DEBATING SOCIAL INVESTING

The following Letters to the Editor appear in the spring 2006 issue of Dissent Magazine. They are a response to "Welcome to 'Whole-Mart'—Rotten Apples in the Social Responsiblity Industry," by Mark T. Harris. The original article appears in the winter 2006 issue of Dissent.

• Response to Mark T. Harris by Amy Domini, Founder and CEO, Domini Social Investments
In his article “Welcome to 'Whole-Mart',” Mark T. Harris presents a detailed challenge to Whole Foods' image as a pure, socially responsible company. By extension, he implies that the field of socially responsible investing is suspect. We do invest in Whole Foods, and recently profiled the company in our annual report to shareholders, along with other companies in our portfolio that provide healthy or organic food.

We do not believe it is our role to defend Whole Foods, but we would like to make a few points very clear about socially responsible investing, as practiced by Domini Social Investments. We do not endorse companies, and we do not claim to invest in “socially responsible companies.” We act on behalf of socially responsible investors - those individuals and institutional investors that are concerned about the social and environmental impact of corporations. We exist to meet their needs, and to use their dollars to help transform the companies we hold, and in a broader sense, capitalism itself.

Mr. Harris portrays a pseudo-religion of John Mackey worship that we do not subscribe to. We try to do our best to measure and evaluate what corporations actually do - not what they claim to do. We are very aware of Mr. Mackey's anti-union stance, and we do not share his views. In fact, we wrote to him several years ago to alert him to very serious concerns raised by the UFCW, and shared by Domini. On our website, we highlight this concern in our brief profile of the company. We want our investors to understand that we are not invested in perfect companies, and that as investors we must make very difficult decisions every day.

We cannot invest in perfect companies, so we strive to invest in companies that are more forward-looking than their peers, and we recognize the leadership role Whole Foods has played in promoting more sustainable agriculture. Virtually every single company in our portfolio is a mix of positive and negative characteristics. Whole Foods is no exception to that rule. We caution Dissent's readers to be extremely wary of any investment firm that tells them otherwise.

We invest according to defined standards. Over the years, we have developed a series of standards that we use to evaluate companies for our portfolios. These standards, which reflect the traditional concerns of social investors, include community relations, corporate governance, diversity, employee relations, the environment, human rights, and product safety and usefulness. If the standards were set to exclude every publicly traded company with a problem, we would have nothing left to invest in, and would not be able to meet our investors' financial goals. The fact that we do establish social and environmental standards, however, sends a strong message to corporations and has helped create a global dialogue about the nature of corporate citizenship.

We don't punish success. If you are investing in large-cap stocks, then, by definition, the companies you hold have been successful enough to grow large, and in some cases to drive their competitors out of business. So long as growth and success have not been achieved through illegal or unethical means, we do not penalize large companies for their success. We share Mr. Harris's concerns about the seemingly unchecked growth of corporations, and believe that our society needs to have a very critical discussion about these issues. As investors, however, we cannot help our shareholders meet their financial needs and also avoid companies that grow. Our investors would like to be part of the solution. They believe that they can effect more change by participating as investors than by standing on the sidelines.

We don't ignore union and labor issues. Contrary to Mr. Harris's statement, we do not ignore union issues and the treatment of employees. The treatment of workers not only at U.S. plants but at overseas suppliers has been one of our key concerns. We have filed numerous shareholder resolutions asking companies to ensure that their code of conduct for suppliers recognizes the right to form unions and bargain collectively. KLD Research & Analytics dropped Nike from the Domini 400 Social Index over sweatshop issues in 1999, and only recently reinstated the company after it agreed to disclose the names and addresses of all of its active supplier factories on its website. Similarly, Wal-Mart was removed from the Index in 2001. Whole Foods' anti-union activities are explicitly cited as a concern in the profile prepared by KLD, which maintains the Domini 400 Social Index.

Picking companies isn't the whole story. Many discussions of social investing assume that it is only, or primarily, about identifying and investing in companies with better social and environmental records. We believe that selecting securities is only one of three important aspects of social investing, which also includes shareholder advocacy and community investing. We believe that investors can be one of the most effective transformative forces in society, and we are dedicated to providing the tools to empower investors to work towards a society, in Mr. Harris's words, that is “guided in its essentials by human needs, not corporate profits.”

We do this by setting clear social and environmental standards to guide our investment decisions, and then by using our leverage as shareholders to engage companies directly. We helped to lead a coalition of investors that convinced Procter & Gamble to start selling Fair Trade Certified coffee. We helped to convince JPMorgan Chase to hire its first director of environmental affairs, and to launch a comprehensive set of environmental policies. We are working with a number of leading companies on improving working conditions in their global supply chains. We have also helped channel tens of millions of dollars into community development financial institutions around the country, revitalizing both urban and rural communities.

Social investing does make a difference in the world, and most social investors recognize that its importance goes beyond any litmus test involving a single company or a single social or environmental issue.

Amy Domini

• Editors:

As co-author of Fortune magazine's annual survey, “The 200 Best Companies to Work For,” I must take exception to Mark Harris's putdown of this list in his denunciation of Whole Foods Market in the Winter issue {“Welcome to 'Whole-Mart'). “What can we expect from a list in which companies can nominate themselves?” he asks. He misleads your readers by not disclosing that the methodology we use involves a fifty-seven-question survey in which randomly selected employees voice their opinions about the practices in their workplaces, including such issues as pay, benefits, and respect. The only way companies can make this list is to have employees who like working there.

Harris obviously doesn't care about what employees think. His gold standard is, Does the company have a union? He hasn't gone out to interview employees at Whole Foods or at other companies on our list. He doesn't have to do that because he has already made up his mind that he knows what they need: a union. Never mind what workers think and feel about their jobs. Never mind what customers may feel about the quality of the food they buy at Whole Foods or the service they receive from enthusiastic employees who buy into the mission of the company. Harris knows best. In Dissent, he is preaching to the choir; let him walk into a Whole Foods store and try out his ideas on employees.

Milton Moskowitz
Mill Valley, Calif. 94941

• Mark T. Harris Replies to Amy Domini, Milton Moskowitz
In her reply to my article, Amy Domini does not attempt to refute my critical description of Whole Foods' notorious anti-union history. In fact, we are told that Domini Social Investments has even written to CEO John Mackey to express concerns it shares with the UFCW over anti-union activity at the company. That's commendable. But I wonder what exactly it means in practical terms. Whole Foods has ignored the Domini firm's union concerns. But Domini does not ignore Whole Foods as an investment, continuing to promote the company as a responsible buy for socially minded investors. Organically aware or not, these investors profit from the low hourly wages of Whole Foods employees.

Nor does Domini ignore anti-trust violator Microsoft, their largest holding, according to ResponsibleInvesting.org. Notably, the software giant is also currently in Amnesty International's spotlight, for supplying the technology used by the Chinese government to censor and jail internet users and dissidents. The latter issue is not mentioned in Domini's list of "concerns" regarding Microsoft.

Unfortunately, Ms. Domini's letter typifies the watery rationales often used by "socially responsible" investment (SRI) funds to sell shares in companies with dubious track records as corporate citizens. McDonald's is lauded by Domini for its commitments to social responsibility, for example. But because McDonald's recycles, sells organic coffee, or adopts new antibiotic guidelines for meat suppliers doesn't change the more egregious reality that this is a business whose profits derive from peddling unhealthy food prepared by an exploited, cheap wage labor force.

I do not doubt that "shareholder activism" has its success stories. I also appreciate that Ms. Domini and other investors care about labor rights, which is more than you can say for many corporate investors. But I question the integrity of a self-described progressive business movement whose investment guidelines are so diluted that companies actively hostile to union organizing or otherwise on the wrong side of justice are routinely recommended to socially conscious investors.

If you think about it, almost any corporation today could be considered a paragon of enlightenment compared to the average corporation of a hundred years ago. That's because popular social movements led by union organizers, civil rights activists, women's rights activists, and others worked to lift up banners of justice in society where previously they had not flown. I put my stock there, as far as hope for a progressive future goes, rather than in an investment industry whose practices suggest it's too often more about feeling good than doing good.

As for Milton Moskowitz, he composes Fortune magazine's "Best Companies" list for the Great Place to Work Institute. His complaint that I didn't mention the employee survey used in the nomination process avoids denying what I did say: In fact, companies nominate themselves for the Fortune list. But I wonder in his surveying if there is even one question asking the Whole Foods employee earning $8 per hour if that's enough to live on.