Q. I have just been voted the president of our investment club and already I'm facing a major dilemma. Four of our members want to know what type of "morals" we will be using to choose our stocks. They are more concerned with the companies we will be investing in than the return on our money. Don't get me wrong, I am just as concerned as the next gal about the environment, women's rights and animal testing, but we are such a diverse group, I am afraid we will be spending our time arguing about "morals" and not on stock selection. Am I wrong to think we should leave our politics at home?

A. It's not at all uncommon for investment club members to get involved in debates about if, or how, the club should use the principles of "socially responsible investing" (abbreviated SRI and also known as "green" or "ethical" investing) to pick stocks for their portfolio. Socially responsible investing is the practice of evaluating companies on the basis of their record on environmental, political, and social issues before investing. Does the company have a good track record when it comes to animal rights or pollution control? Does it operate sweatshops in the Far East? Does it support fair employment practices? Is it involved in the manufacture of weapons, tobacco, or some other controversial product?

Proponents of SRI believe that companies that "do good" will also "do well." There are even mutual funds that invest according to socially responsible principles, such as the Domini and Calvert Group fund families.

But while SRI is often associated with "left wing" issues, there are also investors on the other side of the political fence who consider their own values in making investment decisions, as well as mutual funds that support conservative values.

This is the dilemma of socially responsible investing -- it doesn't mean the same thing to each investor. Just as every individual has his or her own set of personal values, an investor may choose to invest according to those values, or not. And that's where many investment clubs face problems. On the outset, it certainly appears that the decision to invest according to a particular set of values can be accommodated quite well in a club, since the club must reach a consensus or at least have a majority in agreement before any stock is purchased. In practice, though, clubs can find that discussions about a company's ethical practices can ignite into heated arguments. We all hold fast to our own personal values, and it can be very emotional to discuss those beliefs in a group where others may not share your same commitment to a particular ideal, even in the context of selecting a stock for a portfolio.

There are investment clubs that have been formed with SRI principles in the forefront. The Ethical Investors of NE Ohio follow a strict set of guidelines, including requiring that companies adhere to the principles of the Coalition for Environmentally Responsible Economies (CERES). Other clubs consider a company's values, but only in the context of a factor that might influence their future performance (will the costs of cleaning up a toxic factory impact future profits?). Still others don't care about anything other than making profits. And there are clubs that fit into the entire spectrum between avid ethical investing and unconcerned.

Of course, no proponent of SRI suggests that anyone should invest in any company without a reasonable expectation of receiving a decent return. You still need to spend time on stock research -- just because a company gets five stars when it comes to social responsibility doesn't mean it's a good investment.

The short answer to your question is that your club will decide how important SRI is to them. As the club president, though, you'll want to ensure that discussions don't deteriorate into shouting matches about a company's morals. I have two suggestions for you. First, you might consider estabilishing a committee that will create some guidelines about your stock selection process. By laying out in advance the types of companies and company practices that your club will not purchase, you can head off hassles down the road. This document can be general, enumerating some principles that you'd like to see a company utilize and not necessarily a hard-and-fast rule book, or it can be very specific and express the types of values that will entirely eliminate a stock from your portfolio. Your club may decide to convert itself to an SRI club, laying out in your bylaws and partnership agreement the principles that guide your stock selection process.

Secondly, make sure that your entire club understands that the purpose of a club is to build a portfolio by consensus. Not everyone has to agree, but any members who don't agree with a particular decision are still bound to go along with the club. That goes for the stocks you pick, too. If members vote to buy a particular stock, everyone has to accept that decision, even if some members felt that the company's business practices were immoral or unethical.

Third, as club president, it's your job to keep meetings on track. If discussions of a stock start to go down the SRI path and then convert to moralistic arguments, instead of being evaluation of that stock's prospects, you need to step in and guide the members back to the right place. Be ever vigilant that tempers don't flare, and take the opportunity to remind people to be respectful and reasonable whenever members begin to discuss a company's social positions.

Finally, you and your club members have to realize that no company is perfect, even when it comes to ethical values. Ben & Jerry's, the Vermont ice cream maker, is known as a supporter of corporate responsibility, but they have had problems balancing the interest of shareholders and their other responsibilities. One of the lessons they learned was that garbage is garbage -- you still have to find a way to dispose of the waste generated by an enormous ice cream manufacturing plant and minimize its ecological effects, even if the waste is 100 percent natural!