Wednesday, April 4, 2012

Investor Activism and Private Prison Corporations

In January 2012, the United Methodist Church took a stand against private profits generated from imprisoning American citizens. The UMC board of trustees that oversee the investment of company employees in the churches' pension fund voted to discontinue any investment in companies that generate or derive profit from the management and operation of prison facilities. Recognizing the perverse incentives attendant in profiting from mass incarceration, the United Methodist Church decided to "vote with its feet (or $$)" by moving its money.

According to the UMC website and author Heather Hahn: "Private prison companies are big business. But, is it moral for United Methodists to make a profit from the incarceration of people? The United Methodist Church’s pension agency has pondered that question since May [2011]. The Board of Pension and Health Benefits announced Jan. 3 [, 2012] its decision to prohibit investments in companies that derive more than 10 percent of their revenue from the management and operation of prison facilities.

'It came down to that profiting from the incarceration of others was just not consistent with our view of what the (denomination’s) Social Principles ask for,' said David Zellner, the board’s chief investment officer. . . . The week after Christmas, the board sold about $1 million in stock in two companies that fell under the new screen — Corrections Corporation of America, more commonly called CCA, and the GEO Group."

The United Methodist pension fund is the largest church directed pension fund in the world with nearly $17 billion in assets. More than 74,000 clergy and personnel participate in the UMC pension fund and benefits programs.

Is Investor Activism one potential avenue to address the perverse incentives perpetuated by private prisons and those corporations that profit on the basis of increasing prisoner population around the nation and world? Is it immoral to "Bank on Bondage"?

[photograph courtesy of the American Civil Liberties Union]


  1. UMC has taken the first step in investor activism, but besides only pulling its own shares (that of its participants) and talking with its money, UMC should now also vote with its feet: get its group's participants--all 74,000 clergy and personnel--to get behind the message. Considering that CCA has almost 100 million shares and a $3 billion market cap, UMC pulling out roughly $1 million is nothing more than a day's worth of trading on the company.

    But imagine the outreach of 74,000 clergy; this group has a vast social network, and multiplying here could really make investor activism sufficient.

    And although banking on bondage is immoral, investing on the market, for the most part, is not the most socially acceptable norm. Why stop at prisons? What about slave labor (both in the U.S.--in prisons--and in developing countries)? Or environmental neglect? Or labor exploitation?

    If we are going to look at the prison industrial complex and its profits motives, we must also question the profit motives of many companies in the stock market.

  2. UMC's position is laudable in a world where we (shareholders) profit from the stocks of American companies but turn a blind eye to their immoral practices. This post represents, in many ways, a bigger debate that is occuring in our society: Should profit be the only consideration in running a company? Should we turn a blind eye to immoral practices overseas, so long as the company is profiting us at home?

    The operation of prisons for profit is a good example of shareholders profiting on immoral practices overseas. But, as the previous post states, what about the profit motives of mutlitudes of other companies in which we invest? Many of these other companies that we profit by dividend, we also profit by obtaining their products at a cheaper price. Whether it be clothing, jewelery, or tennis shoes, thousands of products are manufactured at low cost to us, but at the expense of human dignity to laborers overseas.

    It seems rather duplicitous that we banish certain labor practices in our country because we find them to be deplorable but readily profit from their absence in other countries. --Jake Layne

  3. I think Nissim-Sabat has the right idea. If the UMC really wants to act on its "Social Principles," it should lobby other Christian denominations to join in on their cause. Not profiting off of immoral purposes is a message all Christians can get behind, and with the large number of Christian organizations in the world a general consensus on this issue would have a large enough impact to make a change.

    I also agree that profiting off of immoral practices isn't limited to just private prisons, but also to international corporations that engage in troubling labor practices overseas. I don't know what other investments UMC is involved in, but companies such as Apple and Nike are notorious for paying their workers alarmingly low wages at hours that border on slavery. To truly want to avoid profiting off of immoral practices, the UMC and other Christian organizations should research the nature of what companies they are investing in and act accordingly.

  4. I think the investor activism initiated by the UMC is commendable, and if the idea gains momentum with other Christian or likeminded shareholders, it can certainly be an effective way to address corporate profiting from increased prisoner populations.

    I find it noteworthy that the UMC determined it will continue to invest in private prison companies that derive less than 10% of their revenue from prison operations. In doing so, the UMC has created an incentive for private prison companies above the 10% mark to decrease their revenue from prison operations if they wish to receive UMC investment. If this 10% bar is adopted by shareholders on a large scale, it is likely the private prison companies will respond by decreasing their prison operations. Taking it one step further, if private prison companies have fewer stakes in profiting from increased prisoner populations, the companies may be less likely to lobby lawmakers for laws that will increase prisoner populations. - Aaron Matthes

  5. I think this article highlights an undeniable fact; profits are king and most other things fall by the wayside. UMC may be announcing that is does not support how private prison corporations operate, but in reality, that does not seem like what is going on. If UMC does not want to profit from the incarceration of others because it would not be consistent with the denomination's social principles, then it should not invest in any of these companies, regardless of the profit ratios.

    I would think that a hardline stance would be much more effective in convincing others to follow suit, rather than adopting a somewhat wishy-washy stance on the issue.

    -C. Hall

  6. This movement by the church makes me think of Pat Robertson's recent revelation of legalizing marijuana. Mr. Robertson has now apparently fully embraced the idea of legalizing marijuana, arguing that it is a way to bring down soaring rates of incarceration and reduce the social and financial costs. It seems some members of the church are slowly coming to the conclusion that locking people away for crimes such as possessing marijuana has a devastating impact not only on the individual, but also the penal system that is busting at the seems from overpopulation. Robertson is tackling the prison overcrowding crisis in America from the incarceration end of the spectrum while UMC is going after the profit generation. Both are effective avenues to pursue to effect change, and hopefully, conservatives will start to pay attention.

  7. This is just one step in the right direction. Not only does the UMC need to encourage other denominations to follow their lead, but also it needs to stress to its congregation why this is important. That could lead to members of the church following its lead and divesting their investment in companies that are profiting from mass incarceration. The larger the group of people who are divesting their interest, the more likely the companies will pay attention.

    I also want to comment on what Mr. Layne said about labor practices in other countries. I call this the Wal-Mart effect. The American public wants to pay the lowest price it can for products, so retailers sell goods that was made in other countries with lax labor laws. The only way for these companies to make money is to take advantage of these methods that we find deplorable. Until we as a culture realize this and are willing to pay more for a product that was produced the right way, this problem is unlike to be fixed.

    Gavin Ward

  8. Elizabeth LaFayetteApril 16, 2012 at 10:09 AM

    I agree that UMC needs to get the lower members involved. Previously working in a state prison myself, I have seen the triple bunking and camp-like style sleeping situations that occur when overcrowding becomes an issue. Triple bunking leads to more profit. The Church needs to emphasize to lower members that the message should be disseminated throughout the membership. I'm sure that UMC is not the only one that has some investments within private prisons (which is obvious or investments would not be deemed profitable). If each member of the vast community pulled their resources from the private prison network, and then this message was passed on, it could eventually create a ripply in the private prison industry.

    However, I think that other large investors will need to take similar action for a clear message to be sent to the private prison industry. Right now it is a huge cash cow, the prison I worked at was adding another wing when I left, and that wing is now full with "high security" inmates. Thus, I think that the crux of the issue may be how legislators are swayed by the big guns benefiting from the influx of prisoners. Such legislation like amendments to sentencing to decrease sentences for lower offense (to decrease disparity between low income and higher income persons) or a change in what sentencing is given for certain offenses that may not be deemed an ongoing threat to society. Thus, although I think that investor activism is a good first step, I think there are much deeper issues (such as legislation reform) that are needed.

    Elizabeth LaFayette

  9. I applause UMC's investor activism. I think it is great to see them follow their moral beliefs and inspire a change where they see an injustice. People should follow their lead and not invest in morally shallow companies.

    However, one must look at the big picture of what is taking place. I admittedly am ignorant on this subject, but I assume that the private prisons are required to meet the same standards as government prisons. Would this system be a bad thing assuming prisoners were receiving a similar level of care in a way that cost our tax payers less money? It is clear that a government facility has no incentives to reduce spending simply because they would likely see budget cuts if they did. With a private facility you take away the wasteful spending and allow investors to make money while saving the tax payers money. It seem like a win for all.