This study examined the concept and application of socially responsible investing (SRI). SRI permits investors to combine their ethical principles with the use of their savings and other assets (Bennett, 1992, p. 46). The guiding principle of SRI is to invest in firms whose products and services (1) do not harm society or the environment and (2) do create some positive effects for society.
Although SRI has evolved into what has been termed as "a full-blown industry of its own," the concept and its application remain controversial (Bennett, 1992, p. 46, 48). The concept of a social responsibility for business firms continues to be resisted by many corporate managements, at least at any level of action other than public relations (Moskowitz, 1992, pp. 71-75). Other corporations, however, are finding that socially responsible actions are leading to improved profitability (Labadie, 1991, pp. 32-35). Some economists support those corporate managements that resist the SRI concept. In this context, Nobel Prize winner Milton Friedman (1982, p. 133) said that:
The view has been gaining widespread acceptance that corporate officials . . . have a 'social responsibility' that goes beyond the interest of their stockholders . . . This view shows a fundamental misconception of the character and nature of a free economy. In such an economy, there is one and only one social responsibility of business--to use its resources and to engage in activities designed to increase its profits so long as it stays within the rules of the game . . . Few trends could so thoroughly undermine the very foundation of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible (Friedman, 1982, p. 133).
Some analysts also contend that SRI restricts an investment portfolio to the point that the risk to earnings is unacceptable (Klein, 1991, pp. 16-17). Other reports...