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Ethical investment.

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Introduction

Ethical investment Ethical investment can be defined as the integration of personal values with investment decisions1. The principle of shareholders wealth maximization relates, to the role of companies as agents of shareholders to maximize the returns for shareholders, in doing so there are incentives available for some companies to minimize cost (Negative), at the expense of social and ethical considerations. Others will work towards better and newer innovations (Positive), to boost the shareholders wealth in conjunction with an active and ethical role within the community. The principles of ethics can be both in conflict with and not in conflict with profit maximization depending on the viewpoints of the company. This statement can be confirmed through the analysis of issues such as, environment, human rights, workplace practices and animal welfare, through different companies focusing on distinct positive and negative issues aspects. The Body Shop International is a manufacturer and retailer of skin and hair care and cosmetic products. This company is well known for its high level of ethical standards that it sets, on various issues and it's success in maximizing shareholder's wealth: * On Environment the body shop has set as it's mission to act in a way which would protect the environment, both locally and globally. ...read more.

Middle

Products tested include drugs, cosmetics, household products, surgical implants, household cleaners and agrochemicals, causing these animals extreme amounts of pain and suffering. The company is highly successful as revenue of the company increased by 3% to 1.6 billion6, but ethical standards was in conflict. In conclusion, it can be seen through the above examples that the conflict, between the principles of ethics and shareholder's wealth maximization can be avoided given that people are willing to come up with newer and more innovative ideas to maximize return. However conflict will still exist if the principle of shareholder's wealth maximization is to be ranked ahead of the principles of ethics, as people will be lazy and just cut cost to improve wealth rather than be innovative, however this method does have a downside to it, as contingent liabilities might arise through their operations. Impacts on the all ordinaries index (AOI) Globalisation of markets: A major contributor to the changes on the AOI would be the global market it self, due to globalisation stock markets are now interconnected with one and another, if a major market like America falls it's loss will echo through to other markets such as Australia, this is due to the growth in foreign ownership of Australian shares by other major overseas companies, also the ties in trade and other financial activities linked with other countries especially the US. ...read more.

Conclusion

77,200 jobs were created and as a result, the housing sector is expected to recover19. Stabilizing of unemployment will lead to a stabilizing of bond prices and gradual decrease in bond prices. Exchange Rates The Australian economy has been performing well compared to the global economy, but the Australian dollar has become weaker this quarter. The Australian dollar dropped from US$51.92 to US$51.20 in September 2001. The US financial market heavily influences Australia and so the downturns in the US economy have affected the Australian dollar and the bond market20. The implied yield of the December bank bill futures contract closed below the cash rate at 4.59%. Other influential factors: 1. Bond prices are influenced by their demand. One particular bond has been issued on behalf of Cairns Waste Management Group to fund a waste treatment plant21. Theoretically, an ethical investor will prefer this security over less environmentally friendly stocks. This will result in a general price increase for bonds. 2. There has been a sudden surge in the corporate bond market recently22. This can be attributed to two factors. Firstly, there has been a reduction of government borrowing, and therefore less government bonds issued. Secondly, fixed income assets have become very popular because of compulsory superannuation moving from defined benefit to defined contribution. This has the effect of increasing bond prices, especially corporate bonds. ...read more.

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