Alisa Valderrama: Investment strategy with a social conscience

For centuries, institutions of higher learning have been regarded as the moral centers of society, promoting benevolent ideals and humane values. The Penn chapter the Student Alliance to Reform Corporations believes that Penn should make more of an effort to live up to the ideals in its mission statement.

STARC was founded for the purposes of persuading our university to consider issues of social equity in its investment policy -- part of a larger movement to reform corporations that harm people and the environment.

STARC is not opposed to the idea of earning money through corporate investments. We of course realize that profitable investment is critical to the University's future. However, we refuse to accept that the goal of making money can justify all the potentially disastrous implications of Penn's investment decisions.

Big business and higher education are inextricably linked, especially at an institution like Penn. Here, investment decisions are made by University Board of Trustees who are often themselves business leaders or board members of the same corporations represented in the University's investment portfolio.

Hence, divestiture from corporations that harm people and the environment is not always a feasible solution. However, STARC believes that there exists a practical alternative that can reconcile Penn's commitment to profit while also preserving the moral integrity of the University.

As a shareholder in any publicly traded company, Penn becomes a part-owner of that company, a position that brings with it the ability to affect company policy. STARC asks that Penn use its shareholder clout to influence company policies, primarily by taking an active interest in their business practices and by voting on proxy resolutions. We simply ask that the University votes in favor of proposals that would further align the company with its own ideals.

This idea is not a new one. In fact, in 1996, a Board of Trustees proxy subcommittee was formed in order to address shareholder resolutions concerning issues of social responsibility. However, in February 2000, when we met with this committee suggesting they consider socially responsible investment principles, the members determined that it was not Penn's place to take moral stances; that the University maintained a policy of neutrality at shareholder meetings.

But this claim is patently false. When a proxy resolution is raised at a shareholder meeting, there is no neutral ground. Penn's abstentions default as a vote against the proxy resolution, and for the management.

Effectively, there is no neutral stance. Assume, hypothetically, that Penn is an investor in Philip Morris, and a resolution is proposed at its stockholder meeting that would stop the marketing of tobacco to children abroad. By abstaining from such a vote, Penn would be voting to uphold that marketing practice.

How could Penn reconcile its commitment to humane values while simultaneously offering support to corporate initiatives that so clearly violate them? This example is extreme, but the precedent it sets for real-life contradictions is alarming.

Surprisingly, even Penn administrators have acknowledged the University's capacity to direct corporate policy. In recent years, Penn has invested in Unocal, ARCO and Hyundai -- companies that were doing business with one of the worst military regimes in the world: Myanmar. The University, citing its objective of maximizing investment returns, refused to divest.

However, as an alternative, Executive Vice President John Fry stated "It is the University's belief that proxy voting can represent an effective means for expressing social, political and environmental concerns."

Fry seems to sympathize with the idea of proxy voting. But still, the University is caught in a Catch-22.

The Board of Trustees subcommittee, though by and large opposed to proxy voting, said they would not consider our general principles protecting human rights and the environment, but that they might consider voting on issues within specific companies, were STARC to present individual proxy cases.

But since Penn administrators refuse to disclose the makeup of the University's full investment portfolio, how can STARC ever present a convincing case to the Board of Trustees subcommittee?

While the actions of one university may have just a minimal effect on a corporation, the ethical stance taken by a group of universities begins a dialogue on campus. And when a large number of the same institutions exercise some investor responsibility, they send a powerful message to society at large.

In the 1980s, many universities -- including Penn -- united to divest from corporations that did business in South Africa, presenting a powerful voice in the fight to end the racist Apartheid system.

STARC thoroughly regrets Penn's decision -- to bury its head in the sand and not face the social and environmental outcomes of its investments. We ask, yet again, that the University administration consider the worldwide human and environmental effects of its investment decisions.

STARC would like to continue the dialogue it began in 2000 with the Board of Trustees Subcommittee on Proxy Voting, but we think the University at large should be informed about this discussion, as we deem it integral to our collective reputation and integrity.

Penn has adopted a lofty statement from Horace as its motto: "leges sine moribus vanae" -- "laws without morals are vain."

We believe that as long as Pennÿturns a deaf ear to social responsibility in its investments, it will continue to trample the ideals of its own motto.

Alisa Valderrama is a senior History and Spanish major from La Jolla, Ca. and a member of the Student Alliance to Reform Companies.

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