> </u1:p>

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