Terror-Free Investing

California has joined a growing number of states to promote the so-called "terror-free" investing, namely, to force pension funds to sell their holdings in companies doing business with the likes of Iran, North Korea, Sudan, Syria and Cuba.

Financial Times wrote this morning:

Interpreted loosely, a ban could affect a number of US companies that have exploited existing loopholes as well as a large chunk of Europe's multinationals - from engineering companies, banks and oil producers to the likes of Nokia and Nestlé.

Also in the news today, Chiquita Brands International, the world's biggest banana producer, has pleaded guilty for paying protection money to Colombian paramilitaries from 2001 to 2004.

Most people would hesitate to argue against corporate responsibilities for stakeholders like workers, communities and society at large, beyond the overarching mandate of making profits. However, fighting the war on terror should not be an extra layer of burden, especially when business and finance are so interconnected globally now.

What's more, despite their formidable prowess to create jobs and generate earnings, companies are in fact quite vulnerable to governments with military at their disposal and no accountability. Chiquita had the choice of losing money and paying up to the druglords. With a simple cost-benefit analysis, a rational business would tend to choose the latter option.

So is legislating against such wheeling-dealing a solution? Far from it. It's the government's job to fight terrorism, not the business's.

Consider this, countries like China and Russia are now on a deal-making binge with the rogue regimes of the world. It is not a time to tie the hands and feet of our profit machines and choke the engines of our growth.