Executive Summary

The following paper presents a rationale to incorporate Jubilee 2000, a worldwide movement to reduce debt and thereby enhance economic justice in heavily indebted countries, into the State of Wisconsin. The goal of this program is to enhance economic justice in Wisconsin as rapidly as possible by increasing the flow of capital to homes and businesses owned by lower-income groups and individuals; by voting shareholder proxies (corporate resolutions) on economic justice and all related issues; and by joining the Wisconsin Coalition of the Interfaith Center on Corporate Responsibility to influence corporate policy in Wisconsin.

(1) Recommendation: that the Wisconsin Council of Churches (WCC) develop a list of community development finance institutions (cdfi's) that are actively supporting owner-occupied housing and business formation by unempowered groups and individuals in Wisconsin; further, that the WCC promote investment in such groups by endowments and individuals who are able to handle those risks prudently. This process will include investing some of the Wisconsin Council of Churches own funds.

In practice, many of the cdfi's listed below offer an alternative investment vehicle with a stated return and maturity that falls within the risk parameters that can be handled by most churches, judicatory endowments, and individuals: Bay Bank, Green Bay, WI; CAP Services, Stevens Point, WI; Dane Fund, Madison, WI (formerly Madison Area Community Development Loan Fund); Greater Galilee Credit Union, Milwaukee, WI; Ho Cak Federal Credit Union, Black River Falls, WI; Impact Seven, INC., Almena, WI; Legacy Bank Corporation, Glendale, WI; Martin Luther King Economic Development Corp., Milwaukee, WI; New Covenant Missionary Baptist Church Credit Union, Milwaukee, WI; Racine Development Group, Racine, WI.

Further information on each of these organizations is included below [view summary]

(2) Recommendation: the WCC recommends that shareholder proxies (resolutions) be actively voted on economic justice and other issues.

In reality, this recommendation means voting for proxy resolutions (and against management, if necessary) on resolutions that would: increase board of director diversity; implement the MacBride Principles; increase fair lending; eliminate child labor, slave labor, and indentured labor; improve working conditions and sustainable wages in offshore procurement; increase reporting on equal employment practices; enhance gender and pay equity; and support the right to organize labor in offshore countries. [Detailed guidelines on these issues by the Methodist Church, Presbyterian Church, and United Church of Christ are linked here. ] In practice, one or more of these guidelines will have to be forwarded to the investment managers who oversee the equity investments to insure that votes are cast.

(3)Recommendation: the Wisconsin Council of Churches will persuade companies based in Wisconsin to endorse progressive policies on economic justice and related issues by joining the Wisconsin Coalition of the Interfaith Center on Corporate Responsibility (rather than independently mounting its own resolution-initiating process). This recommendation was implemented effective January 1, 2000. From time to time information from the WI-CRI may be added.

Jubilee 2000 represents a worldwide movement that advocates total debt cancellation for the world's poorest countries (heavily indebted poor countries or HIPC's). There are some 42 such countries. In these countries, it is hoped that the proceeds realized from debt forgiveness will be reinvested in health care, education, food assistance, economic development and job creation. With that reinvestment, economic justice would be enhanced in those countries. (Debt Burden in Impoverished Countries, the Episcopal Church, revised 7.9.98.)

That result is certainly desired in the long run; but what of the short run in Wisconsin? Jubilee 2000 will reach Wisconsin immediately with education and advocacy that will eventually revise world opinion and world policy toward poor countries, but that result will be delayed at best. What initiatives are necessary to build a base for economic justice in Wisconsin? What actions are appropriate in immediate terms for the Wisconsin Council of Churches?

In order to answer those questions, we need to explore the business ethics that underlie such questions. Business ethics spring from the classic theory of utilitarianism. Utilitarian economic values hold that the consequences of actions represent the best measure of benefits and the "right actions" are those which produce the greatest net social benefits. An action, or decision, is "right" in utilitarian ethics if it results in benefits that are greater than any other decision. In reality, economic benefits are impossible to measure numerically; therefore, relative measures must be used.

This paradigm prompts the mention of one such relative measure. Pareto optimality suggests that a decision is right or at least relatively better than other options if it improves the status of an individual or group and leaves the welfare of all other groups or individuals unchanged. As a slight extension, a decision would be preferred if it improved the status of a group at negligible expense to another (like a business). This extension covers a myriad of decisions that impinge on economic justice like discrimination and affirmative action, international sweatshops, plant closings, etc. In those cases, managers often decide on the basis of short-term measures like profitability and competitive position. These measures seldom involve an assessment of the long run (often intangible) impact on the many groups affected by a given policy or decision. In addition many business decisions rely on tangible and material outcome measures. As a result, many business decisions depart substantially from both utilitarian ethics and the relative measures of Pareto.

The Church's involvement in work for economic justice modifies the utilitarianism of business ethics in an important way. The Church's ethical concern is always focused on the well-being of the most vulnerable members of society. Its view of the economic situation and its evaluation of economic practices and policies are consistently focused through this lens. This measure of decision-making is certainly compelling but is extremely long-run oriented. That is, the Church's concerns do not answer the question of what is immediately needed in Wisconsin. How can we relate utilitarian business ethics and the Church's concern for the least among us to the question of what is necessary for economic justice in Wisconsin? We can do that by suggesting that the actions necessary in Wisconsin are those which enhance the well-being of groups that are often ignored or undervalued, especially if those actions can be accomplished at little expense to economic institutions in Wisconsin. Would economic justice in Wisconsin require equaling income between all groups? Equaling the distribution of goods and services (distributive justice)? Equaling wealth? These measures, though consistent with both utilitarian ethics and Christian ethics, would require a complete revision in the economic system that would be both expensive and long delayed.

In a mixed economy the actions that are more widely supported usually produce an equal opportunity for access to wealth, income, and corporate power, but whether they create actual equality is questionable. The policies that we want to expedite in Wisconsin, therefore, are those that enhance the status of one or more disadvantaged group(s) at manageable expense to the economic system and that enhance the opportunity to gain wealth and income. These goals are more actionable than the long-run goals discussed earlier. That is, goals which convey an opportunity for income and economic power are more likely to be supported by businesses and other economic organizations because their cost is manageable and questions of relative power are not immediately raised. At this point it must be stated that corporate resources are large enough that many expenses that we would regard as appreciable are not material to corporations; thus, though economic justice may in reality require a considerable revision in attitudes, the direct costs are often not material.

Experience has proven that home ownership and business formation lead in the long run to increased access to wealth and income; and in the short run, home ownership and business formation enhance the status of previously unempowered groups. These forms of empowerment can be accomplished at little dislocation to the economic system and/or businesses in it. In Wisconsin, therefore, we should eliminate the barriers that make it difficult for lower-income groups and individuals to obtain capital for home ownership and business formations. Those actions will in the long run improve net social benefit and increase economic development in the form of both wealth and income. Such initiatives will enhance the well-being of the least among us.

Fortunately, there are already organizations at work on that concept of economic justice. In general, these organizations are called community development financial institutions (cdfi's). There are eight cdfi's registered in Wisconsin with the Coalition of Community Development Financial Institutions. They share the objective of channeling capital to business development and home ownership by low-income and undervalued groups. CDFI's function as banks, credit unions, loan funds, venture capital funds, and small business loan funds. We could well start, therefore, by enhancing the work of those organizations.

The Episcopal Church has already created The Episcopal Community Investment Fund, which could serve as a model to channel capital to cdfi's in Wisconsin and organizations which invest in Wisconsin. In addition, the Wisconsin Coordinating Council on Nicaragua (WCCN) was founded years ago to channel capital to impacted groups in Nicaragua operating, in effect, as a cdfi. The WCCN presents the added advantage of operating in one of the countries designated as an hipc. The WCCN therefore meets two priorities discussed earlier.

Ordinarily, cdfi's would represent investment alternatives that are much too risky except for the largest of endowments. Most cdfi's, however, offer a CD-like investment option that is much less risky than investment, contribution, or equity investment. These CD alternatives make it possible for an investor to control the degree of risk assumed. They pay a modest interest rate and are repaid on a pre-stated term. The net effect of these terms is that the investor assumes much less risk of loss than would be the case with a contribution or equity investment. In turn, the cdfi reinvests the proceeds from such CD/s in bona fide housing and business projects at interest rates that are often less than those typically charged in those locations. The combined effect, therefore, is that individuals and churches can invest at a fair interest rate and experience less risk of loss than embodied in direct investments. This analysis introduces the first recommendation for action in WI: that the Wisconsin Council of churches develop a list of cdfi's that invest in WI and advocate personal and church investment in those organizations at risk levels that are commensurate with the endowments of those organizations.

A second recommendation is less obvious: the Wisconsin Council of Churches could inquire into the possibility that some of its denominations and judicatories might invest in Wisconsin cdfi's. Most large endowments invest about 10% of their portfolio in real estate and perhaps an equal amount in smaller businesses. The latter are assumed to be riskier than larger companies; but loan funds of the sort previously described, where interest is paid on the investment and where a track record would pinpoint the rate of failure for loans made, should qualify for investment from endowment.

Corporate Social Responsibility

The Wisconsin Council of Churches should lobby Wisconsin-domiciled companies on a number of issues where a consensus of sorts exists on economic justice issues. The corporate practices that impact most heavily on global economic justice include: increasing board diversity which is an obvious forerunner to increased firm-wide diversity; implementing the MacBride Principles which have to do with discrimination in North Ireland; fair lending practices; global standards which refers to eliminating the practices of child labor, slave and forced labor; indentured employment in cultures which permit those practices; reporting on Equal Opportunity; gender and pay equity; sustainable and living wages; right to organize; and working conditions. Standards of conduct are evolving that have the endorsement of most denominations and judicatories. That endorsement comes in the form of the "Principle for Global Corporate Responsibility" created by the Interfaith Center on Corporate Responsibility, theEcumenical Council for Corporate Responsibility (Britain and Ireland) and the Taskforce on the Churches and Corporate Responsibility (Canadian Churches). In addition, the apparel industry has reached an agreement on global labor standards that could be extended with some difficulty to industry in general. Such standards are implemented by personal conversation with corporate executives, shareholder resolutions, and proxy voting. Shareholder resolutions require a good deal of legal expertise and networking; therefore, proxy voting represents the most realistic method for gaining corporate support on CSR issues.

Fortunately, an organization already exists that has a capability for researching and implementing such a program. Many of our judicatories may already be members of the Interfaith Center on Corporate Responsibility in New York. In fact, it is likely that many of your national organizations are providing the leadership that has made the IRRC so effective. In addition, a Wisconsin division of the ICCR (WI/CRI) functions under the leadership of Rev. Michael Crosby. Joining WI/CRI would gain the research base of the ICCR and the experience of Rev. Crosby in Wisconsin.

Summary of Recommendations

1. That the Wisconsin Council of Churches develop a list of community development finance institutions and community development venture capitalists that are active in promoting owner-occupied housing and business formation by unempowered groups in Wisconsin; further, that the Wisconsin Council of Churches promote investment in such groups by endowments large enough to handle those risks. This investment process will include some of the Wisconsin Council of Churches' own funds.

2. That the Wisconsin Council of Churches satisfy itself that shareholder proxies are being voted effectively on economic justice issues in Wisconsin, namely on equal opportunity and global labor standard (child labor, slave labor, and prison labor) issues and others. Further, that the Wisconsin Council of Churches develop an inventory of proxy voting guidelines that are in use among its judicatories (especially on economic justice issues) and make those proxy voting guidelines available to churches and judicatories that are voting proxies.

3. That the Wisconsin Council of Churches seek to persuade Wisconsin companies to endorse progressive policies on those issues, working with and through the Interfaith Center for Corporate Responsibility (ICCR) and/or the Wisconsin Coalition of the ICCR (WI/CRI). The choice between the two implementation organizations would depend on the cost of membership and the assistance that would be forthcoming on our agenda.

4. That the Wisconsin Council of Churches authorize its Treasurer, Dr. Robert Bock, in collaboration with the Executive Director and the Finance Committee to work on these issues in behalf of the WCC.

Revised 2/3/00-Dr. Robert Bock