The endowment currently has at least one holding in Zimbabwe, a country whose dictator, Robert Mugabe, has been condemned for human rights abuses. The only Zimbabwean asset PRINCO has uncovered so far is a bond for 2,000 Zimbabwe dollars, or slightly under U.S. $.02, but the University is continuing an investigation of its holdings in the country, Golden said.
As recently as 2003, the University held roughly $1.5 million in bonds issued by British defense contractor BAE Systems, Golden said. The company supplied arms to the Zimbabwean government, and may have continued to do so even after the British government imposed an arms embargo on the country in 2000, according to a 2002 U.N. Security Council report.
As of mid-2003, PRINCO no longer held the BAE bonds or employed the external manager who made that investment, Golden said.
“[The 2,000-Zimbabwe-dollar] bond was created in a chain of events that involved a former student trying to pay back a student loan,” Golden explained. “Because of capital restrictions, that student was unable to pay us directly and had to pay the Zimbabwean government, who issued the bond to us.”
That bond was issued in 1989, and it remains unclear why Zimbabwe was first listed in the University’s 990-T filing in 2007. Form 990-T requires disclosure of foreign financial accounts over $10,000.
Though the bond in Zimbabwe has a value of only $0.02, far below the reporting threshold, Zimbabwe may have been included on the form due to “extremely conservative” reporting practices, or because the University has additional, as yet unfound, holdings there, Cliatt said.
“There may be more,” Golden said. “This is the only asset we’ve found so far after many, many hours of work by colleagues … during a time when this is not necessarily the highest priority for or best use of the PRINCO investment team.”
The ethical concerns surrounding investments in countries like Zimbabwe raise the larger question of the moral standards by which the University evaluates its investments.
The answer: There are none, and action is only taken if members of the campus community express “considerable, thoughtful and sustained” interest in a specific issue, University administrators said.
“Fundamentally, the instructions we give to our investment managers is that they should invest with the goal of maximizing return over the long-term,” University Vice President and Secretary Bob Durkee ’69 said. “A strong presumption is that the University as an institution will not take a position or play an active role with respect to external issues of a political, social or moral character.”
This policy is outlined in a 1997 set of Guidelines for Resources Committee Consideration of Investment-Driven “Social Responsibility” Issues. These guidelines, issued by the University Board of Trustees, mandate that the Council of the Princeton University Community (CPUC) Resources Committee will only consider the ethics of a given holding when there is “considerable, thoughtful, and sustained campus interest in an issue involving the actions of a company or companies in the University’s investment portfolio.”
Achieving the necessary level of interest may require that the scrutiny last “over an extended period of time, say two academic years.” Also taken under consideration are the “magnitude, scope, and representativeness of the expressions of campus opinions,” according to the guidelines.
After the requisite interest has been expressed, the Resources Committee considers the issue and may pass a recommendation on to the trustees for approval.
This process for ethical review was put in play most recently in 2006, when members of the campus community asked the University to divest from the Republic of Sudan. The trustees approved this recommendation, and the University took steps to adjust its holdings accordingly. Upon investigation, PRINCO found that it had no direct investments in Sudan, and in February 2007, the University also announced it had severed all ties to the country and that none of its secondary holdings or new investments were in companies associated with the Darfur conflict.
Peer institutions Harvard and Yale take a more active role in screening the ethics of their holdings, appointing special committees specifically to investigate these issues.
At Yale, an eight-person Advisory Committee on Investor Responsibility (ACIR) meets regularly to discuss ethical investment policies for the school’s endowment, said ACIR chair Jonathan Macey, a law professor and deputy dean of Yale Law School. The committee, composed of two students, alumni, faculty and staff members, makes recommendations to the Yale Corporation Committee on Investor Responsibility relating to matters ranging from “company investment in South Africa, to defense contracting, political lobbying and environmental safety,” according to the ACIR website.
Though some of the committee’s meetings are open to the Yale community and the ACIR values outside input, Yale evaluates the ethics of its holdings regardless of community interest, Macey said.
“It’s none of my business what goes on at Princeton, but either an investment policy is ethical or it isn’t,” Macey said. “The idea that it’s only a problem if it upsets a lot of people seems odd to me.”
“It doesn’t seem plausible,” he added. “It sounds like it’s a practical concern at Princeton, not an ethical one.”
Harvard, like Yale, has an Advisory Committee on Shareholder Responsibility composed of faculty, students and alumni that recommends ethical investing policies to the Harvard Corporation Committee on Shareholder Responsibility.
Princeton does not currently have a body specifically devoted to reviewing the ethics of its investment practices.
In 2004, Ben Shell ’05 started a student group called the Princeton Coalition Advocating Investor Responsibility. The group, which is no longer active, aimed “to educate the University community about the social and environmental implications of investment decisions and to encourage the University and other investors to adopt ethical standards in their investment policies,” according to its website.
Shell criticized the University’s current passive policy, noting in an e-mail this week that it has “clearly resulted in Princeton remaining an irresponsible investor.”
“Proactive action is required by the University, instead of turning a blind eye to the ethical implications of its investments until [its] extremely high standard for action is met,” Shell said. “The reality of being an investor is that there are ethical dimensions to every investment decision, and you need to consider those dimensions instead of completely ignoring them, especially when you have as much money and clout as Princeton University, especially when you are supposed to be a non-profit institution that exists to provide public good.”
“Almost every other top college and university do[es] this,” he added. “Princeton shamefully lags way behind.”
In light of the current system, Shell said, the University should increase investment transparency to facilitate students’ ability to evaluate potentially controversial investment practices.
The University used to publish an annual record of its financial holdings but stopped doing so after 2002. University officials said they are unsure what prompted that decision.
Additionally, unlike Harvard or Yale, the University does not file public quarterly reports with the Securities and Exchange Commission because it manages less than $100 million directly in house, Golden said. The remaining funds under PRINCO’s control are invested by external managers, he explained.
The University does not disclose more information about its holdings to protect its proprietary investment strategies, Golden added.
This lack of transparency is not an obstacle to student involvement, though, administrators said.
“Members of the campus community with interest in these issues typically would not need to know whether the University is invested in Zimbabwe today to know whether they feel the University should be invested in Zimbabwe,” University spokeswoman Cass Cliatt ’96 said. “If a group of people have a question or concern about something taking place in the world, that belief would exist regardless of whether the University is invested there.”
Golden agreed that interest in ethical investment practices should not stem from knowledge of how the University invests its money, but instead from a broader interest in the world at large. Examining a list of University holdings for the purpose of raising ethical questions would be “the tail wagging the dog,” he said.
“Why would you focus first on those companies we’re invested in as opposed to looking out and thinking ‘what do I care most about in the world?’ ” he explained. “I care more about the engagement of the entire community in social issues, in ways that go far beyond the investment portfolio, especially because the investment portfolio may be a particularly cost-ineffective way of making change.”
The University’s decision not to publicize its investments has not prevented community interest in these ethical concerns, Cliatt said, citing the 2006 call to divest from Sudan and the two previous incidents of community involvement in the past three decades.
In the 1980s, the University also took steps, at the urging of the campus community, to divest from companies associated with South Africa in light of the oppressive apartheid regime. In 2002, a group petitioned the University to divest from companies that do business in Israel, but the Resources Committee chose not to recommend this policy to the trustees.
“There is not a lack of knowledge about University investments or this process [for ethical review] that has in any way prevented students from pursuing it these three times,” Cliatt said.
Still, the University’s holdings in Zimbabwe have already prompted concern from the campus community, though that concern is possibly unwarranted given the small amount of the holdings.
“I think it would be reasonable to take the position of divesting [from Zimbabwe] given the evidence that ordinary citizens … are suffering in unimaginable ways,” politics professor Evan Lieberman ’92 said in an e-mail. “At this point, the Mugabe regime is in the neighborhood of evil that characterized apartheid South Africa, for which divestment was an appropriate response.”
Zimbabwean student Nelson Chiwara ’11 said he doubted that the University’s investments directly aided the Mugabe regime and added that people should distinguish between Zimbabwean government and the country’s general citizenry.
Shell said the Zimbabwe issue serves to highlight the University’s dysfunctional and ineffective policy for responsible investing.
“Princeton currently has an untransparent, ponderous, bureaucratic and generally woefully inadequate process for determining if indeed the situation in Zimbabwe deserves action from an investor standpoint, what should be done, and then for taking action,” he said.
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