This article is part of our Rising Stars Portfolio series.
Is Monsanto (NYSE: MON) a winner or a sinner? Many people love to hate the agribusiness behemoth.
A poll of Natural News readers recently voted Monsanto "Most Evil," soundly beating other corporate contenders such as Halliburton (NYSE: HAL) and BP (NYSE: BP). Monsanto also beat out BP and Chevron (NYSE: CVX) to receive Corporate Accountability International's Corporate Hall of Shame award for 2010.
On the surface, this stock doesn't belong anywhere close to a socially responsible portfolio. But for fairness's sake, let's take a closer look.
Bearish on Monsanto
Several years ago, few investors considered Monsanto monstrous. Its genetically modified seeds fostered heady growth in sales and profits, not to mention its stock price. Monsanto looked like a winner to those who didn't really care about what kind of practices might be feeding its profits.
But last year, even investors primarily focused on short-term profitability and stock appreciation began to doubt Monsanto. Its share price faltered as its growth slowed; the company faced problems with some of its genetically modified products, and began losing market share to DuPont's (NYSE: DD) Pioneer Hi-Bred unit. Nonetheless, the market's tempered bullishness on Monsanto doesn't make it an automatic buy.
On the corporate governance front, Monsanto happens to be one of the first companies to hold a say-on-pay vote this year. It recommended that shareholders approve a plan to hold votes only once every three years. Monsanto shareholders rejected that concept, instead voting for an annual say-on-pay vote. (Even though the vote was non-binding, Monsanto has indicated that it will comply with shareholder wishes.)
Monsanto had already hit the radar of corporate governance watchers like GovernanceMetrics International for being "high risk," combining an outsized CEO pay package with lackluster financial performance.
A litany of less-than-angelic conduct
Monsanto genetically engineers corn, soybeans, and other agricultural products in order to foster higher yields and greater resistance to pests. But many critics contend that the company's tinkering presents dangers to human health and natural ecosystems.
A recent study from the International Journal of Biological Sciences linked genetically modified (GM) corn to organ failure in rats. Although some have questioned those findings (and pointed out that the researchers themselves cited "signs of toxicity rather than proofs of toxicity"), the study was apparently the result of a second look at some of Monsanto's own data, which the researchers sued Monsanto to obtain.
There are also concerns that weeds that mutate from the use of the GM technology could harm non-GM crops.
The USDA's recent decision to deregulate alfalfa has caused an uproar in the organic community, since alfalfa is prone to cross-pollination. Therefore, it could become more difficult for organic alfalfa farmers to keep their crops pristine and GM-free. Whole Foods Market (Nasdaq: WFMI), a big name in the organic marketplace with plenty of customers who shun GM foods, opposed the alfalfa deregulation.
As it stands, Monsanto has quite a reputation for being a bully in agriculture. A Vanity Fair article from 2008 headlined Monsanto's "Harvest of Fear," citing not only its "ruthless legal battles against small farmers" but also a "decades-long history of contamination."
Monsanto also has a dark past that's difficult to shrug off. Monsanto, Dow Chemical (NYSE: DOW), and several other chemical companies manufactured Agent Orange. The highly toxic herbicide, used in the Vietnam War, has saddled its makers with a bad reputation and numerous lawsuits related to the illnesses and horrific birth defects to which it has been linked.
Monsanto's also known to have "friends in high places," so to speak. Recent Wikileaks cables revealed U.S. diplomats angling for a trade war with Europe over genetically modified products, which are notoriously distrusted there. The U.S. allegedly also tried to pressure the Vatican to drop its moral opposition to genetic engineering.
An SRI no-go stock
There are many reasons why Monsanto simply won't show up in my Rising Stars portfolio, which focuses on socially responsible investing. Monsanto seems too often a negative influence in the world, and a good example of how big can be bad. Its outsized executive pay bothers me on the corporate governance front, too.
Monsanto's public relations team, employees, and shareholders would surely have some counterarguments to my contention. I already know that some folks counter that Monsanto's products help to achieve one very positive outcome in the world: increasing the amount of food available for burgeoning populations.
Even if some of the bullishness over Monsanto has come to an end in recent days, I doubt this stock would ever be "cheap" enough for me to buy, given everything else going on with it. There are too many "winner" stocks with far more socially responsible attributes to choose from.
Socially responsible investing is often in the eye of the beholder, of course, and I'm sure there will be plenty of rebuttals to my take on Monsanto. Is the company a winner or a sinner? Let us know in the comments box below.
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