Dear Economist:
As an economics graduate from Hong Kong, I wonder whether we are doing enough to protect Mother Nature. I have considered donating money to Greenpeace. Then I had a better idea. Why don’t we donate shares of polluting companies to Greenpeace? By doing so, at least some part of these companies’ profits could be directed to environmental organisations through dividends. In some extreme cases, Greenpeace could acquire enough shares to push the companies to transform into a more “environmentally friendly” corporation. What do you think? Cloud Yip
Dear Cloud, Leave aside the fact that if Greenpeace want cash, they can sell the shares you give them, and if they want shares they can buy them with your cash donations. Leave aside, too, the question as to whether environmental organisations would enjoy the irony of collecting dividends from oil and mining companies. I am still unconvinced. You say polluters will pay for their damage, but this is not true. Dividends are payments related to profits, not to environmental pollution. Regulation and tradeable pollution permits discourage pollution; buying shares does not. Worse, if your idea caught on, it would lower the cost of capital of polluting companies and enable them to invest in more marginally profitable projects, although I suspect this effect would be tiny. As for Greenpeace itself, it could indeed use a shareholding to make a fuss at annual meetings. But most shareholders seem to have little influence on the decisions corporate managers take. I suspect campaigning organisations are more effective outside companies than in.