MIT Should Establish a Standing Committee
on Investment Responsibility
The authors propose that MIT establish and adhere to guidelines for responsible investing practices that take into account the social, environmental, and corporate governance impacts of its investments. They further propose that the Institute create a Standing Committee on Investment Responsibility (SCIR) to accomplish this objective.
After years of dismissing global warming concerns, ExxonMobil is beginning to acknowledge the problem of climate change. According to SEC filings, MIT’s endowment portfolio has prominently featured Exxon for many years. Should MIT have been invested in a company that may have been undermining scientific discourse? Such investments might be justifiable if MIT took a more active, community-based approach to shareholder engagement.
Shareholder engagement includes – among other measures – proxy voting, letter writing, and resolution filing, none of which involves altering investment strategies or moving money. Last year, for example, Exxon shareholders filed a resolution that asked the company to adopt goals for reducing greenhouse gas emissions. The resolution received an impressive 31% of the shareholder vote and garnered tremendous media attention. [Dashika Slater, "Resolved: Public Corporations Shall Take Us Seriously," The New York Times Magazine, available at www.nytimes.com/2007/08/12/magazine/12exxon-t.html (August 12, 2007).] It is reasonable to argue that shareholder pressure contributed to Exxon’s shift on global warming.
Last year, as part of a major public relations campaign, Exxon defended itself against criticism by touting its research partnership with Stanford. Its board highlighted this partnership in its proxy statement against the aforementioned resolution. To protest the company’s use of Stanford’s name, Steve Bing withdrew a $2.5 million pledge to the university. Although the Institute does not have a widely publicized partnership with Exxon, external corporate affairs are becoming increasingly difficult for colleges and universities to ignore. With an endowment of $10 billion, which is larger than the market capitalization of many major corporations, MIT carries great influence with its votes, especially since the threshold for resubmitting a resolution is not a majority vote, but rather, a 3% vote for the first year, and an increasing percentage in subsequent years.
Harvard, Yale, and Stanford all established standing advisory committees on shareholder responsibility in the 1970s (respectively, in 1972, 1972, and 1971). In 1971, by contrast, MIT established the ad hoc Advisory Committee on Shareholder Responsibility (ACSR), which did not even convene between 1999 and 2006.
While MIT’s ACSR has been largely defunct, Harvard, Yale, and Stanford have led academia in engaging shareholders and responding to grave human rights crises.
A standing committee complete with members and guidelines would enable a proactive and efficient response to pressing concerns that might arise in regards to MIT’s investments. It is often objected that Institute policy should not proceed from the decisions of peer institutions. In the absence of a clear rationale, however, this posture ceases to be a defense of MIT’s uniqueness and instead becomes an excuse for complacence. The ACSR’s recent decision to divest selectively from certain companies operating in Sudan came long after most schools had decided to divest, and with much criticism about its lack of transparency.
We stress that SCIR would be an advisory committee whose principal function would be to recommend how the Corporation should vote on any shareholder resolutions that were submitted for its consideration. It would have no control over MIT’s endowment. It would, however, allow the Institute to engage corporations in a manner that it has been unable to with an ad hoc committee.
The first step would be to elect representatives to the committee. SCIR would comprise a diverse group of students, faculty, and administrators who would collectively possess expertise in all areas that would be important to shareholder resolution votes, ranging from finance to economics to urban studies to human rights.
The second step would be to draft guidelines in collaboration with the MIT Corporation. SCIR would apply them to determine how to vote on shareholder resolutions.
A standing committee that can represent the community and evaluate its concerns transparently is essential for MIT to live up to its shareholder voting responsibilities. The Corporation Joint Advisory Committee has neither the time nor the resources to undertake the responsibilities with which SCIR would be entrusted. The Corporation could task SCIR with collecting, analyzing, and synthesizing all of the relevant information, thereby affording itself greater time to weigh higher-level considerations of the Institute’s finances.
A Notable Concern
Many individuals have expressed the concern that SCIR might become a channel through which to apply divestment. Given that SCIR’s membership would be so diverse, and that the guidelines discussed above would include a strong presumption against divestment, it would be difficult for any minority to pursue an agenda. Only if the situation under consideration was a priori judged to be sufficiently grave, and if all possible recourses for engagement had been exhausted, might divestment be recommended.
Our proposal has made great progress in the months since its inception. As a response to the student community’s concerns, 39 U.A.S 5.3 – 54gsc7.5 “Establishing Responsible Investing Principles at MIT” is a joint resolution of the Undergraduate Association and the Graduate Student Council, passed overwhelmingly by those student bodies. Available online is a comprehensive informational packet that includes the text of the resolution and descriptions of comparable committees at our peer institutions. [We invite readers to view this documentation at the following link: mit.edu/amnesty/scir.]
We want this committee to be representative of the faculty, and hope to have our proposal placed on the agenda of the February 20 faculty meeting. The time to establish SCIR is long overdue – please join us in realizing this crucial imperative.