As I said recently, “Bringing up people’s stock investments sounds like wandering into a whole neighborhood of glass houses.” And it turns out that Deval Patrick recently sold some tobacco stocks, pretty small amounts: $3200 of Altria (the new Madison-Avenue tricked-out name for Phillip Morris), and $4400 of Reynolds Group. (Thanks to Hub Politics for the steer.)
Again, I would never be caught dead with these stocks in my portfolio … I think. But let’s look at the holdings of the Vanguard 500 Index, one of the most widely held mutual funds in the world. It’s a “passively-managed” fund with very low expenses, and it basically tracks the S&P 500 index, which has outperformed the Dow Jones over the last 50 years or so. This is a fund that puts lots of kids through college and secures retirements for lots of folks.
So what’s the #10 holding in the Vanguard 500? Our good friends at Altria. Reynolds? #309. And by the way, the flat-earthers global-warming deniers at Exxon/Mobil are #1.
Depressing, huh?
But here’s the thing: Patrick owned some 250 stocks — including Sean Healey’s AMG, amusingly. Does anyone honestly think he could personally oversee that kind of portfolio? No. Like mutual fund investors everywhere, he paid someone else to oversee the portfolio. (This is not exactly the Warren Buffett method of small-portfolio investing: “Put all your eggs in one basket, and watch the basket.”) And like I said, most money-managers kind of snicker at the idea of paying any attention to the social record of companies in choosing stocks. I wish that weren’t true, and I don’t think they have good reason to do so, but there it is.
I’m not apologizing for Patrick’s owning of tobacco stocks; it’s good that he dumped them, better late than never. But if you own mutual funds … careful of casting that first stone.
Here’s a lot more on socially responsible investing.
Thanks Charlie, This is a refreshing look at a tired form of ‘smear by association’. Most of us with a bit of 401k money don’t usually have many choices, and even more of us don’t ever look under the hood of the best performing mutual fund that we own.
Have the media or the local blogs thought to check on the portfolios of Reilly, Gabrielli, Mihos, Healey, etc? If not, then I would say this is a very slanted and unethical approach to journalism. I’m willing to bet that 50% of us with 401K’s are invested in some corporation we would object to.
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I have a very good friend who lives off of the interest on her portfolio. She is disabled and is dependent upon interest income. Her financial advisor has authority to make purchases of whatever is necessary to sustain her income. Would you criticize her for having a few thousand dollars worth of objectionable stock? If Deval looked at his portfolio and decided to sell what he found objectionable — so what? If there is suddenly a litmus test for stock holdings, maybe we should demand that all candidates reveal every single detail about their holdings. Fair is fair — right?
Is another reason why someone might hold otherwise “undesirable” stocks. It usually is most effective when someone — or some group — holds a large number of stocks, but the idea is to influence company (e.g., WalMart, Home Depot, ExxonMobil, etc.) policy from within through shareholder resolutions, etc.
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I’m not at all saying that this was DP’s intention in holding certain stocks, but it would be consistent with his stance on serving on the boards of Coca-Cola, Texcao, etc.
Tim, let’s be clear on this: Deval decided to sitoon the board of Ameriquest. He worked for and was employed by Coke and Texaco. Big difference there. On the board he was paid for and responsible for the keeping the executive employees in check and for authroizing the CEO to establsih corporate policy and guidelines. As an employee he was paid to do a job, however distasteful.
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It’s “good” that he dumped them? If by “good” you mean irrelevant, then yes, it’s good.
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And it’s yet another example of the pandering our politicians do for your vote. He probably dumped them because cigarette companies are so easy to hate. It’s like running on a platform against crime, pollution or weeds.
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“I’m taking a strong stand AGAINST poison ivy while my opponent hasn’t said a word about it! Why I bet she even has some growing in her back yard!”
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Why if everyone were to dump cigarette stocks, then I’d buy them and make a pile of money. And, then, if I were so inclined, I’d give money to my favorite charity: the socially responsible thing to do perhaps.
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What a cool gesture! A politician makes a pile of money from the sale of the high yielding cigarette company and giving it to the American Cancer Society. Now there’s a meaningful, and relevant statement.
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What “good” can possibly come from Patrick’s dumping of a cigarette company shares? One thing. It eliminates a sound bite from an opponent’s attack ad: “PATRICK SUPPORTS BIG TOBACCO (camera pans to smoke filled room).”
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Politicians who run ads like that think we’re idiots; politicians who pander by taking irrelevant actions likewise.
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but nevertheless, this is another example of how careful one needs to be BEFORE entering a high-profile political race. Patrick should have cleared this potential skeleton from his closet as soon as he resolved in his mind to run.
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Will this really hurt Patrick? Maybe, though probably not really. But Patrick is still a relatively unknown quantity among average voters, and things like this don’t make a great first impression. Patrick will likely overcome all of that first impression when he wins the convention, but he needs to be more careful, even if in reality the issue really should be a non-issue.
… the most when the candidate has never held public office before. For such a candidate, investments are our best indicator of what the candidate’s priorities and personal values are. Deval Patrick either (1) knew he owned tobacco stock but didn’t care about the social/ethical concerns of owning such stock, or (2) didn’t pay close enough attention to what his investment advisors were doing on his behalf. For someone running for public office, I find (2) just as troubling as (1). If he is not interested/responsible enough to know what he is putting his own money into, we can’t expect him to be a responsible executive for the Commonwealth.
It’s called “You find a socially exceptable stock, and I’ll demonstrate just how that company behaves like jerks.”
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Example:
Company — Ben & Jerrys
“Crime” — clogging the arteries of people Nationwide, thereby contributing to heart disease and all other badness associated with obesity.
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Company — Google
“Crime” — complicitness to China’s censorship.
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We could go on and on.
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The reality is that there are only two entities that can ultimately limit or guide a company’s behavior: government and owners. If you don’t like have a company is behaving, you can either (a) buy ’em, (b) legislate ’em, (c) convince the owners to behave differently through protests, pickets, nonpurchase of their products, etc or (d) convince your legislators to legislate ’em.
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So, ownership and complicitness are always impossible to tie together. I just don’t understand why everyone cares so much about what Patrick does with his money, but not Reilly, Gabrielli, Healy, or anyone else…
… to hear Deval try to make the argument that “ownership and complicitness are always impossible to tie together.” But instead, he dumped his tobacco stock in advance of the deadline for disclosure, perhaps hoping that the public wouldn’t find out about it.
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What the other candidates have done with their money is also important for the public to see. Politicians can talk all they want, but where they put their money tells us who they really are. The only reason we are not talking about the other candidates’ investments today is because those candidates are not the ones who just dumped tobacco stock.
I think we are talking about Deval Patrick because of some combination of (a) veiled racism, and (b) folks searching for something to pull him down.
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I’m not accusing BMG or anyone around here of either. But, news begets news, and the cycle about Deval and money has begun. They’ve all been non-stories, and yet they keep swirling.
You’re right that DP’s stock ownership is a non-issue, won’t matter, no voters will pay attention.
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But please stop the “it’s about race” stuff. Geez, I just can’t bear 6 months of it. I wonder if BMG would actually consider a moratorium on people who characterize any development that is not pro DP as “veiled racism.”
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DP is running. This is good. New blood, fresh ideas. Let’s see what happens.
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He is black. Get over it, my white brother.
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If DP were about to blocked from the ballot, instead of Gabby, you’d call it race.
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If DP were the guy with a career in MA politics yet struggling to get on the ballot, and Reilly was the one raising tons of out-of-state dough, you’d call it race.
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If DP were the incumbent governor, and people were belittling his presidential aspirations – like they do Mitt – you’d call it race.
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Instead, there’s a minor note about DP’s stock holdings – geez, I have Honda, is that bad (autos = emissions) or good (hybrids, yay!) – and you freak out.
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Save race card for real racism, like Achievement Gap, or the inaction on Dorchester’s murder rate.
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This probably isn’t the forum for this, but I really question the whole idea of “socially responsible investing”. Let’s take XOM (ExxonMobil) as an example.
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If I buy a share, where does my $60 (approx.) go? Not to the company. The company only gets money when it sells the stock. When I buy stock, it almost always comes from some other investor. Now, it’s true that sometimes companies sell blocks of stock, so it’s possible your money will go to the company; if you really want to be “socially responsible”, then you need to be aware of when the company is selling more stock.
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Now, it’s true it’s not quite that simple. If lots of people refuse to buy XOM then the price will drop, and the net effect is that the company loses money — perhaps even a substantial amount. But in reality, there are lots of Wall Street types who will jump at even the slightest dip, and the increased demand will drive the price back up. The practice of not buying reprehensible companies would have to be far, far more widespread to have any real effect.
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However, buying the stock gives you an advantage: you get to vote on and even propose shareholder proposals. I personally make it a point to always vote on these proposals, and to do the socially responsible thing. They’re almost always overturned, but sometimes — seldom, it’s true — you get a surprise.
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As others have pointed out, to me, the socially responsible thing to do is to vote and/or put forth proposals, and to donate a portion of your proceeds to charities.
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Patrick — or anybody else — owning XOM or MO or whatever really doesn’t matter to the company, neither helping nor hindering them. But if you can do some good through this ownership, then why shouldn’t you?
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And ultimately, why does any of this matter?
…once you own stock in a company, you have a stake in the company, meaning that you have a personal interest in seeing the company make profits. As profits increase, so does the price of your stock. To put in context: if you own tobacco stock, that means you want the company to sell more cigarettes. The more cigarettes it sells, the greater price you get when you finally decide to dump your stock in the weeks before you have to disclose your stock holdings to the public…..
When you buy a stock it is because 1) you believe it is undervalued by other investors 2) you think that profits will increase in the future. Profits may rise for PhillipMorris from automation, personnel cuts, etc.. not necessarily from selling more cigarettes. I also doubt that DP actually knows each and every company that his money manager invests in.
… so maybe you buy PhillipMorris because you think it could do a more “efficient” job of selling cigarettes (by laying off workers and replacing them with cigarette-making machines). That doesn’t change my point: as an investor, you want the company to continue making profits (for you and other shareholders) from selling cigarettes. If Deval owns PM, he is seeking to profit from the sale of cigarettes. That should tell you something about his priorities in that area.
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Now, as for your statement that you “doubt that DP actually knows each and every company that his money manager invests in” (and similar statements made by others), you seem to be assuming he is an incurious person. Certainly you do not mean to say that it is okay for him to turn a blind eye to the investments his money manager is making with his money?? That would seem quite irresponsible to me. Hardly a quality you look for in someone who, if elected, will be required to delegate responsibilities to others. Q: will it be okay for Patrick, as Governor, to turn a blind eye when state officials spend taxpayer money without discretion??
Scooter, I think the fungibility of stock doesn’t necessarily release one from moral responsibility, and certainly I recommend the SRI way of doing things, for the reasons you cited.
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But regardless, SRI is rare. My point is that there are many, many, many more investors like Patrick than who do SRI, of any sort, be it on their own or through a mutual fund. So if we’re going to pick on him for being morally impure … hoo boy, there’s gonna be a line.
… but I think it’s an important discussion to have nonetheless. I also think that, if Patrick really was interested in doing the right thing here, he’d address this issue head on and explain why it is not responsible to invest in tobacco companies (if that’s what he believes). Sweeping this under the rug and hoping the issue goes away smacks of Karl Rove….
You only have a personal interest in seeing the company make profits IF that was the reason you bought the stock in the first place. Well, duh, I hear you say, but seriously: If you’re being a “socially responsible investor”, don’t you perhaps have other reasons to buy at least some of your stocks?
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As for your last sentence, I am in no way attributing any of this to Deval Patrick. I don’t know enough to even begin to assume any of this, which is why I said that this perhaps is the wrong topic for my comment. I was solely addressing the concept of SRI and what it might/should/does entail.