Steve Milloy, advisor to the Free Enterprise Action Fund, told Cybercast News Service that the organization was formed out of "dismay at how corporations were attacked and doing a lousy job of defending themselves."
According to Milloy, the group wants to counteract the "activists," who he said are "hiding themselves" behind terms like 'Corporate Social Responsibility' (CSR) and 'Socially Responsible Investing' (SRI).
In the typical CSR, according to Milloy, "the activists want corporations to act socially responsible." An SRI can have "two flavors," he said. In one, "you might set up a mutual fund ... that does not invest in tobacco companies," and in the other, Milloy explained, "a fund will invest in those companies and then act as a shareholder advocate" to protest certain corporate decisions.
Milloy said political activists, mostly left-wing, are mixed in with the "socially responsible" investors. "The people who support these (activist) groups are sprinkled throughout the whole responsible investment community. They're very well networked together. They do have coordination."
The liberal activists "do the dirty work," Milloy said, while "the socially responsible investors ... are politically aligned with these people, and they say, you know, JP Morgan ... you're harming the environment and somehow that's going to come back to hurt you."
Corporations 'Acting as the UN'
Milloy believes that "socially responsible" funds are assuming a role that is not theirs to assume.
"Corporations have no business acting as the U.N. or government or charity. They are engines of economic vitality," Milloy said. "If we want to change the laws to improve human rights, or animal rights, or environmental protection, that's fine, but that is not a business' job."
The Kyoto Protocol -- the international treaty seeking reductions in industrial emissions -- has been used by CSR or SRI-related groups to persuade corporations about the need to deal with "global warming," Milloy said. While President Bush has decided against U.S. participation in the Kyoto Protocol, and a person might think the issue was politically dead in this country, CSR and SRI activists are "pressuring corporations to implement private Kyoto protocols," Milloy claimed.
"These are corporations like Citibank, JP Morgan Chase, British Petroleum, DuPont, IBM," Milloy said.
JP Morgan Chase, the international financial conglomerate, has been targeted by, among others, an environmental protection group called the Rainforest Action Network (RAN). Milloy said RAN is "pressuring JP Morgan Chase to stop lending to develop in the third world. They're specifically targeting power projects, and what the third world needs most of all is electricity.
"Rainforest Action Network has already pressured Citigroup and Bank of America into letting [it] be the kind of arbiter of who gets loans from those banks," Milloy claimed. "I mean, if you're a shareholder at Citigroup, do you really want Rainforest Action Network telling the bank where it can lend money?"
Milloy said Kentucky Fried Chicken has also come under fire by the animal rights group, People for the Ethical Treatment of Animals (PETA), for the company's allegedly cruel treatment of chickens.
KFC, according to Milloy, made concessions, "agree[ing] to put pressure on their meat suppliers in terms of how they handle chickens. The irony is KFC never sees a live chicken. They get frozen chicken," he said.
Better for Business?
Milloy believes the social investment groups are bad for business, citing a study by economist Arthur Laffer on whether CSRs enhance business profitability. According to a summary of the study, there is a "negative correlation between business profitability and CSR."
Milloy said the Free Enterprise Action Fund will "invest in the common stock of companies generally found in the Fortune 500 and SP 500" - a strategy he said is geared toward the benefit of investors and businesses.
"What we're trying to create is a grassroots, investor-based movement to pressure corporations to resist the activists," Milloy said, adding that the Free Enterprise Action Fund is "the first and only" of its kind and "definitely the first to be doing this as shareholders."
The fund already owns a stake in about 400 companies, Milloy said, refusing to name specific companies, but confirming that the tobacco industry was included.
Milloy also said the Free Enterprise Action Fund will encourage corporations not to be intimidated by the left and to hire people with the same philosophy. "If you're going to hire these people that can't stand the heat, they shouldn't be in the kitchen. What I can stop is corporate management trying to appease these [activist groups], thinking that it will make the problem go away," he added.
Defending Social Responsibility in Investing
The Innovative Portfolio Strategies Funds (IPS Funds), which according to a policy statement, include "Cruelty Free Investors, Socially Responsible Investors and Environmentally-Responsible Investors," defend the tactic of demanding that corporations adhere to certain moral standards.
An IPS Advisory, Inc. ethical investment policy statement, published on the organization's website, stated that "we must all live and invest within our own moral universe, as we see it.
"In an important respect, it is this need to invest morally. However we individually define it, that creates the common ground for all of us," the statement indicated. "We are all ... at least trying to apply some moral governance to our investment decisions beyond the simple desire to make money."
For a company to be considered by IPSA for inclusion in a mutual fund there must be a respect for animal rights as well as environmental concerns, according to the IPSA website.
IPSA also claims it will not "recommend for purchase the stock of companies that appear incorrigible, or that by the very nature of their businesses are not going to change (i.e., tobacco, poultry and fertilizer companies.)"
Calls to IPS Funds, seeking comment for this article, were not returned by press time.