A quick look at the investment practices of Reed College
I urge all members of the Reed community to read through the college’s Investment Responsibility Policy (IRP), and to think critically about what this little three-page document reveals about Reed’s philosophy of engagement with the world.
In brief, the policy states that in order to protect academic freedom, the college must remain politically neutral as an institution and therefore cannot make investment decisions for reasons other than financial maximization. In other words, “To own is not necessarily entirely to endorse.” Non-financial decisions are possible only “where the action taken reflects widely-held, perhaps almost universally-held social or moral positions.”
While protecting academic freedom surely is the job of an institution of education, equating this with “political neutrality” is dangerous. There is no politically neutral stance; denial of politics is itself a political position. This denial (or neutrality) is a statement of acquiescence to dominant culture or dominant practices. Mass incarceration and systemically racist legal systems are dominant practices of our society — they are normalized, but what is normalized cannot be our definition of what is neutral or morally acceptable, and what is an “almost universally held position” is certainly not always a measure of what is socially responsible. In a time when dominant politics is in the process of electing a rapist to the Supreme Court, denying climate change, and ramping up immigration detention facilities, Reed College especially cannot afford to cushion itself in neutrality and must take a more critical stance in how it invests and approaches politics.
The IRP was adopted by the Board of Trustees in 1978, and has not been amended since. Here’s a brief, and possibly incomplete, history of how this policy has been levied against student investment-related movements for the past 40 years:
In the 1980s’ worldwide apartheid divestment movement, the trustees agreed to not buy further stocks from companies invested in South Africa, but took no action to divest from already held stocks. The move was symbolic only.
In 2014, after a two year effort by the group Fossil Free Reed (FFR), Reed’s Investment Committee cited the IRP and academic freedom as the primary reason the college would not divest from fossil fuels. “Academic freedom,” wrote chairman of the trustees Roger Perlmutter, “requires limiting the political role of the institution or the enlistment of the institution’s name in political causes.” Roger Perlmutter, now Chairman of the Board of Trustees, further insinuated that an institution “as intellectually creative as Reed” was exempt from climate action because “It stands to reason that Reed makes its greatest contribution to the world, and to the climate change issue, through the education of our students.”
In November 2017, when Reed College was one of a handful of colleges named by the Paradise Papers information leak to have holdings in EnCap Investments, an offshore oil and gas investment partnership, Reed was quick to respond with a statement citing the IRP, as well as the statement made to Fossil Free Reed in 2014.
Finally, in the fall of 2017, the demands of the group Reedies Against Racism for Reed to sever ties from its operating bank Wells Fargo, a bank known to invest in the prison industrial complex as well as the Dakota Access Pipeline, were dismissed on the grounds of, what else — political neutrality. “This is not a position of ‘neutrality.’” wrote the Investment Committee in its December 2017 statement. “It is, instead, a recognition that the Reed community’s shared ethical commitment to liberal arts education outweighs other possible goals that groups or individuals within our community might advocate.”
When our institution lumps all social justice concerns under the “political” and shields itself from engagement with the guise of “political neutrality,” how can we as a community challenge the definition of what is “neutral?” Here is a closer look at some of the implications of the policy:
Academic freedom and institutional political neutrality. Preserving “individual freedom of inquiry and expression,” as stated by the Faculty Constitution and Bylaws, does not preclude institutional social responsiveness. The relationship between institutional nonpartisanship and freedom of expression of individuals within an institution is nuanced and should not be unequivocally equated. The 2017 trustee statement on Wells Fargo draws on academic freedom by citing the case of a Marxist professor who was fired in the 1950s McCarthy era. The comparison of this case to RAR protesters misses one key point: in the 1950s the Red Scare was dominant culture; last year, RAR was challenging dominant culture. The release of the Marxist professor Stanley Moore is a prime example of the dangers of actions legitimized in the name of political neutrality.
Primacy of financial objectives. Financial stability is important for the endowment to do its job of providing financial aid and other services. Yet the IRP seems to insinuate that financial stability is exclusive to socially responsible investment. I will not get into the (lack of) long-run economic sustainability of fossil fuels here. But it is clear from the precedents of hundreds of other institutions that have divested or taken steps toward divestment (including universities, towns, and religious organizations) that money need not always be socially blind. And yes, to own is in fact necessarily entirely to endorse.
Appeals and exceptions to the policy. Appeals for non-financially motivated investment can be submitted to Vice President and Treasurer Lorraine Arvin. The IRP writes that the college “should refrain from actions where significant divergence of opinion is perceptible among college constituencies or members.” Judgements on whether to act on non-financial behavior of companies are based on “to what extent the issue can be said to characterize the company.” All of these guidelines are too vague to be very useful, perhaps intentionally so, and rely heavily on the subjective judgments of the trustees’ Investment Committee as to what is a “significant” divergence of opinion and what “extent” of a company’s behavior is enough to deem it considerable.
And what about the statement that “Reed makes its greatest contribution to the world … through the education of our students?” The educational mission of Reed College does not make us exempt from current action, nor does it legitimize current harm done by the institution through the codified apathy if its investment practices.
All of these past failures when it comes to investment-related movements may make continuing to push these issues, and getting Reed to divest, seem daunting. Indeed, we face a set of significant challenges when it comes to tackling questions of investment.
First, specific information about the endowment is guarded by non-disclosure statements. Digging through financial reports, one finds only that “Reed College’s endowment consists of approximately 475 individual funds established for a variety of purposes.” These 475 funds, accounting for a total of 550 million dollars, fall into broad categories such as “absolute return,” “private equity,” and “private real estate.” Further complicating the issue is the fact that many of these funds go through third-party investment corporations. With information about investments and loans convoluted in intransparency, how do we know to where to direct our energy?
Second, the trustees are extremely inaccessible. Not only are they never seen on campus, but the only way to reach them at all seems to be through secondary communication with the Treasurer’s Office. I’m not even sure who the trustees are, or how exactly they operate. After some research I found that the current chair of the Investment Committee, George M. James, worked with Morgan Stanley for 24 years and has now started his own investments capital, all of which still tells me nothing about his vision for Reed. This lack of information creates an environment of mistrust on both sides.
Lastly, as students we have an extremely short generational memory. Organizers leave and new students come in without any context. It takes extensive time and energy to keep regathering information and reeducating newcomers. It’s easy to play a waiting game when you know a student movement is only going to last a couple years at most.
So, where do we go from here?
We need to work toward an organized, lasting network of information and strategies that includes members from across a diversity of student groups. It should be a decentralized organization that is not dependent on any single leader or group of leaders for continuity, and is easily accessible for new members to join. It would be helpful to have more transparency and open communication with administrators and trustees. How the trustees operate, how the endowment functions, and where money is invested should be readily available information. Long-term student organization, financial and procedural transparency, and direct communication are crucial to the process of challenging the institutional backbone of political neutrality and beginning to work toward socially responsible investments.
What would it take to get the Investment Responsibilities Policy reformed? Is there even a system in place that allows for review and reform of investment policies? I have not yet been able to find that out. But what is clear is that for Reed to start acting less like a corporation and more like a socially responsible institution, the socially blind framework of political neutrality that guides our investments must be overturned.
If you are unconvinced, if you disagree, please challenge me, and challenge each other.
Reed College’s Investment Responsibilities Policy can be found at https://www.reed.edu/investments/policy.html.