The Rules of Endowment

The Rules of Endowment

Investment, Divestment, and Social Responsibility

Published on November 20, 2014

In March 1985, seven students went on a hunger strike to protest investments in Columbia’s endowment portfolio tied to apartheid-era South Africa. The following month several students chained themselves to Hamilton Hall, vowing to stay there until the trustees issued a public statement of their intention to divest. Hundreds joined them in their protest, which garnered the support of public figures including Jesse Jackson and Desmond Tutu.

Law professor Michael Sovern and then-University president, who graduated from Columbia College in 1953 and the Law School two years later, was faced with a difficult decision: If Columbia divested from South Africa, the University would be using its money to take a political position.

Columbia’s eventual decision to divest forms the backdrop for ongoing discussions regarding the propriety of various endowment investments in what some regard as controversial industries.  Activists concerned with University investments in the private prisons and fossil fuels industries have pressed their cases for disinvestment.

In part as a result of the lessons learned from the apartheid-investment debates, Columbia has put in place a committee, the Advisory Committee on Socially Responsible Investing (ACSRI),  meant to ensure that such concerns are given full consideration. How well that system is currently functioning, however, is a matter of concern for some activists—members of Columbia Prison Divest and Barnard Columbia Divest for Climate Justice—who have sought to utilize it.

In his memoir, An Improbable Life: My Sixty Years at Columbia and Other Adventures, Sovern  recalls that the trustees were originally opposed to divesting from companies that did business with South Africa on two grounds: concern that divesting would hurt the endowment’s financial performance and the belief that the endowment shouldn’t be used to make a political statement.

As Sovern says in his book, losing money from the endowment—a possible scenario if Columbia divested—was “an outcome typically regarded as a breach of their fiduciary duty.”

While there was a general consensus that apartheid needed to end, divestment was not a tactic without controversy. The counterargument to divestment went that much of the economic pain induced by divestment would be felt by the Black population in South Africa, and that it would be better for Columbia to use its influence in other ways to put pressure on the South African government.

In 1984, Sovern had reached an agreement with the trustees to cap the University’s investment in South Africa at $39 million, a largely symbolic gesture that had no real financial impact.

After a court order failed to clear the protesters out, Sovern wrote a letter addressed to the Columbia community stating that they had had full opportunity to air their position. He noted that the protesters had spoken at the University Senate, where their position was rejected by a vote of 43 to 13, and had twice refused the chance to speak to the trustees’ special committee on investment policy.

Sovern states in his memoir that at the time he had not “paid much attention to the hunger strikers, not knowing whether to believe they really were starving themselves and unwilling to submit to a form of blackmail.”

He decided to continue with business as usual during the blockade as exam time was approaching: “I felt strongly that conceding anything to a group that blockaded a building, no matter how ineffectually, was not an option.” Fifteen students were denied their degrees for their role in the protests.

The month before the hunger strike, Sovern began to rethink his agreement with the University Senate. He grew concerned that Columbia would become an unpleasant place to work for students and faculty. He was also worried about deteriorating relations with Harlem and unions representing Columbia workers, both of which largely supported divestment.

With pressure from students and faculty and pragmatic reasons coming into play, Sovern and several other trustees decided to divest. When the votes were tallied, 27 trustees voted in favor of divestment with three abstentions.

In a phone interview two weeks ago, Sovern said, “The objective of this divestiture was to induce those companies to leave South Africa so that the economic pressure on South Africa would become intense enough that they had to abandon apartheid. At the same time, other pressures were being brought on, such as government boycotts and sanctions by countries.” He stated that divestment had the “explicit objective to eliminate one of the great evils of the time that had a particular resonance for Americans, given our own history.”

Columbia fully divested from South Africa in 1991, when talks to end the apartheid regime were in progress. According to Sovern, Columbia became “the first university with a significant endowment to resolve to divest.”

The Endowment Today

Today, Columbia’s endowment is the fourth largest in the Ivy League, worth $9.2 billion.

The endowment is used to make long-term investments and provides the University with a permanent source of funding to support professorships, financial aid, research, capital projects, schools, departments, institutes, and centers, among other things. The endowment exists in perpetuity—generally, only the money made from investing the fund can be spent.

A majority of the endowment is made up of funds dedicated to certain purposes. A professorship, a fellowship, or research in a particular field can have funds specifically dedicated to it. Each individual endowment fund has its own set of terms and restrictions that limit the things that can be funded by the returns made from any individual gift to the fund. Endowment payout can only be spent on expenses previously agreed upon when the money is donated. Former Dean of Alumni Affairs and Development Derek Wittner, a 1965 College graduate and 1968 Law School graduate, says the money raised for the endowment is “almost always specific.”

The bulk of the University’s endowment is managed by the Columbia Investment Management Company, located in the Chrysler Building. The IMC is a subordinate company wholly owned by the University, formed in 2002 as part of a financial and institutional reorganization. The company is headed by President N. P. Narvekar, who reports directly to the board of trustees.

“The team that manages the endowment has a goal to generate long-term returns within a framework for risk that is acceptable to the University, and thereby provide ongoing support to our operations,” Anne Sullivan, Columbia’s executive vice president for finance, says.

In October, the endowment reported a 17.5 percent return for the latest fiscal year, trailing Yale’s 20.2 percent return but beating the 15.4 percent return earned by Harvard, which has the country’s largest endowment.

The portfolio is diversified among roughly 4,000 equities, commodities, fixed-income instruments, and cash equivalents. However, only 10 percent of Columbia’s holdings are publicly available. The endowment does not release details about its investments, so little is known about Narvekar’s investment strategy.

The board of trustees spends 5 percent of the money made from these investments every year to support the University’s annual budget. The money from the endowment does not cover all of the University’s annual budget, which is used to support more than 3,000 faculty members, more than 9,000 staff members, and almost 24,000 students across 16 schools and various independent units across four distinct campuses. Roughly $200-$300 million of the $2.4 billion annual budget comes from endowment spending.

Direct Impact on Financial Aid

Though our endowment ranks fourth among the Ivies—trailing Harvard, Yale, and Princeton—it compares even less favorably to the big three on a dollars-per-student basis.

The Giving to Columbia website states, “Columbia’s endowment, already lower than that of its academic peers, is especially lacking in terms of endowment per student. The University must increase the percentage of its annual revenues supported by endowment in order to become less reliant on tuition.”

Specifically, 12 percent of Columbia’s annual revenues are supported by endowment income, a low figure compared to Harvard’s (35 percent), Yale’s (35-40 percent), and Princeton’s (45-50 percent). Because such a small percentage of Columbia’s annual revenues are supported by the endowment income, a larger chunk of annual revenue, 25 percent, must be supported by tuition. This percentage is higher than those of Harvard (15-20 percent), Yale, and Princeton (both roughly 10 percent).

The size of the endowment is directly linked to how much financial aid the University can provide to students. As it stands, 50 percent of undergraduates receive some sort of financial assistance. Less reliance on tuition to fund the annual budget would mean that less tuition is needed, making it possible to provide more financial aid.

Responsible Investing

Over the years, students have campaigned for divestment from stocks linked to social issues— sometimes successfully, as was the case for companies linked to South Africa in 1985 and Sudan in 2006.

The campaigns and divestment requests are currently fielded by the Advisory Committee on Socially Responsible Investing.

The ACSRI was created in March 2000. According to its website, the committee’s mission is to advise the trustees on ethical and social issues that arise in the management of the investments in the University’s endowment. The committee is intended to be broadly representative of the University—its 12 members are chosen in equal proportion from students, faculty, and alumni of the University, with two University officers sitting in as nonvoting members.

Former University President George Rupp, who was succeeded by Lee Bollinger in 2002, says in an email that the ACSRI was founded at the request of students. “It seemed to me and to colleagues both on campus and among the trustees that the request was a reasonable one. It would allow broad-based advice (with representation from students, faculty, and alumni/ae) without abrogating the final fiduciary responsibility of the trustees,” he says.

“Voting on shareholder resolutions was certainly the early focus of deliberations. But recommending communications about concerns to corporate management and considering divestment campaigns are also within the mandate of the committee,” Rupp adds.

Previously, according to Rupp, students communicated their concerns about the University’s investments through “letters or petitions, meetings with administrative officials, or public protests.”

The ACSRI did not yet exist when the University divested from South Africa. Sovern said in a phone interview that the South Africa divestiture decision involved extensive discussions with the USenate. As for the role of student activism, Sovern said, “I think it was a factor. There were a number of factors at work. It’s always hard after the fact to sort out causation and separate it.”

The ACSRI primarily makes recommendations related to the exercise of the University’s proxy voting rights. Proxy voting is when shareholders vote on corporate matters. This could include approving a merger or acquisition or electing directors to the board. The committee can also make recommendations related to shareholder initiatives and portfolio screening, and determines the socially responsible investing issues that it researches, setting its own agenda. Formal recommendations voted on by the committee are supposed to be made public.

According to Sullivan, “The endowment is already making a statement by supporting the University, which is fundamentally mission-driven. There is a tremendous amount we do as an institution in research, teaching, and patient care that could not be done without the endowment.”

Sullivan says that if students have a proposal about the University’s investments, “the process is to contact the associate director who staffs the committee and can assist in getting a proposal in front of the committee. The ACSRI can take the proposals at any time, although sometimes it is difficult to fit things in during proxy voting season,” which takes place in the spring semester.

In 2006, Columbia divested from 18 non-U.S. companies doing business in Sudan, based on recommendations made by the ACSRI after a presentation was made by the student-run Columbia University Sudan Divestment Task Force. As was the case when Columbia divested from South Africa, government sanctions were already in place, in the form of an embargo on trading with Sudan for American companies. Stanford, Yale, Harvard, and the University of California system had already made similar pledges to divest.

Sullivan clarifies that Columbia did not actually have any holdings in Sudan at the time: “We have not been in the situation of owning a security that was on that divestment list for Sudan. But that was never a factor for the committee evaluating it. In practice, it has been a policy of non-investment rather than divestment.” Sullivan says that the committee revisits the list every year and adds or removes companies from it depending on the results of their research about which companies are operating in the region.

Sovern contrasted divestment from South Africa with divestment from fossil fuels, arguing that divestment from fossil fuels would not have as much of an effect. “Take divestment from coal companies as a contemporary example. Once you sell company stock, the coal industry is not going to stop functioning. Divesting is going to feel good, but it doesn’t have any practical effect,” he said, adding, “The campaign with respect to South Africa had hope of making a difference. Selling fossil fuel companies isn’t going to make the slightest difference.”

While Rupp prefers not to comment on current issues at Columbia, he says that “if a decision to divest is to have any prospect of impact, it must be deployed very sparingly.”

“Here we are a community of very articulate people who know how to make a statement,” Sovern said. “I prefer individuals making a statement than having the University make a statement—when the University makes a statement, it speaks for everybody, and not everyone may agree. There is an element of co-optation or even coercion.” In the case of South Africa, though, “Apartheid was evil and there was no one trying to defend it,” he added.

Activists and the ACSRI Today

Activists have recently engaged with the committee in hopes of prompting divestment in the prison services and fossil fuels industries.

When students noticed that some of the 10 percent of Columbia’s publicly listed holdings are invested in the private prison industry, they started a divestment campaign, Columbia Prison Divest, for the University to divest from the Corrections Corporation of America, G4S, and to conduct a negative screen for GEO Group. CPD maintains that investing in Private Prisons supports a “racist and classist systems of incarceration and detention,” according to their Facebook page.

Ursula Bollini, former associate director of finance, communications, and socially responsible investing and current director of human resources compliance and protection of minors, met with the group. “She gave me the impression that previous campaigns had not been very reasonable,” Asha Rosa Ransby-Sporn, a Columbia College sophomore and CPD member, says.

The group was invited to present to the committee in November. During the presentation, Ransby-Sporn says some of the committee members made light of Columbia Prison Divest’s campaign. “They kept making jokes like ‘Get back to us when you finish your Ph.D.,’ or ‘I hope this is what you are writing your thesis on,’” she says.

The group has complained of communication issues with the committee and had to postpone a meeting this semester because the committee had not finalized its membership.

A group campaigning for divestment from fossil fuels, Barnard Columbia Divest for Climate Justice, felt some similar frustrations with the committee.  Ryan Elivo, a senior in Columbia College and a former member of the group, recalls that ACSRI contacted BCD in the fall of 2013 to request a presentation.

The group made a presentation to the ACSRI on Nov. 12 of last year. Their specific requests included “divesting from and freezing all new investments in the top 200 fossil fuel companies, organizing an informational panel on divestment,” and updating the committee’s minutes, Elivo says.

The group worked with the committee to organize a panel on divestment held on April 7. “We pressed them for a long time to have a meeting with us afterward, and on April 22, Ursula Bollini finally responded, stating, ‘The ACSRI will vote on whether or not to recommend divestment on the evening of May 13,’” Elivo says, adding, “We were confused about what they were even voting about.”

Some of the ACSRI members, including former education subcommittee chair Sara Minard, were confused about the vote. “Minard was confused because there seemed to be much internal miscommunication at ACSRI regarding procedure and what was being voted on,” Elivo states.

Despite interest in divesting from fossil fuels, some committee members seemed resigned due to bureaucracy issues. “A few of the members were very interested in pursuing fossil fuel divestment, but it seemed to be completely mired in the bureaucratic process,” Iliana Salazar-Dodge, a Columbia College junior and a member of BCD, says.

Minard claimed that the ACSRI had not received a formal proposal from BCD for the committee to vote on, “and here is where it gets confusing,” Minard says in an email. “After the joint panel, I had asked Daniela and the BCD students to send us a strategic proposal for action, along with their meeting notes. I had thought this would be a position paper detailing what exactly they wanted ACSRI to respond to. We never received any such proposal.”

She claims that the committee decided to vote on proposals from the initial November presentation, which it began to use as a formal proposal: “In April, after the panel, some members of ACSRI had begun to discuss that a vote was taking place on fossil fuel divestment. This was a surprise to many others on the committee because we were unaware of any formal proposal on the issue. A date was set for May 13th. Some of us inquired about this vote, and we (were) told it was on the BCD proposal, which we had started to assume was the series of demands made by the student group in November.”

Elivo says, “We had no idea that they mistook our presentation to be our proposal. If we had known that they wanted a complete proposal, we would have written one.”

Despite this, the ACSRI voted to look at a draft document made by the committee based on BCD’s November PowerPoint presentation. Minard concludes by saying, “So what exactly is this vote on May 13th and what information and what process are we basing our decision on, because at this point I don’t know.”

In the same email chain, Alessandra Giannini, a researcher at the International Research Institute for Climate and Society and an adjunct professor in the department of Earth and environmental sciences brought up Stanford’s May 2014 decision to divest from the coal industry, stating, “I am just as disappointed as everyone else in recognizing that we are nowhere near where they got to, to reach their recommendation.”

Though Elivo claimed that Bollini told him the ACSRI had a subcommittee to investigate fossil fuel divestment, Giannini, another committee member, wrote in an email before the vote, “We did not set up a committee, in whatever shape or form, that worked to gather information on this matter for 6-12 months, to come up with a sound proposal. It would be best if we acknowledged that we are behind our peers in the process, and get working on it!”

In the same email she added that what the committee was evaluating as a proposal from BCD would be easily knocked down as it did little besides demonstrating widespread campus support for divestment. “This is not where we should be, given that we are Columbia and we host the expertise of the Earth Institute, that we have failed to consult, just as an example,” she concluded.

Sullivan says that committee members “conduct their own research and interviews to confirm what they are hearing in the proposal or to hear another perspective—the committee explores all sides of an issue”––be that input from faculty, administrators within the University, or expertise outside of the University.

According to Elivo, at BCD’s last meeting with Bollini, Giannini, and Minard, the three committee members suggested BCD withdraw its proposal in light of the miscommunication and resubmit one in the fall of 2014, stating that they would vote “no” on the proposal as it stood. “We told them to go ahead with the vote because we recognized they had not done any research on the issue and that writing a muddled and incomprehensive response would be an embarrassment for both ACSRI and the University,” Elivo says.

Sullivan has a different view of the situation and of the proposal; she says that the proposal requested specific action and claims that the ACSRI spent time producing research. “It is my understanding that the administrative director and the faculty chair attempted to clarify the nature of the proposal before ACSRI with BCD. The BCD proposal requested specific University action, and the ACSRI invested significant time and effort in research and debate around that specific request,” she says.

Power and Process

Benjamin Spener, who graduated from Columbia College in 2014, was a member of the committee during the 2013-14 academic year. Spener says a University senator on the ACSRI recommended him, and he was asked to join by Bollini. He had previously worked in the USenate in various capacities.

University spokesperson Robert Hornsby outlines the selection process in an email: “Faculty are recommended by deans; alumni are recommended by Office of Alumni and Development; students are nominated by Senate; all nominees are also interviewed by the ACSRI administrative team, with a focus on ensuring that the individual has sufficient interest and time available to dedicate to committee activities.”

Spener points out that in evaluating student proposals, the committee must decide whether the endowment should be used to take a stance in the first place. “The first bifurcation of the process is deciding whether the endowment is meant to be a pool of money that is supposed to grow to help the University, or whether the endowment should be used to take a position,” adding, “If you say we don’t care what the endowment is for, then the conversation is over.”

“If we want to take a stance on issues we need to ask ourselves, ‘Do we divest or do we vote our shares a certain way?’ Working from the inside, will we make more of a change than otherwise?” Spener says. Using the example of fossil fuels, Spener says, “We could ask: Is it better to sell those stocks off or advocate for more green technology through the proxy voting process?”

Spener gives the Columbia Prison Divest campaign as another example, saying that the committee might need to ask whether the prisons are “so ethically unsavory that we can’t own them at all, or are they so poorly run that we can vote in certain ways that can make a difference?”

He stresses the direct impact that the endowment has on financial aid available to students. “We have a big endowment, but it’s complicated and it’s not as if we have unlimited funds. The point of the endowment is to give out financial aid in a very meaningful way—because on a year-to-year basis, the endowment helps pay for financial aid,” he says.

Institutional Inertia

Spener says that, while committee members are very dedicated, it is difficult to get anything concrete accomplished. “There are a lot of individuals that care very deeply on the committee, but there is a lot of institutional inertia that makes it difficult to do anything,” he says, adding “This has a lot to do with the fact that the committee seems more set up to deal with the proxy voting process as opposed to divestment issues.”

Scheduling can prove difficult; the committee met regularly in the spring to vote on proxy shareholding and often did not have time to spend researching and addressing divestment campaigns. “They want students to do more of the work on the issues … but once the students do work, they want to do their own due diligence with research. This can get tough because they need to get through all the proxies,” Spener says.

In an internal document written by former ACSRI education subcommittee chair Sara Minard titled “Suggestions for Improving the Advisory Committee’s Decision-making Processes and Public Information-sharing,” she writes about the confused process for receiving proposals. “Documents are addressed to the ACSRI and received by the committee secretary, and these are either considered formal proposals that the entire committee must vote on, or not considered.  How this distinction is made is not clear. When the documents are actually received is not clear.  How the documents were received (through which University channel) is not clear,” she writes.

Spener states that while he was on the committee, the steps the committee should take after groups present a divestment proposal were unclear. “There was not a good sense from people on the committee and people wanting things from the committee about what they can do,” he says. He suggested that to make the committee more effective, a clearer delineation of its power and its process is needed.

This frustration was apparent in the committee discussions, Spener says. “Some of the professors are highly qualified and impressive thinkers who care a lot, but some of them didn’t even speak because they seemed kind of resigned,” he says.

In his time on the committee, there was “not a very clear mechanism to incorporate student feedback on the endowment beyond the committee,” Spener says. As most of the committee’s time was devoted to proxy voting, it became difficult to deal with ad hoc issues on top of its regular duties. Minard also complains of arbitrary vote scheduling, saying, “There are voting dates set without the consultation of committee members and without any discussion on what is being voted and why.”

Justin Carter, a 2014 School of General Studies graduate, former University senator, and former member of the ACSRI, says that most of the recommendations that the committee makes regarding proxy voting are followed by the trustees.

Another issue brought up in Minard’s document is how the ACSRI communicates with students. She writes, “Meeting minutes with scant information about the actual discussions held in the ACSRI meetings are drafted by the secretary and approved at the start of every meeting. These meeting minutes are posted on the website as the public record of the ACSRI deliberations.”

She also claims that the research undertaken by committee members was insufficient. “There are firms that the ACSRI employs to conduct research on the companies on which the committee is voting Proxies,” she states. “There are also sub-committees (education, fossil fuels, etc.) tasked with sharing research with every member on the committee about a particular topic. This research is neither rigorous nor are there any efforts by the committee to exploit the vast reserves of university expertise in many of the issue areas which the ACSRI takes up.”

To improve the committee, Spener suggests that elected students should have a seat on it; while University senators can sit on the committee, there is not a system to appoint other student representatives. “I’d have someone appointed from the student council to be appointed on the committee. If it’s going to be thrust in the spotlight, it should represent student sentiment,” he says.

Minard suggests a more streamlined process to address student concerns through which a timeline and immediate communication with the trustees could be established. Similarly, Carter argues that more communication is needed to improve the ACSRI. “I would say that the biggest area of opportunity is the communication—the finance portal of the University should be more easily navigable. There is a communication issue between students and the ACSRI,” he says.

Moving Forward

Sullivan says that the ACSRI still has a committee to evaluate divestment from fossil fuels and plans to pursue the issue this year: “We have developed a standing committee on fossil fuel out of the work from last spring, which is to say that the ACSRI did not view the issue, broadly speaking, to be closed. The committee is still interested in exploring the University’s role in reducing fossil fuel emissions.”

President Bollinger recently released a statement from Nov. 11 urging the committee to keep investigating the issue. “President Bollinger has encouraged the ACSRI to continue the dialogue with the trustees about this issue. The committee could continue to investigate this without BCD, though I imagine that the ACSRI will continue to be interested to hear BCD’s perspective,” Sullivan says.

In a phone interview on Tuesday, Anne Sullivan said that President Bollinger recently named law professor Jeffrey N. Gordon to chair ACSRI, and divestment debates are gaining increased prominence. The Sabin Center for Climate Change at the Law School is sponsoring a panel discussion of the fossil fuel divestment issue on Nov. 24, and the ACSRI has been working with Prison Divest to host a Jan. 20 panel on the prison divestment issue, both for ACSRI members and the Columbia community at large.

The divestment debate of the mid-80s was an inflection point for the University—both for the endowment and for the empowerment of politically active students. In the decades since, Columbia has put in place procedures to address activists’ concerns, all the while balancing its fiduciary obligations and its desire to ensure that as much funding as possible is available for support of University programs—including student aid. As evidenced by CPD and BCD’s interactions with the ACSRI, these procedures are far from perfect. If the ACSRI hopes to fulfill its function, then a clearer delineation of its power and its process is needed.


Dunni Oduyemi recused herself from the editing of this piece because of her involvement with Columbia Prison Divest.


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