Saintly fund managers cannot earn a license to make sinful investments

Abstract

Can investment fund managers earn a license to invest unethically? Past moral behavior can provide a perceived license to behave less morally, yet people may expect ethical consistency. In four experiments (N = 2,677), we examined whether people license ethical fund managers to engage in ethically questionable ‘sin stocks’—or whether people view ethical fund managers making ethically questionable investments as hypocritical. We investigated both same-domain (past ethical investment) and cross-domain (distinguished military service) evidence for the fund manager’s moral character and earning via both traditional investing and ‘shorting’ sin stocks. We found no evidence of a moral license for ethical investors to earn money off sin stocks (even by shorting them). In contrast, people rated ethical fund managers as less permitted to invest in such stocks, consistent with expectations of ethical commitment—a finding partially mediated by perceived hypocrisy. Hence, people expect ethical fund managers to maintain high ethical investment standards.