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November 04, 2010
Catholic Investors Target Pornography
    by Robert Kropp

Christian Brothers Investment Services leads initiative to request improved transparency from major media companies that distribute pornography.

The issue of pornography has always been a complex one in the United States, as it pits the First Amendment right to free speech against social concerns about the effects of widespread availability. Perhaps that complexity is why, according to Dan Nielsen, Director of Socially Responsible Investing at Christian Brothers Investment Services (CBIS), "A large-scale initiative from investors to target companies on this issue has not taken place."

The absence of such a large-scale initiative ended yesterday, when CBIS, along with 220 signatories, sent letters to five major media companies, asking them to cease the distribution of pornography. If the companies are unwilling to do so, the letter continued, the investors requested "additional information to help us understand the decision to continue offering 'adult entertainment' programming and the scale of this line of business."

The companies targeted include the cable companies Cablevision, Comcast, and Time Warner, and the satellite companies DIRECTV and Dish Network. CBIS, which manages assets totaling approximately $3.8 billion for more than 1,000 Catholic institutions, owns over a million shares, with a market value of about $35 million, in the five companies.

Nielsen told, "The ultimate goal of this initiative is to get companies to cease distributing pornography, to curtail the availability of pornography in this society. That's a goal that's been made very clear by CBIS investors and other organizations. If companies are unwilling to do that, we are requesting that they at least improve transparency, so that investors can make more informed decisions about whether this poses significant risks to the company."

"There is a strong reputational risk to companies, in particular those companies that may have positioned themselves as family-friendly, for whom distributing pornography could affect brand reputation and customer loyalty." Nielsen said. "There's also a potential legal risk, if companies distribute pornography that could be considered obscene, which is illegal."

"If companies will not cease distributing pornography, we're asking them to improve their disclosure on policies and practices to ensure that what they are making available to customers is legal," he continued. "As investors, what we're looking for is confirmation from companies that they appreciate this is a risk, and information on how they're dealing with that risk. Right now, none of the companies are providing sufficient information for investors to evaluate whether companies are addressing what could have a significant impact on shareholder value."

"We're looking for confirmation that there is a process in place for evaluating what material is accepted for distribution, and for details about what criteria are used for evaluation," he said. "We're also looking for awareness that there is a real risk regarding where the line is between what is permissible and what is not."

"If companies are willing to talk with us about our concerns, then we hope it will lead to ongoing dialogue, and eventually change in behavior," Nielsen continued. "If companies are unwilling to engage, one of the advantages we have as long-term investors is the ability to engage companies over a number of years. We've done this with a number of other issues, so we would apply the same strategy here as well, by continuing to try to put pressure on companies."

In 2009, the BBC aired a two-part documentary entitled Hardcore Profits, in which Thomas Strobhar was interviewed. Strobhar is the President of the Ohio-based Thomas Strobhar Financial, and founder of Citizen Action Now, an organization "that combats the imposition of the homosexual agenda." In the documentary, Strobhar took CBIS to task for an investment policy that permits investment in distributors of pornography, as long as a significant portion of their revenues is not gained from the activity.

Asked about the effect of the documentary, Nielsen said, "We had a lot of conversation about that, to make sure we're comfortable with our policies and approaches. There was a high likelihood as well that some of our investors saw the program and had questions."

However, "Pornography is a high-priority issue that we've been involved in for many years," Nielsen continued. "We realized we had an opportunity to change the behaviors of companies."

Describing the investment policy of CBIS, Nielsen said, "Our pornography screen focuses on producers of pornography. For most distributors of pornography, that's not the focus of their business. Pornography investment screens will not capture them. So these companies have been able to profit from pornography without a downside."

Referring to an earlier, successful initiative led by CBIS, Nielsen said, "As our initiative on sex trafficking at hotels in South Africa during the World Cup demonstrates, this is a way for CBIS to leverage our more than a thousand investor organizations."

"The real opportunity for us is to have a positive impact on companies," Nielsen said. "By owning shares in the companies, we have a greater ability to do that than if we divest from companies."


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