Seeking snow white investments

Socially responsible investing can be a way to battle the harms of pornography.

Socially responsible investing, once associated with causes like combating South African apartheid, has the potential to become a serious way to combat the harms pornography causes in our society. The proliferation of Corporate Responsibility departments at corporations attests to the continued importance of socially responsible investing, a practice that has and continues to have a serious impact on America’s leading businesses. It’s now time to apply these principles to the issue of pornography.

One of the recommendations published in the Witherspoon Institute’s report on “The Social Costs of Pornography” is a call for the hospitality industry to “be mindful of its responsibilities to society.” Since many hotels are publicly traded, this recommendation is a call for shareholders to make changes in their business as well. Many people forget that they actually own a business when they buy a stock, equity, mutual fund, etc. As such, investors can fight pornography using the principles of socially responsible investing by not investing in companies that profit from pornography. Individuals can also become shareholders or owners of companies that earn part of their profits from pornography for the purpose of encouraging the management of the company to stop their involvement in pornography. Although anyone can try to influence a company to change its practices, shareholders of a company have more sway with management than the average person. And, the more shares you own the more you can influence a company’s management.

What is the moral argument for only investing in companies that do not profit from pornography? Germain Grisez argues that “if some of the company’s profit-enhancing policies and actions are immoral, the investor normally intends the immorality and so shares moral responsibility for it,” because:

one normally has no reason to invest directly in a particular company’s stock unless one expects and intends one’s money to be used to make a profit, and one normally cannot intend that without intending that the company do all that one is aware of its doing to make its profit: treat people in certain ways, encourage potential customers to choose its products or services, and so on.

Considering the difficulty of determining whether a company profits from pornography, it can be daunting for an individual investor to try to wade through opaque financial statements, SEC filings, and corporate red tape to attempt to determine how much money a particular company makes from pornography or any other immoral practice. In addition to the technical difficulty, there is a great amount of moral complexity, as Grisez goes on to note:

But if one reasonably judges that such activities and/or a company’s bad products and services are unnecessary for a company’s profitability and will contribute little to expected income, direct investment need not be wrong, and one could have a good reason to buy the stock despite the company’s wrongdoing.

We are left to make a prudential decision in gray areas where companies make only part of their money on immoral products or services. These prudential decisions are generally made with the help of an expert in this area since there are many nuances that require a deeper level of understanding.

Obvious names such as Playboy and Penthouse are not the only companies making money off of pornography. In fact, the pornography industry is estimated to be worth $13 billion. However, it can be difficult to tell the amount of corporate profit that comes from pornography because most pornography firms are privately held, thus making it very difficult to obtain accurate information. In addition, there is no hard and fast definition of pornography. Companies are not anxious to voluntarily disclose their participation in pornography because pornography is often an ancillary part of an otherwise family-friendly business. All of this means that it can be difficult to determine which companies profit from pornography and to what extent. Hunting this information down becomes the task of investment firms that put together what are called “investment screens” for socially responsible investors who want to avoid investing in companies that profit from pornography.

Most people can recall that pornography was available at a particular hotel where they stayed, but this sort of empirical data only goes so far. And, although it is certainly possible to ask web-hosting companies like GoDaddy or Yahoo if they host pornographic websites and how much money they make from them, the information is certainly not readily available. These questions need to be asked in order to bring to light the places where pornography is hiding.

And it may not be hiding where you think it is. Disney, an icon of children’s entertainment, distributes NC-17 movies, for example, which, although they are not technically pornographic according to some, are a far cry from Disney’s wholesome classic, Snow White and the Seven Dwarfs. Other major media companies engage in the same sort of distribution, or worse.

Companies that distribute pornography as a small part of their business cannot hide behind any variation of the excuse that “every other media conglomerate is doing it.” Apple, a significant media distributor in its own right, has banned adult content from its applications, or “apps,” downloadable programs tailored for the iPhone. Apple has retained discretion to approve or deny iPhone Apps, and Apple has faced consistent pressure from some app producers and some in the media to relax its prohibitions against obscenity. Steve Jobs and his team at Apple have maintained a very high standard to date that has won them some negative press. In fact, Jobs was quoted in The Guardian as saying, “We do believe we have a moral responsibility to keep porn off the iPhone … Folks who want porn can buy an Android phone.”

There is also good news from the hospitality industry, though much work remains to be done. Marriott International, for instance, provided one of my colleagues with the following statement:

It is Marriott’s practice to keep adult content out of the reach of children and unavailable to any adult who chooses not to view it. We have strong controls in place that allow guests to block these materials. Changing technology and how guests access entertainment has reduced the revenue hotels and their owners derive from in-room movies, including adult content. We are working with in-room entertainment providers and technology vendors to transition to the next generation of in-room entertainment. This new platform of Internet-based video-on-demand will facilitate our exit from the traditional hotel video systems that included adult content in the menu selection, and will also provide guests greater choice and control over what they watch. As we transition to this new platform, adult content will be off the menu for virtually all of our newly built hotels. Over the next few years, this will be the policy across our system.

Though pornography would still be available until Marriott’s new system is fully integrated, removing it from the menus of TV screens is a positive development.

Recently, Dan Nielsen, the Director of Socially Responsible Investing at Christian Brothers Investment Services (CBIS) released an “Action Alert” encouraging people to sign a letter to media companies asking these companies to stop distributing pornography. CBIS is an investment management firm with approximately $3.6 billion in assets under management for more than 1,000 Catholic institutions worldwide. In the letter, Mr. Nielsen cites the Witherspoon Institute’s study on “The Social Costs of Pornography.” Nielsen asks companies such as Comcast, Time Warner Cable, DIRECTV, Dish Network, and Cablevision to “1) Stop distributing pornographic programs, and 2) Improve public disclosure of potential business risks and revenues earned from distributing pornography.” This letter serves as a warning to these media companies about the growing legal and reputational risk that pornography production and distribution will face as the information in the Witherspoon report becomes more widely known. Not everyone may have the money or time to have an impact through socially responsible investing, but signing onto the letter represents an excellent opportunity to bolster CBIS’s efforts to encourage publicly-traded media companies to stop distributing pornography.


Blake Robinson is a Financial Advisor at Fulcrum Securities, a regional financial services firm that tailors individual and institutional portfolios to clients’ ethical concerns. His article is reproduced here with the permission of the Witherspoon Institute.

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