Harvard Stands To Profit From War

With nearly half a percent of its endowment invested in 11 of the government’s 15 top defense contractors, the war with Iraq may have already made Harvard as much as $4.5 million.

And with market fluctuations in the 10 days leading up to the war, the University’s holdings within the top 50 defense corporations, ranked by the size of their defense contracts, brought in more than $17 million.

But not everyone sees the windfall as good fortune.

Some Faculty members have already questioned the integrity of Harvard’s ownership of defense equities, and several plan to raise the issue at next Tuesday’s monthly Faculty meeting.

Among those concerned are Lecturer on Religion Brian Palmer, who said at a teach-in on March 16 and at a campus-wide peace rally four days later that he thinks Harvard should donate any profits from these stocks to a charity such as the International Red Cross.

“Any situation where our community’s tremendous collective wealth is contributing to the death and suffering to thousands of people is our urgent business to [examine],” he said.

But others say that Harvard’s holdings are not morally reprehensible—but patriotic.

“Since I firmly support the war, I think Harvard should invest more,” said Winthrop Professor of History Stephen A. Thernstrom.

Thernstrom also said that taking a moral stance on every investment decision would be a “proposterous way to manage a portfolio.”

And international weapons specialist Allen Sessoms said that he doesn’t believe that Harvard’s holdings are problematic.

Sessoms, a fellow at the Kennedy School of Government’s Belfer Center for Science and International Affairs, said that defense stocks are a sound part of any diversified portfolio.

“The defense stocks are safe havens—some of the biggest companies there are,” he said. “It is not vaguely surprising that an investment portfolio as big as Harvard’s would have stocks like this.”

Jack Meyer, Director of Harvard Management Corporation (HMC)—the endowment management arm of the University—declined to comment on Harvard’s immediate investment strategy but said that HMC’s long term goals do not forecast a change in ownership of these stocks. Decisions to acquire or sell a stock are made by HMC with guidance from the Harvard Corporation, he said.

Meyer also said that these defense stocks, which in the past few months have underperformed the market, are not some of Harvard’s biggest money makers.

But experts on wartime spending said it is too early to predict how the defense sector will perform—but that growth is likely.

“In some sense, the defense stocks are safe—they are going to go up,” Sessoms said.

He said that the value of companies such as Boeing and Raytheon—whose products have been central to U.S. military action in Iraq—will almost certainly rise.

Harvard reported owning 68,121 shares of Raytheon in a Securities and Exchange Commission (SEC) filing last quarter.

The Lexington, Mass.-based company is the prime contractor for the Patriot Air and Missile Defense system which has been used in recent weeks to intercept Iraqi missiles aimed at Kuwait City. Its shares have risen 15 percent since war began and are projected to rise further as the U.S. arsenal—which includes Ratheon Tomahawk missiles each with a price tag of one million dollars—requires restocking.

Harvard also has over four million dollars invested in Lockheed Martin, the nation’s top defense contractor.

And with 141,905 shares of Boeing and 34,153 of General Dynamics—who carry the largest contracts for the tanks and aircraft carriers sent to Iraq—Harvard is poised to benefit from their impending growth as well.

But Sessoms said that this war is unlikely to make Harvard, or anyone else, easy money.

“The war is a blip [for the market],” he said. “There will be a little uptake, a little downtake, but no big deal one way or the other.”

Critics of Harvard’s defense investments said the net sum Harvard may pocket is only one of many concerns they hold.

“There is tremedous educational value in thinking about the war and the nature of power and responsibility,” Palmer said. “But at the same time, everyone knows how undemocratic the [Harvard] Corporation is, and that they probably won’t budge.”

Bois said that he and Palmer are not alone in calling for an examination of these assets, which are only likely to take off in the next few weeks.

“The idea that Harvard would get richer by the good fortune of these stocks is war profiteering,” he said. “It should be discussed.”

—Staff Writer Jessica E. Vascellaro can be reached at vascell@fas.harvard.edu.