As Congress fashioned legislation in July to tighten regulations on accounting and business dealings, several religion-based mutual fund executives were claiming that the current spate of corporate scandals makes it harder to know which companies are ethically sound.
A decade or so ago, the firms that managed church-related investment portfolios would avoid companies that deal in military arms, liquor, tobacco, pornography and other products deemed immoral and socially harmful. But now both secular and religious investment offices would like to be able to pierce the fog hiding unethical business practices, practices that lately have been revealed only as corporate acts have left stockholders holding greatly reduced or depleted savings.
The wealthiest Protestant denomination, the United Methodist Church, has watched its Diversified Investment Fund, the largest pool of investments in its Board of Pension and Health Benefits, lose nearly $1.2 billion since the first of the year. As public shock over corporate scandals hit Wall Street, which lost 390 points on the Dow Jones industrial average July 20, the fund was down to a little more than $10 billion in assets, said Gale Whitson-Schmidt, board treasurer. But the board is not hitting the panic button.
"We're long-term investors, and we're sticking to our discipline," she told United Methodist News Service. And the pension fund office in Evanston, Illinois, is not just tallying its losses. "We're working with other institutional investors that are very supportive of the New York Stock Exchange's recommendations for strengthening its standards for companies that are traded on its exchange," said staff executive Vidette Bullock Mixon.
The board has urged the stock exchange to adopt a policy mandating that companies make public their business code of conduct and corporate governance guidelines, she said. The agency also supports requiring companies to provide transparent public disclosure of their financial performance in a way that is understandable, accurate and complete, she added.
"How do you see into the soul of a company?" asked Mark Regier, stewardship investing services manager for MMA Praxis Funds, which adhere to Mennonite principles. "It's a very confusing time in our books.... It's harder for us to know that we have picked good companies." Mennonites have traditionally avoided companies engaged in military contracts and heavy animal testing, but they want to know more than the window dressing.
Jerry Gray, internal wholesaler for the Mennonite funds, said the company is trying to steer clear of the next Enron by performing background checks on board members. …