Jack, a recent business school graduate, is thrilled to land a job as a fund manager for PureProfit, a successful socially responsible investment firm. PureProfit is committed to the triple bottom line and aggressively markets its mission to invest in companies that produce goods and services that improve the quality of life for all mankind. PureProfit’s Fund Prospectus describes how fund managers apply negative screens to companies that may derive profits from liquor, alcohol, gambling, or defense contracts and also claims the firm regularly reviews holdings to ensure compliance with its own screening policy.
Quickly Jack becomes enamored with his job, the company, and its triple bottom line mission, though his co-workers often poke fun at him for being an “Eagle Scout”. Nonetheless, it is a place where Jack feels he can apply his talents in the investment world, stay true to his core values, and build a comfortable future for himself and his family. In just a few years, Jack steadily builds his clients’ portfolios while building his own nest egg. He and his wife Jill have built a “green” home that is the envy of their neighbors, she has left her well-compensated position in a law firm to care for their two- year-old, and they are planning to hike in the Himalayas. Life is good.
One Friday night, some of the firm’s old hands invite Jack for drinks at the local watering hole and he is flattered that they have included him in their clique. After a few drinks, to Jack’s dismay, one of his flashier colleagues, Pete, boasts that his clients’ portfolios are growing at a faster rate than the firm’s average, and adds, with a wink and a nod, “you know Jack, if you really want to get ahead in this business, you can’t be so squeaky clean. Take it from me, those negative screens are easy to ignore, and no one is watching.”
Happy to be accepted by his colleagues, but troubled by Pete’s unguarded comments, at first Jack attributes Pete’s remarks to having had a few too many. After a little investigating, to his chagrin, Jack discovers that Pete’s comments were not bravado. In fact, several PureProfit fund managers have been investing in companies that have stakes in tobacco, alcohol, gambling, and defense contracts over a period spanning several years. He confides in Jill, who urges Jack to report Pete and his cronies. Jack is not only concerned about Pete, but also he is worried that Mr. Pure, the President, and Mr. Profit, the Vice President, of PureProfit may be complicit in this deception as well. Jack and Jill are losing sleep wondering whether this is a legal issue (Jill says yes) or an ethical issue (so says Jack). Jack also worries that he might lose his job if he reports his discovery to the higher ups. Then — he fears — Jack, Jill, and all they have worked for will come tumbling down.
- Is Pete’s disregard of stated company investment policies illegal as well as unethical?
- Does Jack have an ethical obligation to report Pete and his cronies for their ethical lapses to Mr. Pure and Mr. Profit, at the risk of losing his job?
- If Jill is correct, should Jack report his discovery to the Securities and Exchange Commission?
- What would you do if you were in Jack’s shoes?
Submitted by Susan Calegari