In response to recent economic events, the media have struggled to convey the complexity and scale of what’s at stake in Washington, and on Wall Street. In an attempt to give this problem a human face, the popular press has focused on the top executives of major financial firms. Some leaders made tens of millions of dollars in good times, but could they still profit when taxpayers bail out their companies?

To help answer this crucial question, KLD Research Data Manager Eric Benjamin has researched compensation at the biggest bailed-out firm (so far): AIG. Compensation is a key corporate governance issue, and Eric is well-versed in the topic, having co-authored United for a Fair Economy’s 2006 report on pay inequality, Executive Excess.

The Fate of Executives at AIG

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The attached letter from the Social Investment Forum, which presents socially responsible investors’ priorities for any government bailout of financial firms, speaks for itself. I will only add that this process should include no restrictions on judicial review of any transactions – either of deals involving individual companies or the process itself. This is the only way the truth of what’s been happening will come out.

Click here for a pdf of SIF’s letter to Congress.

Social Investment Forum

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Is everyone a socially responsible investor yet?

Of course not, but in 2006, when money management giant TIAA-CREF surveyed its investors’ views on socially responsible investing (SRI), 67 percent of all respondents agreed with this statement:

“When making investment decisions, what is most important to me is ensuring that my investment decisions reflect my personal values about social and environmental impacts.”

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Environmental Finance is a British magazine that covers “the ever-increasing impact of environmental issues on the lending, insurance, investment and trading decisions affecting industry.” Contributors include environmental and business writers, and also experts in the field – including KLD President Peter Kinder.

The September issue [subscription required] includes “Lessons from China to the City,” a consideration of the policy approach described as “engagement.” Leaders such as US Secretary of State Condoleezza Rice have argued that economic engagement with nations like China will lead to political and environmental reforms.

Peter’s article looks at engagement’s track record in China, and also describes a more active sort of engagement: social investors’ campaign against South African apartheid. He presents lessons of successful engagement with both governments and corporations, and suggests that only a sustained, coordinated effort by governments, activists and ordinary citizens can really fulfill engagement’s promise:

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Today’s business page – at least I think it was today’s, if only because I found it on my lawn this morning – tells a cautionary tale about undead, web-sourced news. Old newspapers turn yellow and disintegrate, but six-year-old Chicago Tribune stories can rise again to stalk (in this case) the share price of United Airlines.

United’s stock briefly fell 75% yesterday after Bloomberg posted an article about the airline’s impending bankruptcy. As the Tribune explains today, the story was actually written in 2002. That didn’t stop an automated search “bot” from finding the piece, which was posted on the South Florida Sun-Sentinel web site without a date. A financial news search service sent that link to Bloomberg, who posted it among Monday’s other headlines.

Nasdaq temporarily halted trading after the mistake was discovered, and United issued a statement debunking the claim. Still, the company’s stock didn’t fully recover before trading closed.

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“Daddy, what’s a ‘Verizon’? An ‘Exxon’? An ‘Accenture’?” We whiz by these made-up names without asking questions our children might.

Mellon Bank, Iron City Beer, Lorain Coal & Dock: Those were company names I grew up with fifty years ago. They answered who, what and where fairly clearly.

In a time that supposedly values “transparency,” we should look more closely at names and words than we do. Do they or their usage convey hidden messages, intentionally or unintentionally? Do they have a context that illuminates their meanings?

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Global water trends are forcing consumers, businesses, and industries to manage water resources more efficiently. In spite of this, the global economy still sustains wasteful practices, like the cultivation and export of water-intensive crops, including tomatoes and coffee, from regions that are critically short of drinking water.

Water’s fundamental role in life complicates communities’ efforts to keep it clean, accessible and affordable. Water is a core public good with no known substitute, and investors cannot trade or ship it as easily as many other commodities. Also, regional political and environmental factors affect industrial users of water, as consumers and businesses share limited supply and discharge capacity.

These factors have created an eco-efficiency imperative for corporations: learn to do more with less water. KLD environmental, social and governance (ESG) research to help investors support this important work follows two paths:

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The Environmental News Network has presented new information on the astounding volume of water that is “embedded” in ordinary consumer goods. The ENN article is based on UK Water Footprint, a new study from the World Wildlife Fund-UK, which quantified the water used to produce food and other products:

“Just one tomato from Morocco takes 13 litres of water to grow while the various ingredients in a cup of coffee collectively use 140 litres. A shirt made from cotton grown in Pakistan or Uzbekistan cotton — and possibly irrigated by water from the Indus river or the rivers that feed the Aral Sea in central Asia — soaks up 2,700 litres of water.”

Consumers use far more “virtual” water than tap water, which means that their water footprint stretches far beyond their own watershed. As the examples above emphasize, virtual water is often drawn from dry regions in the developing world.

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