Responsible Investor General Guideline Adopted by the Board of Trustees April 1973
Society supports the achievement of these missions [the university mission] by conferring great privileges on university communities. Exemption from income and property taxes, and tax deductibility to the donor for gifts made to universities, are among the important - even crucial - privileges conferred upon universities by the society in which they function. It follows that the energies and funds of a university should be devoted mainly to its primary missions and goals and not diverted to other causes such as official promotion of particular political or social views.
It further follows that capital funds received in support of a university's missions and goals should be invested primarily with a view to financial considerations such as safety and growth of capital and production of income, thereby producing further funds to support and advance such missions and goals. The need for productive economic employment of funds is particularly acute in the present inflationary period of rapidly rising costs.
Even though it is concluded that attempting to pass judgment upon or to influence the conduct of business corporations with regard to the social consequences of their activities is not among a university's primary missions, it does not follow that the university should ignore the ethical implications of the investment of its capital funds in various corporate enterprises. Indeed, we believe a university has the ethical responsibility to exercise such power as it has as an investor in ways designed to prevent or correct social injury caused by corporations in which it invests. Nevertheless, it must be recognized that there are difficult practical problems associated with attempts by a university to exercise this ethical responsibility, among which are the following:
- A university's power to influence corporate action, while not negligible, is nevertheless quite limited. The amount of funds available to Brandeis University's portfolio managers is too small to cause economic detriment to a corporation by deciding to refuse to buy its stock, or by deciding to sell its stock, if already owned. A university's power of moral persuasion greatly exceeds its economic power as a buyer and seller of securities; if effectiveness is a criterion by which the university's attempts to influence corporate action are to be judged, it is believed that such activities as the voting of proxies, and communication with management to urge upon it various courses of action or inaction (perhaps with accompanying publicity), are much more promising fields of action that the refusal to buy or hold securities.
- Particularly difficult would be the question of deciding which companies to "reward" or "praise" by buying their securities and which to "punish" or "censure" by selling or refusing to buy their securities. There is probably no company which will not at sometime be engaged in an activity which is offensive to some people, and the larger the company the more likely this is to be the case. It is difficult enough to reach agreement on what particular policies are "good" or "bad"; the difficulty is greatly compounded when it becomes necessary to further decide whether, considering a corporation's activities as a whole, it should be "praised" or "censured." This compounded problem is largely avoided if the university concentrates its efforts on influencing specified activities rather than making the judgment on the corporation as a whole, which would be implicit in a decision to purchase or sell its securities on the grounds of social acceptability of its overall performance.
- There are some questions on which the university community may be deeply divided. To attempt to adopt an official university position favoring one or the other side on such a question would tend to impair the university's capacity to carry out its educational mission, both because of the distraction and diversion of energies caused by attempting to resolve the question and because of the derogation from academic freedom, which is implicit in the university's taking an official position on controversial issues. Consistent with its ethical responsibilities as an investor, the university can and should avoid taking a position on corporate responsibility questions of this sort.
- The problem of obtaining sufficient information to reach informed decisions is greater than it might first appear. At any given time, the university is likely to own securities of many corporations. Merely reviewing the proxy statements of these corporations without attempting to be informed on aspects of their activities, which are not the subject of proxy statement proposals, will involve a considerable commitment of time and effort.
With the foregoing factors in mind the Investment Committee of the Board of Trustees proposes the following guidelines in discharging its ethical responsibilities related to investment in corporate enterprises:
The University as an Initial Investor
In deciding whether to purchase securities of a particular corporation, the university will in most cases be guided solely by the financial considerations of safety and growth of capital and production of income. Only when the corporation is directly and substantially involved in activities clearly considered by the university community to be contrary to fundamental and widely shared ethical principles should the portfolio managers be instructed to avoid purchase of its securities.
The University as a Continuing Investor
- The university should exercise its ethical responsibilities as an investor primarily through the voting of its shares on propositions presented in corporate proxy statements. The university may also wish to make formal or informal representations to management concerning the corporation's activities. Only in exceptional cases, where it is found that the corporation's activities are gravely offensive to the university's sense of social justice,should the university consider initiating formal corporate action such as the proposing of matters for inclusion in a proxy statement, or initiating or joining in shareholder litigation.
- When the university finds that a corporation in which it owns securities is directly and substantially involved in activities causing social injury, it will vote its shares in favor of propositions, which it considers likely to change such activities or to mitigate the social injury, which they cause, and against propositions, which it believes will have the opposite effect. Written representations may be made to management where appropriate, and other shareholder action may be initiated under circumstances referred to in paragraph A. In deciding whether to take shareholder action, the university should give due consideration to whether the company acting alone has power and responsibility to correct the injury, or whether correction could be made more appropriately through the enactment of new laws and regulations. The university should refrain from taking action on, or should vote against, proxy proposals involving social or political matters which are unrelated to the business of the particular corporation, and should refrain from voting on proposals which are likely to cause deep divisions within the university community.
- Where a corporation's conduct is found to be clearly and gravely offensive to the university community's sense of social justice and where it is found that the exercising of shareholder rights and powers is unlikely to correct the injury, consideration should be given to selling that corporation’s securities. Due regard should be given to both positive and negative conduct of the corporation in such areas as:
- hiring, employment and pension practices;
- relationships with oppressive governments;
- product safety and consumer health;
- extent and nature of military contracts;
- conservation and environmental pollution;
- participation in charitable, educational and cultural life of the community.
In considering whether a sale should be made, the economic effect of such a sale on the university's portfolio should be a relevant, but not necessarily controlling, consideration.
Addendum to Responsible Investor General Guideline Adopted by the Board of Trustees April 28, 2020
Brandeis University was a proud early adopter, in 1973, of a Responsible Investor Guideline (the “Guideline”) to assist it in meeting its goals of investing its capital to advance its core academic mission, while doing so in an ethical manner. The Board of Trustees affirm its commitment to ethical investment, and adopts the following Addendum to the Guideline. This addendum is intended to recognize changes in the methods of investment that have occurred since the Guideline was originally adopted, and to establish a process by which the Brandeis community may raise and study concerns regarding the ethical investment of university funds, and provide advisory recommendation on such issues to the Investment Committee of the Board of Trustees.
- Process for Review
The Board recognizes that from time to time it may be appropriate to examine the ethical implications of particular investment decisions. While it expects such cases to be rare, the Board nevertheless wishes to establish a process by which the Brandeis community may raise and study concerns regarding the ethical investment of university funds and provide advisory recommendations on such issues to the Investment Committee of the Board of Trustees.
A. Any member of the Brandeis community may submit a proposal to the President’s Office (a “Proposal”) regarding the ethical investment of university funds to one or more of the following groups (“Representative Sponsors”):
- Brandeis Faculty Senate;
- Brandeis Alumni Board;
- Brandeis Student Union;
- Brandeis Graduate Student Association; or
- Brandeis Staff Advisory Council
B. The Proposal must include the following information, clearly and succinctly stated, and in sufficient detail to allow the Proposal to be carefully analyzed and for all the relevant factors to be carefully weighed
- An Executive Summary of the Proposal.
- The social issue that is of concern and that raises the question of the ethical investment of university funds: its nature, extent, and the degree of harm being caused.
- The breadth of concern and level of consensus within the Brandeis community; whether and to what degree the issue might conflict with Brandeis’ primary academic mission.
- The action that is being proposed to remedy or mitigate the university’s position.
- How the proposed action will impact the entities engaging in activities that create the social issue, and whether the action can be expected to lead to genuine and durable change by those entities.
- Consideration of the potential impact on university investments, to the extent known to the authors of the Proposal.
- Any other relevant factual information which will assist the Board of Trustees in making a decision.
The Representative Sponsor shall be responsible for screening Proposals, and for recommending to the Administration that a RIAG (defined below) be convened. When the Representative Sponsor makes such a recommendation, the President, Provost, Chair of the Board of Trustees and Chair of the Investment Committee shall consult as a group and may in their discretion determine to convene a non-standing Responsible Investment Advisory Group (RIAG). In such event, the Proposal will form the basis of the RIAG’s deliberations.
Incomplete Proposals may be returned to the Representative Sponsor with a request that the required information be provided.
A RIAG shall be comprised of the following members:
- Three Trustees (current or emeritus), one of whom shall be designated as chair
- Two faculty
- Two students
- Chief Investment Officer or delegate
- Executive Vice President Finance and Administration or delegate
The Chair of the Board of Trustees will appoint the three Trustee members and designate the Trustee chair.
The Provost will recommend to the Chair of the Board of Trustees two faculty members, taking into consideration those who may have knowledge and expertise in the fields relevant to the issue(s) raised by the sponsoring entity, and two student members.
The Chair of the RIAG will convene meetings, set the group’s agenda, and coordinate meeting schedules so as to expeditiously consider the Proposal before the group. The Group will consider the Proposal, request additional information as necessary, and make a written recommendation on the Proposal supported by its findings, to the Investment Committee. In the event that the RIAG does not reach unanimous consensus, the recommendation shall note the minority view. The Group will conduct its work primarily during the academic year and aim to develop its recommendations no later than the semester following its convening.
The recommendation shall be transmitted to the Board of Trustees through its Executive Committee. Such recommendation will be advisory and therefore non-binding. The final decision on any changes to endowment investment policy rests solely with the Board of Trustees.
Coordination and administrative support to the RIAG will be provided by the Office of the Executive Vice President of Finance and Administration.
- Fund Investment
The Board recognizes that the majority of the University’s investments are not made through the direct purchase of stock or securities in particular corporations, but are instead made through participation in investment funds managed by third-party managers, in which multiple institutions and entities invest (“Funds”). These external investment managers have been chosen on the basis of their investment acumen and the belief of the University’s Investment Committee that these firms are capable of producing excellent risk-adjusted investment results over time. With these pooled fund vehicles, the investment managers are responsible for all buy and sell decisions for the companies in the portfolio. In addition, the investment manager is responsible for all proxy voting. In these circumstances, where seeking to influence the behavior of particular corporations, the university may do so by influencing such investment managers, or by choosing not to participate in Funds which contain stock or securities in particular corporations or sectors. While the University can express a position to the investment manager and attempt to alter its investments or proxy vote, it cannot compel an investment manager to act in a certain way on any decision, especially given the relatively small size of the University’s investment. If the University were to completely withdraw the University’s investment from a Fund, in addition to the loss of a skilled investment manager, the necessary sale of all securities in the fund could be costly to the University, especially in the case of private partnership holdings.
These circumstances do not diminish our ethical responsibility as an investor, but highlights an additional layer of complexity in the implementation of the Guideline. References in the Guideline to the purchase or sale of stock or securities, or taking other shareholder action to influence corporate behavior, shall therefore be deemed to include the purchase or sale of interests in a Fund, and the taking of action as an investor in a Fund to influence the Fund’s behavior or that of the corporations or sectors in which the Fund invests.