Harvard: Put Your Money Where Your Mouth Is

William Lee knew the question was coming, so he came with his answer prepared. The sooner the conversation ended, it seemed, the faster this issue would disappear from the minds of student activists. It seemed to us in Fossil Fuel Divest Harvard when we met with Lee, the Senior Fellow of the Harvard Corporation, and Larry Bacow, the President of Harvard University, that they had few words to spare when the issue arose: Why are you keeping the Advisory Committee on Shareholder Responsibility a secret? Lee said that as fossil fuel divestment activists, we should not be concerned with the ACSR — the change we sought lay far from its agenda. His message was clear: just forget about it! While it’s true that the ACSR isn’t the divestment decision-maker, it plays a significant role in how Harvard acts as a shareholder, which is at the center of President Bacow and the university’s arguments against divestment. For those of us who believe strongly that Harvard’s conduct as an investor should reflect the moral principles it espouses, we should be concerned  — deeply concerned  — with the ACSR and the staggering lack of transparency around it.

Perhaps unsurprisingly, most students have never even heard of the ACSR. This lack of knowledge is largely by design. Outlined only in sparse terms on Harvard’s website, it is one of the university’s two Committees on Shareholder Responsibility and is comprised of four faculty members, four students, and four alumni. Originally created by President Derek Bok in 1972, the ACSR was meant to advise the Harvard Corporation on investment issues. In 1984, the committee’s purpose was realized: only two years before Harvard undertook partial divestment, the ACSR voted for Harvard to divest its holdings in companies doing business with apartheid South Africa. 

Decades later, as of fall 2019, the ACSR has focused on how Harvard can use its power as a shareholder to influence companies in which it has holdings by developing a set of proxy voting guidelines. The guidelines, according to the Harvard Gazette, represent “part of a larger set of activities intended to intensify Harvard’s engagement with its external investment managers, with companies, and with other investors on issues of corporate social responsibility.” In other words, the ACSR can help block or accelerate systemic changes in Harvard’s investment policies. 

For years now, Harvard has deliberately kept its students and the greater university community in the dark by obscuring the processes behind its investment and shareholder decision-making — obscuring, even, how the members of the committees that make such decisions are selected. Without any meaningful answers from the administration, these practices suggest a concerted effort to evade public accountability. 

Burying the Truth and Usurping Student Power

Traditionally, it has been the job of our student governments to select student members for the ACSR. It is also within their constitutional authority: the Harvard Undergraduate Council and the Harvard Graduate Council constitutions include language around the councils’ responsibility to appoint students to faculty and university committees. However, it seems that at least in recent years, neither the UC nor the HGC has been acting on this power. In fact, when asked, the councils’ leaders were not even aware that they had it! To date, there is no record of the UC appointing a student to the ACSR since 2015, when it appointed Kevin Wang, Class of ‘16. The HGC has never done so.

There’s a reason why no one, including the representatives of our student bodies, knows about the ACSR: for years now, it seems that Harvard has internally selected its members. In our meeting last fall, Lee said that deans now recommend students for appointment, usurping a power fundamental to our student governments’ authority.

The de facto stripping of student governments’ ACSR appointment powers and the lack of transparency around the ACSR selection process are only symptoms of a systemic disease: the administration’s efforts to prevent the democratization of the university. 

Harvard is actively delegitimizing its student governments by undermining their formal authority. In the process, it is also eroding the institutionalized process that these governments represent for elevating student voices in the working of the university. As students build more power on campus and call for transparent and just management of the university endowment, we can see that the administration is afraid of relinquishing total control. It doesn’t want to face internal pressure to meet the demands of our campus community — that Harvard pursues investment practices that support our planet, our communities, and our peers’ futures, and end investment practices that jeopardize them. 

When Voting is for Show 

The jargon of “proxy voting” may sound alien to many students, but it’s more important than a lot of us realize. For those who have never heard the term before, proxy voting involves casting a vote on behalf of a shareholder or corporation on resolutions around the funds and companies in which it holds shares. The ACSR’s proxy voting guidelines inform how Harvard Management Company uses its voice as an investor on shareholder resolutions. In broad terms, the guidelines outline the principles that HMC strives to follow in casting its proxy votes, accounting for a range of issues from anti-genocide policies to climate change. How the university casts its proxies provides a key test of its willingness to challenge unsustainable and unjust corporate practices as a shareholder, as it often claims to do. 

Yet, in their current form, Harvard’s proxy voting guidelines can’t uphold the university’s stated commitments to sustainable investing. Perhaps most glaringly, Harvard makes clear that while it distributes these guidelines to external managers of the endowment, they “are not intended to be prescriptive,” and the university recognizes that such guidelines may diverge from third-party manager’s practices. Since the endowment is mostly managed by third parties, not extending these guidelines to third-party managers means that most of Harvard’s $41 billion endowment might be handled in ways that violate the principles of sustainable and socially responsible investing Harvard advocates. At the very least, Harvard could do more to hold its third-party managers accountable for basic sustainable practices. It could, for instance, require them to report their compliance with the guidelines and be more selective with who it entrusts with its money in the first place. 

The language of the guidelines themselves also proves prohibitive to acting seriously on such principles. While the guidelines recommend generally uncontroversial measures, such as supporting proposals asking companies to report on climate change-related business risks, they also explicitly instruct investment managers to “vote against resolutions that direct companies to take actions contrary to their core business focus and strategy.” Through this policy, Harvard dramatically evades its responsibility to push the most planet-offending companies to change their business and move toward decarbonization. Where the line between acceptable “advocacy” and inappropriate “management” of these companies by shareholder resolutions is drawn makes all the difference — and so far, HMC has drawn that line strictly enough to inhibit substantive support as a shareholder for real and necessary climate action.

A recent example of the failures of shareholder advocacy can be found in the ACSR’s decision over a Chevron shareholder proposal detailed in the CCSR’s 2017-2018 annual report. The decision regards a proposal asking Chevron to “issue a report…describing how the company could adapt its business model to align with a decarbonizing economy by altering its energy mix to substantially reduce dependence on fossil fuels.” Because Chevron is one of the world’s largest energy corporations and one which has been one of the highest emitting investor-owned companies since 1988, supporting this resolution would have represented a basic sign of Harvard’s commitment to charting a more sustainable path forward. Notably, the resolution wasn’t even asking Chevron to take steps to decarbonize, but merely to issue a report on how it would do so. 

And yet, the ACSR voted unanimously to abstain from the proposal. It justified its decision by affirming that “such a shift in strategy is properly a business decision for the company rather than a matter for shareholder input.” The ACSR said that shareholders could more appropriately support the pursual of renewable energy alternatives instead of pressing a fossil fuel company “to move away from a core business in which it has long been involved.” But if shareholders aren’t willing to take even these preliminary stands to encourage decarbonization among the companies most notorious for driving global climate change, then what good could this “shareholder advocacy” do in an ever-warming world? It seems that not “managing” a company licenses it to continue operating in a way that fundamentally threatens the future of Harvard’s students and our planet. If HMC doesn’t want to interfere in a company’s “core business,” but also recognizes the risks associated with it, then it seems like that’s not the right place for HMC to invest. 

The hypocritical reasoning on this proposal reflects the inherent failure of Harvard’s shareholder engagement strategy. It seems unclear if Harvard even really believes that such “engagement” has power. If it does, then why is the university unwilling to take even a real stand in its proxy voting on issues pertaining to our generation’s very future? Perhaps, even Harvard knows that its call for shareholder engagement is only for show. 

A Call to Action 

Harvard wants its students to be the next “citizen-leaders for our society,” yet ignores the voices of those very same students. If this university expects us to live out the values of its Veritas motto, then it has to start practicing what it preaches and allow students a seat at the table. The next step is clear: Harvard has to take concrete steps to make its investment practices match its stated commitment to supporting its students’ futures. 

First, to meet basic measures of transparency and democracy, the university must recognize the authorities of our student governments to appoint undergraduate and graduate student members of the ACSR. These processes must remain open and accessible to the student body. Likewise, it should disclose how it chooses its faculty and alumni members as well, and ensure that these selection processes remain open and transparent to the bodies they’re meant to represent. 

Second, Harvard should adopt stronger lines as a shareholder if it’s going to continue to claim that such advocacy can make an impact. To be clear, shareholder advocacy is no substitute for divestment. HMC acknowledges this distinction in its Sustainable Investment Policy, which states that the university “recognizes that very rare occasions may arise when companies’ activities are so deeply repugnant and ethically unjustifiable as to warrant the university’s institutional dissociation from those activities.” As with companies perpetuating the apartheid South African regime, manufacturing tobacco products, and enabling the Darfur genocide — from which Harvard has divested in the past  — the fossil fuel industry certainly meets HMC’s divestment threshold. If a model of business that poses an existential threat to our communities and debases our planet in ways beyond repair is not “deeply repugnant and ethically unjustifiable,” then what is? Refusing to divest when doing so clearly meets the red line HMC itself has drawn exposes this policy as pure rhetoric. 

Finally, in those circumstances where shareholder advocacy can make a difference, Harvard needs to show real muscle in enforcing its stated commitments. That means the ACSR’s proxy voting guidelines must change; the line between “managing” companies and pushing them to act more responsibly must be drawn in ways conducive to advancing the university’s own principles. It also means that Harvard should be actively pushing third-party managers to adopt these more stringent guidelines, just as it must also end its policy of not extending divestment “restrictions to investment advisors of commingled funds where Harvard is not the sole investor.” Until Harvard makes the bulk of its endowment accountable for meeting the standards its principles suggest, its claim to being a “sustainable investor” is a lie.

Of course, none of these solutions can be a cure-all. Whether the ACSR has real sway over the Harvard Corporation and third-party managers remains an entirely separate and important question. If Harvard keeps this body from exercising real power, no amount of democratic or principled reform will ever succeed in making it more than a tokenized display. Such reforms must be coupled with new recognition of the role that this body can and should play in making Harvard a responsible shareholder, as well as in realizing the interests of its stakeholders — Harvard’s students, faculty, alumni, and community members, and all who have an interest in the future of our shared planet.

The administration’s storied legacy of obstinacy and vested interest in maintaining the status quo means that Harvard is not likely to make these institutional changes on its own. In order to achieve endowment justice, students, faculty, and community members must step up to hold Harvard to account.

Image Credit: Flickr/Shelby L. Bell

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