Harvard's 1972 solution to the need for ethical stances on investment questions was to create a system of two committees on shareholder responsibility. The Advisory Committee on Shareholder Responsibility (ACSR), made up of faculty, students and alums, researches cases and then reports to the Corporation Committee on Shareholder Responsibility (CCSR).

The two members of the CCSR make a final decision, subject to approval by the Corporation as a whole. The Corporation is Harvard's seven-member chief governing board, responsible for overseeing and approving the University's investments, academic appointments and budgets.

Exercising Authority

In recent years, the two committees did agree to force HMC to divest selectively from businesses operating in South Africa during apartheid and firms that manufacture tobacco products.

But these are exceptions to Harvard's standard operating procedure.

The ACSR and CCSR devote their time almost exclusively to proxy decisions, questions on which all of a firm's shareholders may vote. They are usually raised by outside interest groups that own shares, such as human rights or environmentalist activist organizations.

For example, in 1985, the two committees considered whether General Motors should sell to South Africa's police or military.

Both agreed it should not, and the CCSR voted for the proxy.

But in the same year, a proxy asking that Raytheon make no new contracts with the South African government or state-controlled governments was favored by the ACSR but rejected by the Corporation's committee.

"The routine business is proxy business," Fineberg says.

The result is that any ethical examination of a Harvard investment requires that an outsider bring the question to the table.

"If nobody put forward a proxy about Nike, Harvard will not take a stand, at least within the normal operation of these committees," says Joseph L. Badaracco, chair of the ACSR and Shad professor of business ethics at Harvard Business School (HBS).

Proxies aside, the question of whether to purchase a stock in the first place is almost never asked by the CCSR. It rests, instead, with fund managers.

The bottom line: no one asks about Nike.

Badaracco says this results in a review process that is "fundamentally reactive."