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Entine%20Myth%20of%20social%20investing%20copy

Entine%20Myth%20of%20social%20investing%20copy -...

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http://oae.sagepub.com Organization & Environment DOI: 10.1177/1086026603256283 2003; 16; 352 Organization Environment Jon Entine Performance Research The Myth of Social Investing: A Critique of its Practice and Consequences for Corporate Social http://oae.sagepub.com The online version of this article can be found at: Published by: http://www.sagepublications.com can be found at: Organization & Environment Additional services and information for http://oae.sagepub.com/cgi/alerts Email Alerts: http://oae.sagepub.com/subscriptions Subscriptions: http://www.sagepub.com/journalsReprints.nav Reprints: http://www.sagepub.com/journalsPermissions.nav Permissions: http://oae.sagepub.com/cgi/content/refs/16/3/352 Citations at The John Rylands University Library, The University of Manchester on November 15, 2008 http://oae.sagepub.com Downloaded from
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10.1177/1086026603256283 OTHER ORGANIZATION & ENVIRONMENT / September 2003 Entine / SOCIAL INVESTING Dialogues and Debates THE MYTH OF SOCIAL INVESTING A Critique of Its Practice and Consequences for Corporate Social Performance Research JON ENTINE Miami University American Enterprise Institute A ccording to its advocates, social investing (also known as socially responsible investing or ethical investing) is a fast-growing phenome- non that represents “nearly one out of eight dollars under professional management in the United States.” Its central tenet is that clients can “invest for their own futures and a better world at the same time” by buying stock in companies that pass social screens and avoiding investments in companies that do not. According to this gen- eral approach, publicly-traded companies can be “objectively” rated using data gathered by social investing researchers, most notably by Kinder, Lydenberg, & Domini (KLD). Some academicians incorporate these ratings into their research as measures of corporate social performance (CSP). In contrast, this study contends that social investing principles are problematic and that the data and ratings gener- ated by social investment researchers are hopelessly flawed. Social investment advocates rely on sketchy, highly selective research and pseudo-objective ratings that belie the complexity of modern corporations and economies. Social screening in general and KLD’s ratings in particular are tainted by anachronistic, contradic- tory, idiosyncratic, and ideologically constructed notions of corporate social responsibility. Representations of the growing financial impact and competitive performance of social investing are questionable. No social research organization or “socially responsible” mutual fund has yet presented a coherent case for why its criteria are ethical or socially responsible or better at effecting social change. This study concludes that the general approach of social investment advocates, including by academic researchers, is one of vindication of the true believer, not investigation.
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