s members of the Dartmouth community, we all share the responsibility for upholding the "Principles of Community." While many of us strive to live in accordance with these principles, it is not possible to do so unless Dartmouth as an institution models its own actions on these principles. Dartmouth does not operate according to the "Principles of Community" in its investing of the endowment fund.
In the fiscal year ’99, twenty percent of the college’s revenue came from returns on the endowment fund, recently valued at $2.49 billion. This revenue was used to partially cover the operating costs of the college including faculty salaries, building operation and maintenance, and student programming among many other costs. Simply by existing on the Dartmouth campus- attending class, using the libraries- community members are taking advantage of the endowment returns. If the "Principles of Community" are not considerations in college investment policy, then it becomes impossible for an individual to be a member of the Dartmouth community and also uphold these principles.
Currently the investment guidelines for the endowment as determined by the Trustee Investment Committee are to maximize growth while minimizing risk. However, there is a trustee committee that is charged with reviewing the social and public responsibility of the college’s investments: the Council on Investor Responsibility. In recent years, the council has positioned itself as a reactionary group, meeting only when confronted with a major social issue by concerned students. In the past, the council has met to discuss investments in corporations doing business in South Africa, investment in a hydroelectric dam in Quebec, and investments in the tobacco industry.
There are different ways that an institution can become a responsible investor. The first is by divesting from corporations that have been deemed socially irresponsible by the Dartmouth community. The second way is to invest in companies that seek to significantly improve our society and a third way is to use the college’s leverage as a shareholder to change the way in which socially irresponsible companies do business through active shareholder voting.
Opponents and skeptics of socially responsible investing have brought up many drawbacks to the concept. They claim that socially responsible investing will result in reduced rates of return which will either cause academic programs and facilities to deteriorate due to cuts in funding or cause an increase in tuition to maintain current funding levels. In addition, opponents are skeptical of the ability of the Dartmouth community to agree on what is socially irresponsible behavior. Opponents of socially responsible investing also doubt that divestment from companies will have any impact on society.
Recent research comparing rates of return in the S&P 500 of socially responsible vs. irresponsible companies shows that the socially responsible companies outperformed the socially irresponsible companies in 1 year, 5 year, and 10 year total returns to shareholders. Some schools already practice some degree of social responsibility: Vassar puts a percentage of its endowment into a socially responsible fund, and schools such as Stanford, University of Michigan, Harvard, University of Wisconsin, and Tufts have divested themselves of tobacco companies. None of these schools has weakened academically as a result of screening their investments.
While agreement on what constitutes social responsibility and social irresponsibility may be difficult to build amongst the Dartmouth community, that in it self is an unacceptable reason to ignore the issue. Throughout the history of the United States it has been difficult for people to agree on many social issues such as slavery, women’s rights, and segregation. However, through meaningful dialogue most people were able to come to an agreement on the issue.
If one sees an action, such as divestment, as a solitary act by only one institution, it is easy to understand why one might not think it would make any difference overall in society. However, if one sees this action as a part of a larger movement that will be inspired and spurred on by our actions, large-scale societal change becomes a real possibility. Apathy due to a perceived lack of effectiveness is a poor reason for inaction.
This final argument that divesting of companies won’t change society is also evidence of a common confusion between divestment and the larger scope of socially responsible investing. Many times people mistake socially responsible investing to mean only divestment from those companies that are socially irresponsible, while ignoring the other two components of socially responsible investing: positive screening for socially responsible companies, and shareholder activism. Divestment should be the last step of an institution trying to change the way that a company does business. Oftentimes institutions can have a greater effect on corporate behavior by using their leverage as shareholders than they can by divesting from a company. For instance, by sponsoring a shareholder resolution, Cornell was able to encourage the nation’s leading retailer of old growth rainforest wood, often poached from dwindling reserves in South America, to phase in certified wood grown in sustainable forests. In past efforts to achieve socially responsible investment policies, student action has been a key factor and the situation is no different this time around.
The most effective and constructive action to take now is to write a letter on behalf of yourself or a student organization to the Council on Investor Responsibility demanding fairly chosen student representation on the council, a regular meeting schedule, and a commitment to the three forms of socially responsible investing. Additionally, bring up this topic in class and with friends and start the dialogue that needs to occur within ourselves and our community.
