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Oversight Sufficient Already, Bok Says

Investments Monitored By Corporation

By Gregory B. Kasowski

Countering claims that much of Harvard's endowment goes without formal ethical oversight, President Derek C. Bok said yesterday that the University sufficiently monitors the activities of the Harvard Management Corporation (HMC), the firm which runs the $5 billion endowment.

Nevertheless, at Monday's meeting of the Advisory Committee on Shareholder Responsibility (ACSR), the body charged with advising Harvard on the ethical responsibilities of investing, members spent spent several hours questioning their role within the University.

"We talked about expanding the role of the ACSR," said Anita Ramasastry '89, a law student. "We should just get a better feel for the way Harvard Management works and invests."

The discussion of investment oversight comes at a time when Harvard has increasingly made substantial investments into high-risk areas, which now make up more than 20 percent of the entire endowment. According to the 1988-89 Financial Report, the University now holds nearly $1 billion in "private placement investments," which include venture capital, leveraged buyouts and real estate.

Over the past week, several ACSR members have said that the group is powerless under the current investment structure. Formed in 1972, the 12-member ACSR, composed of faculty, alumni and students, currently can only make recommendations about ethical resolutions that come up in publicly-traded stock which the University owns.

With the shift in investment strategy at HMC over the past decade, this segment of the endowment has dwindled to less than 30 percent.

Bok said in an interview yesterday that the seven-member Corporation, Harvard's primary governing board, already provides enough oversight of University investments with the current system.

"[Those investments are] all part of Harvard Management Company, which in turn has a board of directors and plus the Corporation watches over that," Bok said. "Yes, we're very much aware of what they've invested in and we watch it quite closely."

Although he did not address the question of reforming the ACSR, Bok said he did not feel any attempt had been made to keep the committee in the dark.

"I'm sure there's no desire to with hold anything," Bok said, adding that it would be difficult to provide accurate lists of holdings since many investments are done indirectly.

Although several ACSR members said that they spoke at Monday's session in support of expanding the role of the oversight committee, ACSR Chair William A. Sahlman said yesterday that he did not think there was a need to change the current system.

"I start from the premise that this committee does influence the general investment policies made by the Harvard endowment [investors]," said Sahlman, associate professor of business administration. "These are not evil people trying to undermine the ethical responsibilities of the University atall."

Much of the discord within the Harvardcommunity has focused on the lack of informationHMC provides about its holdings. Currently, theUniversity only releases listings on majorholdings in large publicly-traded companies.

Several ACSR members have said that they feelunable to make recommendations to the Universityabout investments since they do not know exactlywhat Harvard was invested in.

Ramasastry said yesterday that there seemed tobe a consensus within the ACSR that the membersshould be more fully informed.

"We have to be better informed and bettereducated before we can be effective," Ramasastrysaid. "We have to be educated about the bigpicture of how Harvard manages its investments andhow the process works."

Despite the recent increases in privateplacement holdings, Bok said Harvard involvementin the area has probably leveled off.

"I don't think it would grow very dramatically.I think it's at a proportion now that seems tomost of us to be about right," said Bok. "Whatwe're seeking is greater diversity...directplacements, [but also] foreign investments."

"I think it's much more likely that over thenext 10 years the increases will occur in theamount of overseas investments," Bok said.

Tara A. Nayak contributed to the reportingof this article.

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