DovBear et al: Glatt kosher investments in the stock market?

A guest post on DovBear raises the issues of stock ownership and Jewish law. The gist of it is that since owning a share of stock is ownership (and usually voting rights) in a company, and since Jews are prohibited to benefit from a variety of behaviors, such as labor on the Sabbath, stock ownership is fraught with problems for the traditionally observant Jew.

To get around this problem, some Israeli hedge funds have created portfolios out of index funds, bonds, and stock options. In all three cases, the instruments owned do not represent an ownership stake directly in any business, nor are the instruments traded on Shabbat or holidays by the hedge  fund. However, the options purchased are options to buiy or sell stock of companies that do violate any of the variety of problematic prohibitions.

I wonder how many Jews are attuned to this issue. Most of the investors that I know invest in indexed mutual funds, not in individual stocks. However, I know lots of people who made money in the IT boom by buying individual stocks of companies whose employees were most certainly working on shabbat, and were most certainly Jewish. Is this something we should be paying attention to? The technical connection between business ownership as envisioned by the Talmud and stock ownership is quite solid. Owning stock gives the rights to a share of future earnings, and comes with voting rights to help set company policy. True, you can’t run the business from the floor of a shareholder’s meeting, but is your inability to make the company conform with Jewish law an excuse for not observing it yourself, or  is it an indication that you shuld not involve yourself with such a business?

If you want to be technical, then you must ban ownerhsip of those stocks, even as you embrace ownership of bonds and options in those same companies. On a technical level you’re free and clear – there’s no bar on lending money to someone who violates the Law (though priority should be given to “your nation, the poor who live among you”), and trading options carries no ownership stake whatsoever (unless you need to actually exercise the option rather than just trade it in, but even then your holding time is so short as to be de minims, imo).

If you prefer taking a broader, non-technical view, you wind up becoming a values-investor. Though the extent of ownership that stock confers may not rise to the level where you would avoid it because of halachic  concerns, investing in companies that clash with your values is a larger problem. It also stops mattering whether the investmen is stocks, bonds, options or more complex derivatives. Benefiting from a company’s performance when that performance runs contrary to your ethics is repugnant in any form. I suppose short-selling would be ok though…

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