Shareholder democracy goes to war

Today’s Wall Street Journal marks an important breakthrough on the financial front in the War for the Free World, a heretofore largely neglected but potentially decisive battlefield for Americans and other freedom-loving peoples.   The Journal‘s op.ed. pages feature an extraordinary essay by Sarah Steelman, the State Treasurer of Missouri, which calls national and international attention to the newest instrument for defeating state-sponsors of terrorism: Terror-free investing. 

The contribution such an investment strategy could make was underscored in a study published by the Center for Security Policy in August 2004. The Terror Investments of the Fifty States documented that, as of that time, eighty-seven of the Nation’s most prominent public pension funds (representing police officers, firefighters, military personnel, teachers, government employees, etc.) had roughly $188 billion invested in some 400 companies that partnered with terrorist-sponsoring regimes.   (Of course, the total investment by the capital markets in such companies would be vastly larger.)   Treasurer Steelman makes clear – just as the Center’s report did in 2004 — that it is our choice whether our public monies should be invested in these companies and that is incumbent on all Americans to use their shareholder "vote" to tell companies that partner with terrorist-sponsoring states: "Not with our money."

Of that $188 billion investment, the Center’s study suggested that some $73 billion was actually finding its way into the hands of the Sudanese, Libyan, North Korean, Iranian and Syrian governments.   At least some of these funds and the revenues they generate are presumably being put to use by our enemies for the financing of terrorism, the acquisition of weapons of mass destruction and the threat and/or practice of genocide.

Treasurer Steelman’s op.ed. recounts the pioneering work being performed by her Missouri Investment Trust (MIT) – "the first public agency in America to implement a terror-free investment fund."   By so doing, she has established that investors can "vote with their feet," declining to put their pension funds, mutual funds or other personal savings at the disposal of those who do business with our enemies.

Importantly, Ms. Steelman’s experience with MIT makes it clear that one need not sacrifice return on investment in order to do the right thing. The Missouri Investment Trust actually performed better as a terror-free fund than it would have by partnering with the terrorists’ favorite companies.   In addition, as she notes, there is less risk exposure for fiduciaries associated with investing terror-free since, by so doing, institutional and private investors are able to avoid what the Securities and Exchange Commission calls "global security risk" – the material risk that arises from doing business with the world’s most reprehensible regimes.

Today’s Divest Terror breakthrough extends far beyond the precedent-setting Missouri Investment Trust.   As Ms. Steelman notes, there are now or will shortly be options for terror-free investing through a variety of other venues including: the Roosevelt Anti-Terror Multi-Cap Fund (RATF), the first mutual fund in the Nation to be certified as terror-free, now available via Missouri’s 529 college savings fund that will be open to all Americans;; and the availability of that fund’s offerings (and surely, in the future, others) to the thousands of corporate clients of Nationwide Financial’s 401(k) vehicle.   This certified "terror-free" mutual fund is also reportedly available for direct investment through E-Trade, Ameritrade, Schwab and many other investment firms.  

Thanks to Sarah Steelman’s courage and leadership, the opportunity to privatize an important part of the War for the Free World is at hand.   It behooves every American investor to take advantage of this chance to do his or her part for the war effort in ways that can make a material difference.   As Treasurer Steelman put it:   "By choosing to invest terror-free, we can help cut-off financing for terror-sponsoring governments, help our soldiers, make our investments less risky and make a difference in the contemporary fight for liberty.   That’s democracy."