In response to student outrage, Derek C. Bok, who was University president at the time, created the Advisory Committee on Shareholder Responsibility and the Corporation Committee on Shareholder Responsibility. Tasked with reviewing “shareholder resolutions raising issues of social responsibility,” the groups were created to ensure that Harvard’s publicly traded investments be subjected to a degree of ethical scrutiny.
The ACSR, which includes four faculty members, four alumni, one undergraduate, and three graduate students, meets annually over dinners at the Harvard Faculty Club to discuss the issues that require shareholder approval. It reports its recommendations to the CCSR, a three-person subcommittee of the Harvard Corporation—the University’s highest governing body—which ultimately decides how to vote on each issue.
Although the CCSR is not required to follow the advice of the ACSR, their views align the majority of the time. According the CCSR’s 2010-11 annual report, the Corporation subcommittee agreed with the ACSR in 29 out of the 38 cases reviewed that year.
RI hopes to reform the ACSR and CCSR, insisting that the two committees have lost influence and relevance since their founding 40 years ago. Changes in the structure of financial markets have led Harvard to put less of its money in publicly traded equities, reducing the portion of Harvard’s investments that are actually reviewed by the committees. According to the annual report, the number of proposals voted on by the University dropped from 111 in 2008 to 19 in 2009 “due to changes in asset allocation.”
Though Rees says the ACSR and CCSR are good in theory, “in reality [they] don’t have a lot of power and need to be reformed.” Rees and other advocates argue that the University should allow the committees to review a larger portion of Harvard investments and consider opening their meetings to other members of the Harvard community, increasing the transparency of an otherwise secretive review process.
TRANSPARENCY
HMC’s opaqueness has become a point of contention between students in RI and University administrators, and may account for the widespread misconception that Harvard ignores social factors when making investment decisions.
Students acknowledge that the University may already be engaging in what would in their opinion constitute an acceptable amount of responsible investing. But they say that so long as the Harvard community is left uninformed about any steps the University already takes to invest responsibly, advocates will continue to question HMC’s investment strategy.
While RI recognizes that Harvard cannot release all information regarding its investment portfolio, group members say that Harvard should release a list of its previous investments either months or years after they are made. They point to schools like Columbia University that adhere to such a policy as proof that disclosure need not harm investment returns.
“Transparency ideally would be the next step, but I also think we can’t sit around and wait for Harvard to become more transparent when it’s been run un-transparently for the last 300 years,” Ebrahim says.
Without more openness regarding how HMC manages its money, RI says, there is no way students can gauge how responsible an investor the University really is.
“I believe that [HMC is] following some of these processes. That’s what HMC says and I believe that’s true,” says Rees. “But we believe that a more codified set of rules or more stringent guidelines, including more transparency, is something that can really help us get rid of all the bad [investments] and something that can serve as a model for other universities and endowments.”
—Staff writer Hana N. Rouse can be reached at hrouse@college.harvard.edu.