Since November of 1999 there has been a group on campus calling itself "Students for Socially Responsible Investing" which wants to bend university investment policy to serve an unspecified set of left-wing political objectives. We believe that the endowment exists to support Columbia's important and socially beneficial mission in this country, and that anything that threatens the return on that endowment is a threat to that mission.

Let there first be no mistake, for those of you who are not investment professionals, about the fact that any restrictions placed on the endowment will on average tend to reduce its return. Although there is some contentious research denying this, and this is not the place for a detailed rebuttal, suffice it to say that restricting one's investment options violates a basic axiom of investing to which I can testify as a capital-markets economist at the Federal Reserve Bank of New York. Furthermore, it is also an axiom of investing that even small dimunitions of return in the short run can have a huge effect in the long run due to compounding. This controversy is therefore no small matter quantitatively.

Currently, the university receives a significant part of its operating budget from endowment income. A threat to endowment income is therefore a threat to every program at Columbia. It means less money for teaching, for research, and for financial aid.

To politicize the endowment would be a threat to future fundraising by the university. When people give money to Columbia, they recieve, superficially speaking, nothing at all in return. What they do get is their own confidence that their money will be spent to a good end, namely the various programs of the university. If they believe that their money will be wasted, either by poor administration or poor financial stewardship of their gift, they will be less inclined to give in the first place. To fail to manage the endowment for greatest return is to waste their money.

To waste donors' money on partisan political grounds is doubly offensive to the donors, because they are likely to be split, as is American society, roughly evenly between people right-of-center and those left-of-center. "Socially-responsible" investing always seems to mean divesting from companies that offend liberal views, never conservative ones. It is therefore not "responsible," but rank partisan arrogance dressed up in neutral language. A list of types of companies conservatives might like to divest from appears below. But why should a conservative donor give money to Columbia at all if he or she knows that it will be invested in an explicitly liberal fashion? This is an open invitation for conservatives to take their money elsewhere.

Columbia's endowment resembles the conception of the Earth that environmentalists enthusiastically repeat: a sacred trust that we did not create and do not own, but are merely the custodians of with an obligation to pass it on to the next generation. The endowment is a tempting target for political mischief, because it is a huge (over $ 3.5 billion in 1999) sum of money that our generation enjoys access to because of ceaseless accumulation since 1754. But this money was not donated, at significant cost to tens of thousands of donors, merely so that we could do with it what we please. It was donated to support the university indefinitely into the future, and we are obliged to treat it as a sacred trust for future generations. This is why we do not oppose the current liberal proposal with a counter-demand that the endowment be invested in accord with our own conservative political proclivities.

The greatest possible mistake the Board of Trustees could make in this situation is to give any sort of formal recognition, as has been suggested, to the group SSRI or any group with similar objectives. If any such group were recognized and given input into the university's investment decisions, it would instantly command vast credibility and cachet in the radical community on campus. The ability to say, "we are formally recognized by the university and are allowed to meet with the trustees on a regular basis" would enable the group to be taken much more seriously than if it were just another pressure group with nothing to show for its efforts. It would become a focus of radical activity on campus, and would attract to itself a whole grab-bag of radical causes, some of which are doubtlessly unknown today. Every time it was allowed a victory in setting investment policy, it would become more attractive to radical elements as a way of "getting meaningful things done." Thus its demands, even if seemingly moderate now, would get more radical and more insistent with each passing semester. The list of companies that Columbia would be expected to divest would grow inexorably, until it had a major impact on the available investment choices. The list of prohibited companies could include, but not be limited to:

Companies that "polute the environment," i.e. the entire oil, gas, coal & auto industries.

Companies that "produce toxic chemicals," i.e. the entire chemical industry.

Companies that "create Frankenfoods," or genetically-engineered foodstuffs, i.e. most of U.S. agribusiness.

Companies that "employ child labor," i.e. most companies producing apparel in the developing world.

Companies that "are merchants of death," i.e. every defense contractor in the U.S., plus the gun industry.

Companies that "sell unhealthy products," i.e. currently tobacco but eventually including alcohol and fast food.

Companies that "exploit Third World countries," i.e. every company that imports, or sells at retail, bananas and other Southern-Hemisphere products.

Companies that "abuse animals," i.e. currently the fur industry but eventually including the entire meat industry, including supermarkets.

Companies that "discriminate against women," i.e. almost every corporation in the whole of Japan, the Far East, the Middle East, Latin America and other countries with traditional sexual mores.

Companies that "are evil monopolies," i.e. whatever computer maker is currently the most profitable.

Companies that "promote evil right-wing ideas," i.e. every publisher or media conglomerate that publishes conservative authors.

Companies that "promote harmful images of women," i.e. every publisher of fashion magazines.

Companies that "promote violence," i.e. every media conglomerate that produces action movies or TV shows.

Companies that "despoil wilderness" i.e. every energy company exploring for new resources.

There are probably many other causes for which divestment could be demanded, but the point above is clear: once the principle is accepted, the list of companies that must be divested from can quickly become infinite. We challenge the trustees to take a look at Columbia's current portfolio and then remove all those companies that would fall into one of the above categories. If you will excuse the pun, we bet that there would be almost nothing left.

Furthermore, if Columbia allows the proposed politicization of its endowment by the Left, there is no way that the Right can be expected to remain silent on this issue. This could lead to the following demands, which we must confess we would feel we had no choice but to fight for if forced to accept corresponding divestments from the other end of the political spectrum:

Companies that "do business with communists," i.e. every company selling to or importing from mainland China.

Companies that "make money off of abortions," i.e. almost every drug and surgical-equipment maker.

Companies that "perform fetal research," i.e. most pharmaceutical manufacturers.

Companies that "export American jobs," i.e. any manufacturer that moves plants overseas.

Companies that "betray American security," i.e. every defense contractor that has sold weapons to a country we have later gone to war with.

Companies that "undermine American values," i.e. any media conglomerate that produces sexually explicit movies, TV, or magazines.

Companies that "attack religion," i.e. any media conglomerate that produces anti-religious or religiously sceptical movies, TV, books, or magazines.

Companies that "exhibit liberal media bias," i.e. the entire U.S. media industry except for the New York Post, the Wall Street Journal, and the Fox TV network.

Furthermore, it must be pointed out that as the university itself gets more and more involved in commercial activities, particularly in biomedical applications stemming from the medical school, it will itself become vulnerable to political criticism of these activities. Unfortunately, once things start to get politicized, it is hard to put the genie back in the bottle and contain this process. We as conservatives would explicitly prefer not to have the endowment politicized from either side, and are willing to live with the above-mentioned things, which we view as evils, in the interest of Columbia's well-being. We must point out that the opposition is not similarly willing to sacrifice their partisan self-interest for the general good of the institution.

SSRI has presented itself to the university community as a reasonable-minded organization. In fact, this group is heavily populated by confessed socialists and others with bizarre economic views hostile to the very idea of maintaining a successful investment portfolio. Their own internal literature, circulated at their meetings, clearly and unabashedly states their hostility to corporate capitalism as such and their belief that the university's endowment should ideally be expropriated for socialistic purposes.

In discussions of divestment policy, the question is often asked, "Would you have invested in I.G. Farben, the Nazi chemical combine, in 1935?" To this the answer of any civilized person must obviously be no. However, there is a difference between clearly egregious evils and matters of mere partisan opinion. A Nazi chemical company is evil from any point of view ever considered respectable within American democracy. The divestment cases listed above are not. They are only evils from the point of view of specific segments of partisan opinion, and there is frequently not even agreement of all persons on the Left, or on the Right. In other words, they must be considered mere items of someone's private political agenda, not as moral imperatives that all decent persons are obliged to abide by.

It must be pointed out that the opposite of divestment, namely the deliberate direction of endowment funds into certain investments because of their politically attractive character, causes exactly the same problems as divestment. The endowment would be converted to a slush-fund for pet projects of the politically correct, with no limits in sight. This must also be prevented.

It must also be pointed out that for every divestment case suggested above, the involvement of any company under accusation must necessarily be a matter of degree. Does a corporation whose product is 99.9% automobile tires, and .1% rubber bullets of the type used by noxious regimes, deserve to be divested from? What if the percentage is 1%, or 10%? What if it is .00000001%? What if they don't make the bullets, but sell the rubber to those who do? What if Kellogg's sells conflakes to visiting dictators when they eat their breakfast at the Plaza Hotel? Where can we possibly draw the line? The answer is that we probably can't, except in the clearest cases, like Nazi chemical companies, the divestment from South Africa, or the Soviet gas pipeline, which eventually became objects of bi-partisan consensus.

It must also be pointed out that there is not full agreement, even among nominal "liberals" or "progressives," concerning what is socially responsible. For example, some decry basic industrialization in the Third World as sweated labor, while others decry the attempt to regulate wages there as a First-World plot to deprive these countries of the only competitive edge they have with which to better themselves economically.

It follows from all these considerations that the university should only divest itself of companies against which there is a clear bi-partisan consensus. Some may be impatient at this approach, but the historical record suggests that in cases where divestment was, in hindsight, appropriate, such a consensus has indeed formed. To be patient enough to wait for this consensus to form, is a necessary part of good citizenship in a democracy. To try to short-cut this process is as mistaken and profoundly anti-democratic on this issue as it would be with any other controversy.

So who is to decide when there is a general consensus of civilized opinion against a company or an industry? Thankfully, this country has laws, a legislature, and a judiciary. It is our proposal that companies only be divested from when they have been found unlawful or contrary to national policy by the duly empowed organs of our government.

Home