On Social Responsible Investment

Social Responsible Investment (SRI) is a new investment measure which is both of financial purposes as well as social responsible practice, the fundamental doctrine of which is to create fortune and at the same time to change the world. In those developed capital market outside China, social responsible invest has rapidly turned into a immense power that can't be neglected. As an investor aimed at enhancing social welfare, SRI promotes corporations to practice their social responsibility with the strategies screening, shareholder orienting, and community investment. SRI took place a little bit late in our Country; however, it has great potential, which surely will play an increasingly important role in practicing corporate social responsibility. The provision concerning social responsibility in our Company Law has double legal meanings of two levels, the legal social responsibility and the social responsibility beyond law. The former is of compulsive nature, the latter of discretional nature. The social responsibility beyond law mainly depends on corporations'free will, the direct motive of which comes from directors as well as the shareholders. Thus, there are two paths to achieve the social responsibility beyond law, promoted by hierarchies and promoted by shareholders, of which the latter is mainly embodied in SRI. Actually, SRI has incomparable institutional advantages in practicing the social responsibility beyond law. First, it promotes corporations to practice social responsibility within the existing company law domain. Second corporations are able to balance between gaining profits and assuming social responsibility with SRI. Last but not least, SRI turned the social responsibility into a direct consideration in corporations'decision-making process. Three specific methods are used to practice social responsibility by SRI. First, freely invest to the corporations which have better social responsibility practice, expelling those immoral corporations. Second, to exercise shareholders'rights to know, obtaining information concerning corporations'social responsibility to for SRI's next investing step. Third, submit motions as shareholders to the general meetings to get the outside expectations and critiques towards the corporations known by the general meetings, in order to practice corporation social responsibility by the decision-making process. This method has been proved to be the most effective way to promote social responsibility. Fourth, get more shareholders'support and more attention for its motions by soliciting proxies. The development and effect of SRI is based on shareholders'rights to know, the institution of motions and proxies solicitation. In this sense, the provisions in our company law concerning corporations limited by shares have some defects: the scope of shareholders'rights to know haven't yet covered corporation's non-business information, i.e. information of practicing social responsibility, the shareholding ratio for shareholders to submit motions is too high, the scope for submitting motions is too narrow, the remedy for the motions-submitting rights is left blank, and there are no regulations concerning proxies solicitation. Those defects considered, these may bring adverse effects for fulfilling SRI's functions to the largest extent, so modifications should be made to the existing company law concerning this issue, while at the same time, a transparent social environment for information concerning social responsibility is needed. The publications of social responsibility report and the formulation of corporations'social responsibility index for listed companies are vital channels for publishing and clearing information of social responsibility. As far, primary practices have been done in our country, and of course, further perfections are still in need.