Exploring the history of University divestment policies

On April 18, the University received two petitions, one calling for divestment from companies that do business in Israel and the other opposing such an action. Any decision about divestment at Princeton would ultimately be made by the trustees, after consultation with the Resources Committee of the U-Council. At a recent meeting, the Resources Committee reviewed the guidelines for its consideration of divestment-related issues, which have evolved over the last 34 years.

Princeton's first policy statement on divestment was issued in 1969. It was based on the work of an ad hoc faculty-student-staff committee, chaired by Professor Burt Malkiel, that had spent a year, at the request of the trustees, considering whether because of its abhorrence of apartheid, the University should divest from companies that did business in South Africa. The committee advised against divesting, and in their statement the trustees agreed with this recommendation. But they also announced one exception: the University would not hold stock in companies that did a primary part of their business in South Africa. Noting that the Resources Committee was being created, the trustees also announced that in the future they would look to that committee for advice on investorresponsibility issues.

The University's next major statement on these issues, entitled "University Investments and South Africa," was issued in 1978. In this statement, the trustees reaffirmed a "strong presumption against the University as an institution taking a position or playing an active role with respect to external issues of a political, economic, social, moral or legal character."

At the same time, they recognized "that the racially defined and repressive policies of South Africa create a situation so compelling as to warrant special attention" and that the University does have a "responsibility as a shareholder to take positions on questions raised by shareholder resolutions."

The statement provided guidance for the review of shareholder resolutions, argued against a policy of "general disinvestment" from companies that do business in South Africa, and urged caution in considering any policy of "selective disinvestment" beyond the already adopted policy.

The statement identified standards that would have to be met before coming to any final decision to exclude a company from the Princeton portfolio. Among other things, there would have to be a thorough assessment of the full range of a company's activities and its overall commitment "to pursue generally accepted canons of corporate responsibility" and an opportunity for a full exchange of viewpoints between the company and the University.

The next major development occurred in 1985 when the trustees approved a set of academic initiatives to bring South African students and scholars to Princeton and specified criteria to be used and a process to be followed "in considering the possible selective divestiture of securities in companies doing business in South Africa." The report emphasized that "in keeping with the nature of the University, its openness to conflicting points of view, and its commitment to maintaining its independence, the purpose of any policy of selective divestiture should not be to make political statements or to seek to bring pressure to bear on companies or governments to adopt particular policies. Rather, selective divestiture should be considered only when such action seems required to prevent the University from being associated, as a stockholder, with a company whose behavior has been found to represent, in substantial degree, a clear and serious conflict with central values of the University."

The trustees issued a further statement on selective divestiture in January 1987. By then the University had disassociated from three companies. (It eventually disassociated from one more.) This report reiterated that "for Princeton, divestiture means disassociation" and that in making its decisions about disassociation, "the University's attention focuses on the conduct of the company itself, not on general political considerations."

In 1992, the University codified its "Guidelines for Resources Committee Consideration of Investment-Driven 'Social Responsibility' Issues," drawing on all of these earlier documents. It is these guidelines, which may be viewed at www.princeton.edu/~vp/cpuc/irg.html, that were before the Resources Committee at its recent meeting. The guidelines set out a clear progression for considering issues related to divestment, beginning with a requirement that there be "considerable, thoughtful and sustained campus interest in an issue involving the actions of a company or companies" before the Resources Committee even begins to study the issue. While the committee has some flexibility to determine what constitutes "sustained campus interest," the guidelines suggest that the issue would need to be raised "over an extended period of time, say two academic years." The committee is also expected to consider "the magnitude, scope and representativeness of the expressions of campus opinion." If these initial tests are met, and if central University values are found to be at stake, then a later test is whether it is "possible for the University community to reach a consensus on how the University should respond."

What the Resources Committee concluded at its recent meeting was that the proposal that the University divest from companies that do business in Israel did not meet the first guideline and could not meet that guideline until the passage of time had demonstrated, or had failed to demonstrate, "sustained campus interest." While the test of campus consensus was not yet raised, the committee also noted that this is an issue on which consensus clearly does not exist at this time. What the committee did not do is pass judgment on any issue except the one that was before it, which was whether the proposal met its guidelines for consideration at this time. There are many other campus venues where the concerns that gave rise to the proposal and alternative means for addressing those concerns can, and should, be discussed.