How your investments make a difference.
Voting with your dollars is nothing new. People have been boycotting companies since the 1800s.
As a community of consumers we’ve made Apple replace iPhone batteries, we made Amazon cut ties with the National Rifle Association, and most recently other companies have actually been boycotting Facebook’s advertising platform to protest their use of “hate speech for profit”.
Every purchase we make is a vote for the company we bought it from. That is the power that consumers have over the companies that profit off of them. The problem is, consumer activism is actually indirect protesting.
I would like to believe that all companies answer to their customers, but the truth is that... they don’t. Customers matter to companies because without them, they don’t make money. But who cares if the company makes money? The shareholders.
Executives answer to their shareholders, not their customers.
Executives care about the stock price. This is a cliche repeated in movies over and over, and it holds true today. Because CEO’s salaries are 20% cash and 80% stock on average, they make money when the stock goes up. If they could make the stock go up without having to please customers, they would do it every single time.
They also want the stock to go up because the executives are employees of the shareholders. That means they answer to the people who invest in them. If the company is publicly traded, they answer to you and me.
If you own Tesla stock, you are technically Elon Musk’s boss.
Now, that’s a bit of an exaggeration, but it’s true. If you own one share of Telsa stock, which currently costs about $1,500, you own 0.0000000055% of Tesla. On your own, your vote isn’t going to count for much.
But, if enough Tesla shareholders unite, they could vote to fire Elon Musk! We hope not though. He’s a pioneer of green energy and is one of the better CEO’s on our watchlist.
So, how does my investment have an impact?
Two ways: you change the stock price and you get to vote.
If you buy a stock, you increase demand for that stock and the stock price usually goes up. By choosing not to buy a stock, you decrease that demand. Remember how I said executives get paid in stock? If you push the stock price down, they’re getting squeezed and will change how they operate so that you will buy their stock. Just like that, you’ve made an impact.
Second: If you own common stock you get something called Voting Rights. This means that you have the right to cast your vote on important issues on Tesla’s docket. If the company wants to take out loans, issue more stock, or even start a new car line, you get to vote on it.
This gives you the power to change how Tesla does business. Luckily, Tesla tends to do business responsibly, but if you own stock in a company that uses prison labor or pollutes the ocean, you can vote for them to change their harmful practices.
But I thought you said my vote doesn’t count for much?
Your vote doesn’t count for much alone, but remember when TikTok users trolled the president of the United States? One person reserving a spot at his rally (with no plans of going) didn’t count for much, but when over a million people did it he arrived to find an empty stadium! People have power in numbers.
This is where we come in. Because Hoskin Capital is a community of impact investors, we can vote to change how companies act together. Because we manage your money in portfolios, there are other people in our ecosystem that own that same stock. By spreading awareness and connecting like-minded investors, we turn your small impact into a much larger one.
If you’ve made it this far, you deserve a reward! Schedule a Discovery Call and mention that you learned something new from our blog. You’ll get your first 3 months of portfolio management for free!
As usual, I hope you learned something new.
Warm regards,
Nate Hoskin