The Securities and Exchange Commission’s
attempt to publicize a list of companies with business
ties to terrorist-sponsoring states caused quite a stir
this summer. The list of more than 90 companies
included a number of household names, from
AstraZeneca to Cadbury Schweppes to Reuters to
Xerox. Posted in June on the SEC’s Website, it was
accompanied by strong words from chairman Christopher
Cox, who said that investors shouldn’t have to
wonder whether their investments “are indirectly subsidizing
a terrorist haven or genocidal state.”
As it turned out, the SEC’s method for determining
offending companies was itself indirect, and
incorrect. Companies were singled out for simply mentioning
Iran, North Korea, Sudan, Syria, or Cuba in
their annual 10-Ks. Outraged companies,
and lawmakers, cried foul, calling
the SEC’s method inaccurate,
unfair, and based on outdated information.
The list was removed weeks
later and the SEC has vowed to
retool its approach to identifying
such companies, although it has not
stated publicly when it will unveil a
new list or describe its criteria for
inclusion.
Investors concerned about
buying stock in companies that have
ties to terrorist-sponsoring states
already have access to information on
the issue. Several private firms not
only offer lists of such companies, but
say they define material ties to terrorist
states more accurately and quickly
than the SEC. The Conflict Securities
Advisory Group, for one, maintains a
list of more than 400 companies differentiated
by type of business connection,
which can range from equity
ties to actual on-the-ground operational
facilities.