A series of New York Times articles recently reported on how hundreds of thousands of consumers and employees in the United States unassumingly give up their right to a day in court by signing off on the fine print about private arbitration in their contracts.
Signing a legal document without completely understanding what you are agreeing to has become a rather common practice in the Internet age, where consumers have to choose between reading through page-long clauses with legal jargon or scrolling down and clicking the “I agree” button.
The risks of providing uninformed consent are not limited to decisions that require our signatures—every spending or investing decision we make is a seal of approval on the fine print that is usually neither clearly disclosed nor completely understood in the process.
This version of the fine print includes (but is not limited to) the nature of the global supply chain, the sourcing of the raw materials, the employment practices of a business, and the social and environmental externalities caused by production/consumption. This ranges from the simpler peek into how the fruits and vegetables you consume are farmed and transported to your kitchen table, to the more complex picture of each component of the supply chain that is linked to the parts that make up the phone you use or the car you drive.
That’s not to say that every product should be accompanied by books upon books about each and every detail about the businesses involved, but rather to point toward the need for investors and consumers to look beyond the letters in bold.
There have been efforts by activists to increase consumer awareness on critical issues following widely publicized controversies (like sweat shops or blood diamonds) or as part of campaigns to influence corporate behavior. One example of an effort that brings such activists and consumers on the same platform to share and act on information related to the products they purchase is a mobile app called Buycott. At the cost of spending a few extra minutes to learn more about the grocery products you are planning to buy, you can make decisions that are aligned with your values.
Investors are also becoming increasingly aware of the fine print that has been usually ignored in the financial sector—the environmental, social and/or governance (ESG) impact and performance of the businesses that they own shares in or lend to.
An additional dimension of the relationship between shareholders and businesses, beyond the investment decision, is the right to engage with the management on a regular basis—primarily through voting in the annual shareholders meeting, also known as the “proxy season” (around April of every year). There are more and more venues available to investors to support campaigns and resolutions with a social or environmental mandate, but most shareholders are not aware of how their shares are voted or how they can influence that decision.
Next time you are at the grocery store, or handing over your credit card, or reviewing your investment portfolio with your advisor, spare a few minutes to find the fine print and act on it.
