Who's Responsible for the Oil Spill in the Gulf...You? A Case for Socially Responsible Investing // 07.01.2010 at 11:54 AM
U.S government officials are estimating that up to 60,000 barrels of oil are still pouring into the Gulf of Mexico daily since the tragic oil rig explosion on April 20, with little that can be done about it until relief wells are completed in August. Independent experts believe this amount could be greater, resulting in one of the greatest human-induced environmental calamities in history.
There are four publicly-traded corporations involved with this rig--BP, Transocean (RIG), Halliburton (HAL) and Cameron International (CAM)-- with BP taking the lion's share of the blame. According to survivors of the explosion and internal BP documents obtained by numerous media sources, corners were cut when testing the safety of this rig and the equipment aimed at preventing this type of blowout, and that there was negligence in addressing potential problems that had already been discovered. These sources also claim BP urged that processes be sped up to unsafe levels to expedite the profitability of this well.
At a rental cost of $500,000 a day plus operational costs, managing an oil rig is an expensive venture. And any idle time with no oil production directly affects its profitability. Shutting down the operation for a week or more to fix safety concerns would have cost BP millions of dollars. So, yes, corners were cut. And the financial result of bypassing safety concerns will equate to billions of dollars in clean up costs alone. The total environmental and economic damage is immeasurable at this point, the full extent unlikely to be known for decades.
So who is responsible for this human failure of epic proportions--BP, Transocean, Halliburton, Cameron ... or you? That's right, you. Are you partly responsible for what has happened?
A viable case can be made that we're all partly responsible, given our gluttonous demand for dirty energy and our lack of political, economic and even aesthetic will to employ cleaner alternatives. But, coming from a different perspective, if through personal accounts or a workplace retirement plan, you own shares of stock or bonds issued by any of these four companies, or other investments that aren't socially screened, the likely answer is yes--you are partly responsible for this spill.
Let's consider a hypothetical situation. You are the owner of a taxi service. At your direction, the company not only cuts corners on the safety of its fleet, but has communicated to the drivers they should drive well above posted speed limits so more customers can be served. If one of your taxis were to be the cause of an accident resulting in property damage and loss of life, wouldn't you be civilly and quite possibly, criminally liable? Sure you would. I'd like to believe most people have the moral fortitude not to run a business in an unethical manner such as this.
So, why then do principled people decide to own or allow themselves through other investments to own stock in companies such as these, who have run their businesses exactly as is suggested in the hypothetical? If you own shares of these four companies, directly or not, you are an owner of these companies that skimped on safety and chose to speed up operations without regard to the financial and environmental risks.
Shareholders are supposed to have a voice in how their companies are run. They have the opportunity to vote yearly on the board of directors and bring up other issues with management at annual meetings. It's quite obvious though that the shareholders of BP, Transocean, Halliburton and Cameron International have not emphasized the importance of corporate ethics and responsible drilling to company management.
In the past twelve months, these four companies have reported combined profits of nearly $70 billion. So, those who own these stocks have personally profited from the unscrupulous behavior of these companies, at the expense of human life, wildlife, vital eco-systems and the economy of an entire region. Or have they?
While short-term traders may have made money on the fluctuations in these stocks, have long-term investors shared in those profits? I certainly can't estimate any single investor's personal gain, but BP, Transocean and Halliburton are all roughly at the same share price they were in 1997, although having paid some dividends. The only of these stocks that has maintained any longer-term gain in share price is Cameron International, which is still down roughly 20% since the accident.
If you've been a long-term owner of any of these stocks, what have you gained personally as a result of the unsafe, unethical business practices and corner-cutting of these corporations? The truth is, you likely have very little to show for it on your personal balance sheet. And people died, and people are losing jobs, and Gulf Coast businesses are folding, and our beautiful mother earth - well, she just continues to suffer.
Do you know what's in your portfolio? Are you aware of and comfortable with the ethical standards employed by the companies you've invested in? Do you blindly follow the advice of your adviser or just dump money into whichever investments have performed the best? Shouldn't your portfolio reflect the principles that you display in your personal life?
Know what you own!
Darron Stover is president and founder of Invest for Change, LLC (www.investforchange.com), a Raleigh-based socially responsible financial services firm, offering securities and investment advice through FSC Securities Corporation, a Registered Broker/Dealer and Registered Investment Advisor; Member FINRA/SIPC. Invest For Change is not affiliated with FSC Securities Corporation. The views expressed are not necessarily the opinion of FSC Securities Corporation, and should not be construed directly or indirectly, as an offer to buy or sell any securities mentioned herein. Information is based on sources believed to be reliable; however, the accuracy or completeness cannot be guaranteed. Investing is subject to risks including loss of principal. Stover can be reached at firstname.lastname@example.org.
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