How Your Investments Can Change Society
By Christine Schmidt
The Societal Impact of Investing
While we have been examining the personal impact of finances and how they fit into stewardship with the resources that God has entrusted to us, it’s also important to realize its impact on those around us. Investing has the power to impact not just our own lives but also the lives of those in the greater community, such as in our country. There are two ways that we can directly impact the community with our money by investing. The first is through our ability to influence company boards, and the second is through a joint effort to affect the market as a whole. To illustrate how exactly we can impact broader society, let’s look at two real-world examples.
Investing and influencing company boards
When Warren Buffett first purchased and was running the now infamous textile company, Berkshire Hathaway, he offered his investors the opportunity to contribute to charity using company funds when their stocks would increase. In the beginning, he grouped their money together by percentage, and donated to charities of his choosing. Over time, hearing the concerns of his investors he changed his charitable giving structure to allow investors to direct funds to charity on an individual level as opposed to a group level, and have greater control over who receives their percentage of charity. Later on, again, those who worked for a company he controlled discovered that one of the charities that was receiving a large portion of their charitable contributions from Buffett himself was Planned Parenthood. These consultants did not morally agree with their funds being directed to this company and brought the issue to Warren Buffet and the Berkshire Hathaway Board. Listening to his employees, Buffett stopped donations to Planned Parenthood.
Why this works: Today, CEOs and boards operate on the idea that they are fundamentally employed by their stockholders. While there are incentives to make sure that stocks grow as much as possible, it is realistic with this knowledge of your position to the CEO and board as an investor to influence company action, since the CEO and board aim to please their stockholders. Additionally, stockholders have the opportunity and right to vote for who is on the company board. Thus, you are able not only to bring various desires you have for the future of the company to a CEO’s attention, but you may doubly influence the company by helping determine who is on the board, which votes on decisions the company must make that you do not have influence over. Furthermore, employees can also effectuate change through voicing concern to the owners in regards to charitable giving. Many companies today which have charitable giving programs also are open to suggestions for other charities in which to donate.
How can we use investing as stockholders to influence a greater good for society? Armed with the knowledge that CEOs treat stockholders as their employers, we can influence the way CEOs treat not only the various charitable programs they support by directing funds towards good causes, we can also influence the way that the company interacts with society generally. If we disagree with the way a company is presenting itself to the community––such as with questionable ads––stockholders have great influence, even over that of the product consumer.
Investing and influencing the market as a whole
In March of 2021, it became apparent the impact even a few investors investing even small amounts can have as a conglomerate. When Reddit users banded together, they purchased massive amounts of stock in companies such as GameStop and Blockbuster, a move which had a major impact on hedge fund managers. The efforts of these Reddit users increased the price of each of these stocks that overturned the usual supply and demand structure of market prices in ways that the hedge fund managers were not expecting, causing some of these managers to lose a substantial amount of money.
Why this works: With GameStop, this worked especially well since it involved a large group of people working together to effect this change; currently, only a small amount of citizens invest outside of their retirement accounts. Thus, they were able to effect the change they wished to see together. Likewise, it is not a large jump to see how it can work inversely, through selling instead of buying. If investors are able to show their displeasure by manipulating the market through purchases, they could do something similar by selling their shares and refusing to support the company. Thus, by buying and selling company shares, stockholders may quickly indicate support or displeasure at company actions.
How can we use investing as stockholders to influence a greater good for society? While the events of the GameStop phenomena were an example of personal unrest and revenge, we may learn from this incident how to use stocks to influence the market. One of the fascinating occurrences in the stock markets is that stocks respond extremely quickly to money movement and will reevaluate at a significantly quicker pace than governmental or political elections can. Supply and demand are quickly calculated and reevaluations can happen in hours or days, changing the price of a share.
When we are discerning as a group what we desire the market to do, we may show companies how to act by supporting those that already act in a way with which we agree. For example, Chick-fil-A is known for being closed on Sundays as a day of rest and for supporting family values, while staying out of politics. If we agree with Chick-fil-A’s values and business model by purchasing their stock, we let other companies know what we support and stand for. Seeing the potential for greater support, these companies in which people can purchase stock will change quickly to meet the demand. If many people with the same values band together, this change could happen within days or at least a year.
Conclusions
We can determine from the examples of Berkshire Hathaway and the GameStop phenomenons that our dollars hold an immense amount of societal impact. From influencing individual companies through voting to influencing the market through buying and selling shares, we see that the quickest responders to investor desire are companies who wish to please their stockholders. Knowing this, we may use the system for a greater good, demanding of our companies a higher standard through charitable donation requests and better morals. We can accomplish these effects by ourselves, but we may see the greatest change in the quickest amount of time by choosing to act as a team to support those companies which share our values. Through these examples we can better see how investing can be a great opportunity not only for our personal stewardship, but also to help and influence the country at large.
