…but who’s buying? As the old Megadeth song goes. The question is, should we be making an issue of the fact that West Sussex county council’s pension fund invests in arms firms, including Haliburton?
As reported in this week’s Crawley News this came to light after a question from Chris Mullins, one of the West Sussex councillors:
What investments, if any, does West Sussex County Council hold in weapons companies? If West Sussex County Council has such investments will the county council end its involvement with these unethical companies?
When the answer came back it transpired that the council’s pension fund had links to Haliburton, Ultra Electronics, Rolls-Royce and Meggitt, all involved in the arms business one way or another. I guess that Haliburton is the most notorious name on the list because of all the suggestions that it was deriving great benefit from the Gulf war whilst having all sorts of connections with the US government that started the war.
The leader of the county council, Henry Smith, said:
We have got to maximise the value of our pensions on behalf of our employees which include teachers, social workers and fire fighters. We are the biggest employer in West Sussex. We don’t directly manage the funds ourselves.
All our investments are conducted fully within the law and we have a stipulation that our investments are ethical. The criticisms are unjust.
I think I will have to disagree with that collection of contradictory statements.
For a start let’s ignore as irrelevant the bit about being the biggest employer in West Sussex. That is just a PR phrase that WSCC insert wherever they can and has nothing to do with the matter in hand, unless Mr. Smith thinks that the scale of a corporation has any bearing on its need to be ethical – in any case the context doesn’t make it clear whether being a larger employer means you have to be more ethical or less.
We can also discount the bit about teachers, social workers and fire fighters. Another reflex phrase, just dropping in job areas that we will be sympathetic about. It doesn’t matter. Would we say that its OK to invest money in companies that torture puppies or deliberately pollute oceans because the profit would go to nurses?
The two contradictory statements are that “we have to maximise the value of our pensions” and “we have a stipulation that our investments are ethical”. Some of the least ethical businesses can be the most profitable so you can’t guarantee both: you decide which is more important. At no point is it clear which of these considerations is more important to Henry Smith (who will also benefit from the WSCC pension fund – its not just teachers and fire fighters!)
The statement that “all our investments are conducted fully within the law” is disingenuous. Nobody suggested they were illegal. It is not illegal to invest money in any publicly listed company. Whoever manages the council’s funds would have to be very inept to invest in illegal operations. It is not illegal to invest in a tobacco company that encourages children in the Far East to take up smoking, but few people would consider it ethical.
The trouble with ethics is that it is largely subjective. There is no definitive statement of what is and is not ethical, although many have tried to make one, notably Peter Singer and JS Mill. The best you can do is have a majority opinion. As it happens, the majority of people in the country, and presumably the county, think that investing in arms companies is not an ethical investment. Incidentally, that is the reason I feel free to criticise the council’s investment while personally working for a company not unconnected with the arms trade. The point is that as a public body the council’s investment policy should fit in with the majority opinion of the public and not with mine or any other individual’s.
Mr. Smith says that the council doesn’t manage its own funds. This is normal. The council is not a centre of financial expertise (as the Fastway funding fiasco proved) so it makes perfect sense to place its investments in the hands of somebody who is. When you do that you can let your fund managers have a totally free hand or you can give certain guidelines, like the proportion of investment to go into high-risk, high-yield investments, how much should go into safer investments and whether there is any particular business or type of business to avoid or concentrate on. In West Sussex’s case their leader has said there was a stipulation that investments are ethical, which is very laudable.
What it boils down to is that WSCC put their pension fund in somebody else’s hands and asked them to invest it ethically. They invested some of the funds in companies that most council tax payers and fund members would probably consider unethical.  The possibilities are that either:
- Henry Smith and colleagues did not know. If they didn’t know it then they should be publicly criticising the fund managers and taking steps to make them follow the council’s instructions and not publicly supporting them.
- Henry Smith and his colleagues did know but either don’t agree with the majority that such investments might be unethical, or don’t care as long as the profits are there.
The criticisms are not unjust: they are perfectly valid. I for one would welcome an unambiguous statement about whether Henry Smith agrees with public opinion on the arms trade or not, and whether the council’s definition of ‘ethical’ will change or not. I think it would also be interesting to know what teachers, social workers, fire fighters and other council employees think about it.
By the way, this was all reported in the Crawley News because the councillor who asked the original question represents a division in Crawley, but it is relevent to the whole of the county. Has it been reported in the local papers that represent that enormous stretch of West Sussex outside Crawley?
1. I doubt very much that the teachers are in the WSCC pension fund.
2. There is a wad of case law relating to ethical investment of pension funds that boils down to (I am no lawyer): the Trustees of the pension fund, in this case WSCC, have a duty to aim to get the maximum return from their investment. This overrides any ethical considerations. In practice, it is almost certainly legitimate to instruct fund managers to omit certain types of investment unless, in their judgement, to do so would sell the fund short. The fund is the property of the members, the council merely holds the assets in trust.
I don’t think that it is sufficient to state ‘be ethical’ because one could argue (for the sake of argument!) that Halliburton are ethical because they are rebuilding Iraq post-war
WSCC’ s pension fund invests the pension contributions of other Council employees, like Crawley Borough Council’s. This means I’ve got a bit of money tied up there, as I paid into the pension when I was a councillor.
Maybe the question should now be extended to other areas of investment that are considered to be ‘unethical’, like, as you suggest Skuds, peddling ciggies to children in poor countries, or companies which contribute to Tory party funds.
What do people consider to be ‘unethical’ in investment terms?
I’m confused.. Ian, are you saying that the CBC pension fund is part of the county’s fund?
Gert hit the nail on the head by saying that the fund is the property of of it’s members. AFAIK they get the chance to vote for trustees who will represent their views on investments.
Whether a fund should have an ethical dimension and exactly what that entails does not depend on my definition of ethical, or Henry Smith’s, or even the readership of the Crawley News but its a matter for the members whose opinions are not quoted – except that obviously Smith and Mullins are both members of the fund as well as members of the council.
The council is saying it is not involved in the decisions but is defending those decisions as if it was in charge.
Part of the problem, in my view, would be that the Council Workers will get the best deal on a pension by using a Council run scheme rather than a private pension but if they would prefer the investments to be ethical (or if it is necessary that the investments comply with Shar’ia law for example) then they must accept a worse deal. Again, I am almost certainly being naive but should the ‘largest employer’ be allowed to, effectively, financially punish workers for their ethics.
Interesting discussion! Readers interested in knowing more about the world of ethical investing might like to go to my site. It covers many of the questions raised here and offers the latest global news and research related to ethical investing. It’s at http://investingforthesoul.com/
Best wishes, Ron
Yes, I’m sure that CBC’s pension fund & WSCC’s pension fund are one and the same…if I am wrong no doubt someone will correct me.
It seems to be possible to get a good return on money by investing it ‘ethically’, take the Co-operative, for example. What I’m not sure about is what exactly is an ‘ethical’ or an ‘unethical’ investment.
Is it defined in a Code of Practice for pension funds and investment companies?
Jane – apparently ethical investments don’t have to have a poor return. (According to Symon Hill, spokesman for the Campaign Against the Arms Trade. He says”There’s no contradiction between financial viability and ethical investments”)
The trouble with ethical investment, as Ian hints, is that it about as well-defined as “affordable housing”. There are just so many things that polarise opinion and that some people would think ethical and others unethical: fox hunting, prostitution, nuclear power, homosexuality, alcohol, pornography, nepotism, tax avoidance, trading with Cuba…
You might even take something like the arms trade and decide that there are good and bad companies, or just say they are all bad. Or say they are all fine, even the ones that make landmines and cluster bombs and bribe foreign defence ministers.
For all I know, Saddam may have thought that gassing kurds was absolutely ethical, so you can’t have a definitive code of practice.
Maybe the next time the fund trustees send out an annual report, or there is a call for new representatives, there will be a bit more interest?
Nobody’s asking for a “definitive” WSCC/CBC Code of Practice – that’s clearly impossible – but what is clearly possible is a “defined” WSCC/CBC Code of Practice.
Are we to assume that WSCC/CBC has a “defined” (eg written) Code of Practice in this regard ?
And if so, are we to assume that this Code is being implemented ?
Council taxpayers (Cllr Smith’s bankroller) AND Council employees, have a perfectly legitimate right to see that “defined” Code, and also to see that it is being implemented.
The WSCC Leader, Cllr Henry Smith, seems to believe there is a very clear Code of Practice : INVEST IN THOSE COMPANIES WHICH PRODUCE THE HIGHEST RETURN.
Trans-national global corporations (eg Halliburton), which produce ‘killing equipment” for wars throughout the world, appear to guarantee the highest return on investment.
So, it seems to me, if WSCC applies its present ‘Code’, most of the pension money might well be invested in nuclear warhead manufacturers.
That would make good business & profit sense, but bad ethical & moral sense – wouldn’t it ?
In fact, to my mind, it would not just be a morally obscenity – it would be moral insanity.
The main ‘unethical’ areas ought to be fairly obvious – arms, tobacco, Nestle. Not everyone agrees about pharmaceuticals – results usually good, business practice sometimes not – and I’m still confused on GM. Shar’ia law is, apparantly, quite specific about what are not acceptable types of business for banks to invest in for Muslims. Although everyone has a different view on what is ethical the main problem seems to be that, without any transparency to pension fund investments the employee is unable to make an informed decision on what their money is invested in. Although ethical investments do give a good return I would imagine than really big investment funds do better. What would be encouraging would be employers putting their money where their corporate social responsibility statement is.
Investing in any corporation so closely associated with a mafia-styled elite intent on global control of resources, and thus inevitably global war, seems “unethical” (immoral) to me.
The thing is Richard, despite what you say, I think the council’s pension fund is the one aspect of a council that we taxpayers shouldn’t have a say in.
We can have opinions obviously, and hope the members agree now they are aware of the facts, but it is not a service aimed at employees not residents, and it is funded by those employees out of their salaries not by our taxes. (Apart from any employer contributions of course)
As it happens, the Mrs. is an SSA at a school and is part of the WSCC pension scheme. She was suitably offended by the story.