University lags behind in investment ethics

The REC is a student-founded nonprofit organization that advocates for “socially and environmentally responsible” investment by colleges and universities, according to the REC website.

All Ivy League schools except Princeton and Cornell have committees responsible for regular review of their institution’s financial investments that also serve as a forum for student and faculty concern over the moral or political consequences of the investments, Weber said.

Weber noted that “at Cornell, the president called a working group this fall” to discuss forming an oversight committee.

The University’s process for reviewing investments has come under scrutiny in the past week, after WPRB first revealed that the University has investment ties to Zimbabwe.

Princeton University Investment Company (PRINCO) president Andrew Golden said that the University held until 2003 roughly $1.5 million in bonds issued by a defense contractor that supplied arms to Zimbabwe. Currently, the only Zimbabwean asset that has been discovered in PRINCO’s holdings is a bond worth $0.02.

Despite the relative financial insignificance of the University’s current investments in Zimbabwe, the scrutiny sparked by the disclosure underscores the need for a formal investment review committee, Weber said.

“Princeton is the only one of the peer institutions that is not actively addressing this,” Weber explained.

A committee on investor responsibility would make it easier for “community members to weigh in on the given issues without launching a campus-wide campaign to get the attention of the administration,” she added.

A set of guidelines for the Resources Committee of the Council of the Princeton University Community, adopted by the Board of Trustees in 1997, recommends that the Resources Committee conduct an “extensive review” of a given asset only if the committee “believes there to be sufficient campus interest in an investment-related issue.”

Included in the guidelines is a list of steps for the Resources Committee to follow in deciding whether to review an investment. The first step instructs the committee to determine whether there is “considerable and continuing campus interest” before proceeding with a review.

Wilson School professor Stanley Katz, who chaired the Resources Committee during a student campaign for divestment from apartheid South Africa in the early 1980s, said that bringing an issue to the Resources Committee has become more difficult since the 1980s.

The process to review endowments based on ethics “ought to be much more flexible and proactive,” he added.

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“University policy for investing was the same then as it is now; [it] emphasized not taking into account social concerns,” he said, explaining that the University is often able to avoid making changes in its investment portfolio by waiting for the students who are protesting an investment decision to graduate.

“The University’s policy is a combination of co-optation and strategy of delay,” Katz explained. “With anything, you wait two years, for [within that span of time], everyone who’s interested will probably be gone.”

University Provost Christopher Eisgruber ’83 wrote in a letter to The Daily Princetonian on Monday that he believes the Resources Committee is an adequate “vehicle for crystallizing ... discussions” about the University’s investment decisions.

“Far from focusing on ‘outrage’ or ‘opposition en masse,’ the University’s procedures emphasize the need for sustained and thoughtful community-wide deliberations,” Eisgruber added in the letter.

The procedure used by the Resources Committee is “well-tailored to Princeton’s principles,” Eisgruber said in an e-mail Tuesday. He added that he believes the “Resources Committee serves these purposes better than would the sorts of panels or committees that exist at some other universities.”

Weber disagreed with Eisgruber’s assessment of the University’s system, noting that a committee that reviews investments only when members of the community “raise a ruckus” would “not give stakeholders access to an orderly, institutionalized process to address concerns, nor does it feature any system for keeping the investment decisions accountable to the community.”

Eisgruber also said that the first rule of ethics for the University is an “obligation to invest its funds to maximize their value to the University’s mission, which is to advance teaching and research.” He added that “the University may nevertheless put specific limitations on the scope of its investments when a central University value is clearly at stake.”

President Tilghman declined to comment, explaining in an e-mail that she did not believe she had anything to add to the comments made by Eisgruber in his letter and by Vice President and Secretary Bob Durkee ’69 in the ‘Prince’ article on this issue last week.

“Fundamentally, the instructions we give to our investment managers is that they should invest with the goal of maximizing return over the long-term,” Durkee said last week.

Some, however, say the University has a higher moral responsibility.

Philosophy professor and ethicist Peter Singer said he believes that “a major institution like Princeton, and one that has a strong commitment to values, should have an ethical review committee” to regularly examine its investments.

Singer also took issue with a section of Eisgruber’s letter to the ‘Prince’ stating that one of the University’s ethical principles is that it “must in general refrain from taking institutional positions about external issues of a political, economic, social, or legal character.”

Some issues that are considered “political” are important enough for the University to respond, Singer said.

“The University would not take political party positions, but the University should reasonably take a position that it would not invest in industries that use child labor,” Singer explained, noting that “some people would see that as a political issue.”

Lauren Rhode ’12 said she was concerned enough with the investment review process that she has decided to take action.

Rhode is founding a student group to urge the University to establish a body composed of undergraduates, graduate students and faculty that would review University investments.

“We have a responsibility as Princeton University to use everything we can to better the world that we are in,” Rhode said, adding that the University should also use shareholder votes to influence polices in companies in which it is invested.

—Senior writer Josephine Wolff contributed reporting.