Planned Investment Policy Weighs Money Vs. Society
While it discusses the need for balance between the two motivations for investment-to increase University resources or to support improvements in society-the Austin Committee report puts most of its weight on the moneymaking side of the scale.
"Whatever societal improvements might be achieved by a different investment policy must be balanced against the loss to society from the University's having reduced the means to carry forward its teaching and research," the report comments.
But, if adopted by the Corporation, the report's suggestions would signify an important change in Harvard investment policy since President Pusey, four years ago, said, "Our purpose is just to invest in places that are selfishly good for Harvard. We do not use our money for social purposes."
The Austin Committee distinguished between the University's criteria in selecting initial investments and its responsibilities to affect policymaking of corporations in which it already owns stock.
"The University, in its role as initial investor, should strive fundamentally for maximum return," the report says.
Following the suggestion of the Wilson Report on The University and the City, the Austin Committee recommended one major exception to the rule: cases that involve "the University's duty to the more or less immediately surrounding community." In such decisions, the committee suggested, the University might consider community benefits as a "positive" reason to invest.
On the other hand, "in deciding whether to avoid certain investments," the University might rule out buying stock in tobacco companies, South African corporations or organizations practicing racial discrimination.
However the report equivocates on the points of negative considerations-especially on the second, saying, "There is the problem of drawing a line, not only in South Africa but in other countries with domestic or foreign policies that are considered reprehensible."
And, the report adds, "When it comes to investing in American corporations that do business in foreign countries, a policy line would be even more difficult to draw."
When the University is already a stockholder, "it need not remain passive in the face of substantial evidence that the company is acting in an antisocial way," the report says.
The Committee acknowledged that ordinarily "abstention in a proxy contest is a vote for management." For that reason, "the University should vote its stock on occasion in favor of change for the symbolic effect of a great university's taking a position on a social problem."
But the Committee outlined limits to University action. The University should not litigate, solicit proxies, or "join forces with other large, tax-exempt organizations in policing the conduct of business organizations."
The latter is an apparent reference to Campaign GM, the group of Washington lawyers supported by Ralph Nader. Last Spring, Harvard voted its shares with the GM management, against Campaign GM. President Pusey created the Austin Committee in response to criticism of that decision.
Campaign GM is leading a similar proxy fight this year. If the Corporation followed the committee's recommendations, Robert W. Austin, Wilson Professor of Business Administration and committee chairman, said last night, "the University could vote with Campaign GM or vote against it." To a large extent, the decision would depend on the fact-finder's advice.
"But the University should not play a leadership role in such cases," Austin continued. He suggested "talking to the management of GM and urging it to change its policies" as one alternative stratagem.
The Austin Committee also urged the establishment of a "fact-finder" to field recommendations on the "non-financial aspects of the University's role as investor." This official would seek out investments that "are financially competitive, yield extra social benefit as well, and are promising enough to cover the extra cost of the effort required to find them."
The fact-finder would report to the Corporation, which makes the final decisions in investment questions.
Like Harvard and Money, issued by the University Governance Committee, the report of the Austin Committee recommends an examination of the powers of the Treasurer, the major individual shaper of University investment policy.
In addition to his position as chief financial officer, George F. Bennett, Treasurer of Harvard College, is a member of the Corporation and the Managing Partner of State Street Research and Management Company, an investment counseling firm in Boston.