Glossary

1035 Exchange

A method of exchanging insurance-related assets without triggering a taxable event. Cash-value life insurance policies and annuity contracts are two products that may qualify for a 1035 exchange.

401(k) Plan

A qualified retirement plan available to eligible employees of companies. 401(k) plans allow eligible employees to defer taxation on a specific percentage of their income that is to be put toward retirement savings; taxes on this deferred income and on any earnings the account generates are deferred until the funds are withdrawn—normally in retirement. Employers may match part or all of an employee’s contributions. Employees may be responsible for investment selections and enjoy the direct tax savings.

401(k) Loan

A loan taken from the assets within a 401(k) account. 401(k) loans charge interest and are normally paid back through payroll deductions. If the borrower leaves an employer before a 401(k) loan has been repaid, the full amount of the loan is generally due. If the borrower fails to repay the loan, it is considered a distribution, and ordinary income taxes may be due, along with any applicable tax penalties.

403(b) Plan

A 403(b) plan is similar to a 401(k). A 403(b) is a qualified retirement plan available to employees of non-profit and government organizations.

Divestment is also called as divestiture, the dumping of belongings in any of a variety of ways, normally for ethical, financial, or political purposes. At the institutional level, divestment is a strategy and set of economic permits used by corporations, groups of shareholders, individuals, and governments to put pressure on a company or a country, typically to dispute either the company’s or the country’s policies and practices. Thus, divestiture acts as a means of leveraging economic power to assist bring about political, economic, legal, or social transform. This transform can occur in different ways, including the removal of new corporate investment, removal of accessible credit from banks, the selling off of operating units, the cutting off of operations, and the lessening of portfolio holdings in firms doing business in the target country. At the individual level, divestment take places when stock holdings are free because of variance of interest or when an individual investor sells stocks that emerge to have a poor future.

Features Of Divestment

  • Arguments in support of divestment that involves a company or country normally are based on either a positive supposition of sagacity or a negative supposition that economic force is the only means for transform.

  • Arguments presume a long time line and the inevitability for cooperative effort by the divesting institutions.

  • Divestment at the institutional level may be political, legal, financial, or ethical in nature. These mostly overlap one another.

  • A company may react to shareholder or consumer pressures and close down its operations in a country with a pitiable human rights record, doing so for financial and ethical reasons. Subsequently another country’s government may forbid investment, whether public or private, in that country.

  • So, investment and divestment can spot as either ethical or unethical, based on moral foundations. To get help related to divestiture, our financial advisors Birmingham Al ever ready to provide their services.

  • Permits, selective purchasing, and disinvestment are extra actions that can be used along with divestment to bring about political, economic, and social transformations in a targeted country.

  • Constructive engagement is another strategy which means the extension of economic bustle between a corporation or government and a targeted country. Those who resist divestiture mostly sustain constructive engagement as a feasible alternative, retaining the current economic association will bring about dialogue or pressure for transform in the targeted country.

Examples Of Divestment

  • During 1970s and 1980s, businesses and governments globally objected the apartheid rule of the white-ruled government in South Africa by divesting.

  • Example of multinational corporations that moderately or fully divested from South Africa during the 1980s consists of Eastman Kodak, International Business Machines (IBM), Coca-Cola, General Electric (GE), and Xerox.

  • The state of California in 1987 divested by reformation its investments so that $90 billion would be divested from companies doing business with South Africa.

  • During the 1990s, divestment was used to objection the military-ruled government of Myanmar (Burma), when such multinational corporations as PepsiCo, Texaco, Hewlett-Packard, and Federated Department Stores (later Macy’s, Inc.).

  • In Myanmar and South Africa, the democratic opposition partnerships promoted multinational corporations to return and reinvest only after a democratically elected government was established.

  • During 2006, because of ongoing genocide in the Darfur region of Sudan, different states in the United States, including Illinois, Louisiana, Oregon, and New Jersey, accepted legislation necessitating public pension funds to divest companies working in Sudan.

  • Different institutions of higher education, like the University of California, Harvard University, Amherst College, Yale University, and Stanford University, approved policies divesting their portfolios of investments in companies doing business with Sudan.

  • Many religious organizations have also viewed divestment as a moral compulsion.

Does Divestment works?

Divestment from corporations doing business with Israel out of objection to the country’s apparent infringement of the human rights of Palestinians. In 2014 the General Assembly nominated in favor of divesting from three major U.S. corporations that accomplished business in Israel.

There is some distinction in divestiture’s effects across different sectors. In a 2013 report by the Smith School of Enterprise and the Environment at the University of Oxford, the authors found that coal stocks are less liquid than those of oil and natural gas, and that divestment consequently has a greater chance of impacting share price because it is harder for alternative investors to be found. To be sure, Peabody Energy Corporation, a coal company, recently affirmed in its financial report that “divestment efforts could extensively affect demand for our products or our securities.” However, even in this sector, the effect will perhaps be very small. In that same Oxford report, the author’s concerned campaigners that the straight impact of divestment is “likely to be minimal.”

There is one way in which divestment campaigns can have a positive impact. Campaigns can use divestment as a media hook to produce stigma around certain industries, such as fossil fuel. In the long run, such stigma might lead to fewer people wanting to work at fossil-fuel companies, driving up the cost of labor for those corporations, and possibly to greater famous support for better climate policies.

This is a much better argument in agreement of divestment than the allegation that you’re directly lessening companies’ share price. If divestiture campaigns are run, it should be with the plan of stigmatization in mind. However, campaigners require being careful. First, there is a risk of confusing people signifying that divestment will directly hit companies in the pocketbook when the evidence mostly proposes that it won’t.