Social investors have long been interested in executive compensation. The pay packages of CEOs occasionally attract attention from the mainstream press, too, and the June 12 issue of The Economist weighs in on the issue.

Three different articles consider executive pay, and they follow different paths to the same general conclusion. Yes, the authors agree, it’s possible that companies overpay their executives – especially in the U.S. – but it’s hard to say how much compensation is too much. The first article, “Pay Attention,” includes this sweeping statement:

“It is near impossible, of course, to determine the correct absolute level of executive pay.”

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The Sustainable Endowment Institute (SEI) recently released its College Sustainability Report Card. According to its Executive Summary, the Report Card “seeks to encourage sustainability as a priority in college operations and endowment investment practices by offering independent yearly assessments of progress.”

Institutions of higher education have played a significant role in SRI at least since the South African divestment movement of the 1980s. The Report Card examines both the investment practices of these schools and the sustainability of core university operations.

SEI finds that “the level of campus sustainability initiatives far outpaces that of endowment sustainability activity.” Responsible food-service and recycling practices, for example, earned “A” grades for 29% of schools. Only 4% of colleges achieved the same grade for their “Endowment Transparency.”

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A growing number of KLD’s clients serve high-net-worth investors (HNWI), commonly defined as individuals whose investable assets exceed $1 million. Nelle Coady, Assistant Manager of Client Services at KLD, reports that “the next generation of money” is concerned with the social impact of their investments.

“Young, high net worth investors are looking to be more proactive,” Nelle explains. “Our institutional clients tell us that social responsibility is a priority for more and more of their younger investors.”

The wider investment community, in the U.S. and abroad, has recognized this trend. American Banker reports: “Major custody banks are increasingly adding socially responsible investment factors into their monitoring services.”

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If your livelihood depended on the quality of your advice, wouldn’t you be your own best customer? Maybe not, especially if you’re a fund manager, according to a new study from Morningstar. Their analysis of SEC-required disclosure of managers’ holdings reveals some surprising numbers:

“In U.S.-stock funds, 47% report no manager ownership. And it gets worse from there. Fully 61% of foreign-stock funds have no ownership, 66% of taxable bond funds have no ownership, 71% of balanced funds put up goose eggs, and 80% of muni funds lack ownership.”

Should investors be concerned? Investment News quotes Morningstar’s Russel Kinnel:

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PIMCO’s Bill Gross devotes his June Investment Outlook to “the debate about the authenticity of U.S. inflation.” Gross says that this debate “has been joined by the press and astute authors such as Kevin Phillips.” (Gross calls Phillips’ new book “Bad Money,” which was excerpted in a recent Harper’s article, “as good a summer read detailing the state of the economy and how we got here as an ‘informed’ American could make.”)

Gross describes a study that compares U.S. inflation with that of 24 other nations:

These representative countries, chosen and graphed by Ed Hyman and ISI, have averaged nearly 7% inflation for the past decade, while the U.S. has measured 2.6%. The most recent 12 months produces that same 7% number for the world but a closer 4% in the U.S.

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Mainstream investors are reportedly only interested in environmental, social and governance (ESG) issues that will have a “material” impact on the company (higher or lower profits) — more specifically a near-term impact. On the other hand, traditional ESG investors do not want to invest in companies that have a negative impact on society or the environment — that are a risk to the community and ecological balance, not just to that company.

Social investors often assert that companies that manage their social and environmental responsibilities will ultimately do better financially. Sometimes it turns out, however, that the negative ESG risks are not material risks to a company in the short term.

Laws and regulations have not caught up with the latest externalization of impacts. Even where they have caught up, the legal costs and regulatory fines are often minimal as a percentage of revenues that can be obtained by ignoring and externalizing these impacts.

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According to The New York Observer, the Blackstone principals were not on the floor of the New York Stock Exchange when their IPO opened.

But The Man in The White Suit was. Tom Wolfe, legendary author of among others The Bonfire of the Vanities was making his first visit to the Exchange floor.

“All the years I’ve been in New York, I’ve never been on the floor of the Stock Exchange. So, a friend of mine, who knows a member, got me invited. I’m walking around and I see these television cameras. Somebody in the television crew spots me. I don’t even know where he was from. So, he says to me, ‘What do you think of this Blackstone I.P.O.?’ I’m joking, I say, ‘I think it’s the end of capitalism as we know it.’”

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I was part of a panel discussion that addressed strategies for responsible international investing at last week’s Green Mountain Summit on Investor Responsibility. Since the focus of the panel was on the challenges and opportunities of both the research and product side of the equation, I thought that an informal overview of current retail mutual fund offerings available to U.S. investors would be a valuable framing exercise.

As sources for the overview I used the U.S. Social Investment Forum (SIF) directory, Morningstar’s socially responsible investing fund screener and the web sites of fund sponsors. I excluded alternate share classes when they existed and focused on funds available to U.S. investors that had global or international exposures, regardless of whether or not the exposure was explicitly part of the funds’ investment objective.

The results of this exercise are summarized below. I found just 14 funds for responsible investors that had global/international exposure, 10 of which had explicit mandates for such exposure. I included three funds that are not branded as socially responsible investing (SRI) funds, but would appeal to responsible investors because of their emphasis on environmental factors.

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Herewith from Fox News via London’s Sunday Telegraph the latest example of the exposure of inconsistences – at least in the eye of the beholder – between a foundation’s mission and its investments:

SHE PROVIDED the finale to yesterday’s Live Earth concerts, even writing a special song to mark the worldwide musical event. But instead of being lionised, Madonna found herself accused of hypocrisy after allegations that she has financial links to some of the world’s biggest polluters.

The Ray of Light Foundation, a charitable fund established by the star to support her favourite causes and named after one of her biggest hits, has $4.2 million … of shares in a string of companies including Alcoa, the American aluminium giant, the Ford Motor Company and Weyerhaeuser, an international forest products company. All have been criticised by environmentalists.

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The Congress of the United States spent more than two years on ERISA, the Pension Reform Act of 1974, hearing countless witnesses, conducting dozens of studies, and considering a raft of alternative proposals. Yet there is not one mention in those thousands of printed pages of the social or political implications of the pension funds, and very little concern for the economic impacts, on capital market or capital formation… -Peter F. Drucker (1976)1

The Ontario Teachers’ Pension Plan led a successful group of bidders for Bell Canada (BCE)2 on June 30. According to the New York Times (July 1, 2007), ‘The deal for Bell Canada, worth about 51.7 billion Canadian dollars ($48.8 billion), would be the largest leveraged buyout ever.’

The Canadian Pension Plan Investment Board put BCE in play, and a number of other large Canadian plans indicated interest in bidding before withdrawing.

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