Taking a step toward responsible investing

The University prides itself on being "in the nation's service and in the service of all nations." This slogan is usually taken to mean that Princeton should educate its students to spend their lives after Princeton in service. However, I believe that this slogan should mean more than that; why shouldn't Princeton use its own resources to serve this goal as well?

Princeton has a $9.9 billion endowment. Obviously, the primary purpose of this endowment is to maximize profit in order to create the best financial opportunities for Princeton so that it can continue to invest in the cutting edge research, facilities, financial aid scholarships and faculty salaries that have made Princeton the top university in the country. However, a $9.9 billion endowment also carries enormous responsibility. Whether or not we realize it, the large sums of money that Princeton has invested in public companies can have significant social and environmental impact on the world we live in.

Shareholders in public companies can vote on proposals that will affect company policies through a mechanism called proxy voting. Proxy voting is the primary means by which investors can influence many aspects of a company, including business operations, corporate governance and social practices. Through this mechanism, Princeton and other large shareholders are invited to express their opinion and influence corporate policies on a variety of issues, some of which have important ethical, social and environmental implications. For example, it might be proposed that a particular company adopt a human rights policy, add a clause regarding sexual orientation to its nondiscrimination policy, change its policy towards its treatment of animals or report on the environmental impact of certain operations.

I am not arguing that Princeton should always support such proposals. However, today Princeton does not make any decisions on whether to support such proposals at all. It leaves proxy voting at the hands of Princeton's investment managers, whose job is only to maximize Princeton's profits. This policy has created a situation in which members of the Board of Trustees have never decided how to cast Princeton's proxy votes, and also have never received any information on how Princeton's investment managers decided to cast those votes. For example, if Princeton ever owned stock in a company in which there had been a proposal to add a clause regarding sexual orientation to the company's nondiscrimination policy, we would have had no idea whether or not Princeton supported this proposal.

The policy of ignoring proxy voting goes against the core of Princeton's values. Princeton funds student volunteerism and social service endeavors through groups such as the Student Volunteer Council and Project 55, but will not use its endowment funds to promote social change. Princeton spends its money teaching students about environmental policy, but refuses to take the time to deliberate the merits of a proposed amendment to the environmental policies of a huge multinational corporation.

When the University of Michigan fought its affirmative action case, Princeton felt the need to influence this important debate, which could alter the lives of millions of college-aged students. This track record of social responsibility makes Princeton's lack of initiative in trying to influence social policies in large multinational corporations, when it can easily do so, rather perplexing. Princeton has owned shares in large multinational corporations such as McDonald's and GE, in which a change in social policy has a huge impact on millions of people around the world; this impact may be as large as the positive social impact that Princeton students make with their Princeton education, and should therefore be as important to the university.

Universities such as Harvard, Yale, Stanford, Columbia and Duke have solved this problem by creating advisory committees. Such committees actively research and debate the merits of proposals that arise in companies in which these universities own stock and provide the university boards with recommendations on how to vote. Princeton is lagging behind its peer institutions on this issue and is now one of the only top universities in the nation that still does not take advantage of its right to proxy voting.

While educating its students to work "in the nation's service and in the service of all nations," Princeton should use its endowment for the same goal. An important first step toward this was taken with the adoption of a USG resolution supporting the creation of a proxy voting advisory committee. The Board of Trustees should adopt this proposal and bring such a committee into existence. Karen Karniol-Tambour is a Wilson School major from Netanya, Israel. She can be reached at karenkt@princeton.edu.