Heavy Lifting - thoughts and web finds by an economist
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Monday, June 13, 2005
Who has the greater moral authority to demand changes of a firm or how a firm operates, those who own stock in the company and therefore have voting rights, or those who do not own stock? Those who do not own stock in a company are often the first to tell the company what to do with their private property. It seems that owning stock in a company that behaves different from what you want them to do is a primae facae reason to sell the stock, and continue to carp about what the firm does.
From today's Chronicle of Higher Education (reg req'd) comes a story about Harvard and Stanford selling their stock in PetroChina because PetroChina does business in the Sudan and the Sudanese government violates human rights. Students at both schools urged the stock to be sold insisting that profiting from such gross violations was immoral.
Students across the United States and Canada have been pressuring colleges and universities to dump such investments. They say it is unethical for educational institutions to support corporations with ties to the Sudanese government, which has sponsored militias that have raped, killed, and abused thousands of people in the country's Darfur region.
Divestiture won't stop the student activists from telling what PetroChina should do with their assets. However, as soon as the stock is sold the student activists have no basis for telling PetroChina what to do with its assets. Why not take the dividends from PetroChina and reimbursing the good folks of the Sudan, or rebuilding destroyed villages, or paying for relocation to the United States under asylum. There are a lot of good things that could be done with the dividends of PetroChina, but by selling the stock all options are foregone and the profits go to someone else.
It would seem that if the student activists really wanted to effect change, rather than seeming to, they would push for Harvard and Stanford to buy more stock in PetroChina so that Harvard and Stanford could use their collective guilt or moral superiority to direct the assets of PetroChina.
The anti-capitalist attitude assumes that owning an asset and earning a profit is automatically an immoral position. Further, it seems that the anti-capitalists assume that owning an asset precludes the right complain about how that asset is used, that the profit motive blinds the capitalist to violations of human rights, etc. However, it is the exact opposite that is ture. While those who do not own an asset have no direct ties to the profitability of that asset, and therefore might feel better about themselves at night and may be more prone to voicing opposition to how the asset is used, their opposition is completely immaterial. While student-activists can gain the ear of the media, and hence the world, through their protest and successful pressure to divest from PetroChina, after this one episode they will have no other leverage on PetroChina and hence no reason for the media to listen to them.
Why do confused twenty-year olds seem to run the campus on our top institutions?
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