Response to Swarthmore Mountain Justice’s ‘Open Letter’

Editor’s note: This article was initially published in The Daily Gazette, Swarthmore’s online, daily newspaper founded in Fall 1996. As of Fall 2018, the DG has merged with The Phoenix. See the about page to read more about the DG.

I write in response to the “Open Letter to the Finance and Investment Office and Board of Managers” from Swarthmore Mountain Justice on November 15, 2011 about the College’s investment policies. The letter called on the Investment Committee and the Finance and Investment Office to provide specific information on endowment investments. This response explains the College’s current policies on endowment investments and invites interested groups to share their views with the Committee on Investor Responsibility, created in 1997 in order to involve students in fulfilling the College’s responsibility as a shareholder of companies held in the endowment.

The Board of Managers believes the primary mission of the endowment is to support our vibrant academic program and the residential life on campus, including our admissions and financial aid policies that ensure access to qualified students from all economic backgrounds. The Board of Managers delegates to the Investment Committee of the Board the investment responsibility for the endowment. Its charge is to “provide a sustainable level of distribution in support of the College’s annual operating budget while preserving the real purchasing power of the endowment.” This policy ensures that the endowment can provide for future generations in the same way it provides for today’s students, faculty, and staff.

The endowment last year (2010-11) provided almost 40% of the College’s operating revenues. The College spent an average of $29,955 per student from the endowment. The average cost per student of a Swarthmore education last year was $80,944. Every student at Swarthmore, even those who are not on financial aid, receives a benefit from the endowment every year. The College’s financial aid policy, its low student/faculty ratio, and the library’s wide collections, to name a few, would not be possible without the endowment.

The Board of Managers does not believe the endowment should be used in pursuing objectives other than to help the College meet its primary mission. Underlying this policy is consideration of the many thousands of donors to the endowment over the generations, whose generosity was intended to support the educational mission of the College.

The Investment Committee does not choose specific endowment investments, but rather chooses professional investment firms to invest portions of the endowment in accordance with their areas of investment expertise. Prospective firms are evaluated on many criteria, including investment philosophy, process and performance, of course; but also considered are the quality and stability of the firm and its investment team and its code of ethics and professional standards. These firms then choose specific investments. They likewise evaluate companies with similar attention to a wide range of criteria, again including the quality and integrity of company management and practices. The best firms are in high demand and can choose their clients. Once a firm is hired, the College signs an investment agreement with that firm. Typically, those agreements have confidentiality clauses. Disclosure of a firm’s investments would reveal its proprietary investment strategy and compromise its competitive advantage.

The Investment Committee believes the College should be a pro-active shareholder in the companies it owns shares in. The College has a responsibility to hold companies accountable. Annually, companies must hold a meeting for shareholders. At these meetings, and under applicable SEC regulations, shareholders may put issues on the ballot for a shareholder vote. Swarthmore’s Committee on Investor Responsibility—on which four students, two administrators, and two members of the Investment Committee serve—monitor shareholder resolutions and make recommendations about how Swarthmore should vote its shares. The student members of the Committee have attended and spoken at shareholder meetings and worked in conjunction with other institutions on issues of equal employment opportunity, labor and environmental standards, and reporting of political contributions, to name a few.

In the last decade, the College’s Committee on Investor Responsibility has demonstrated that effecting positive social change can come from exerting influence on a company by the very virtue of being a stockholder. In 2002, three days after Swarthmore informed Lockheed Martin of its intent to re-file a shareholder resolution urging the company to bar discrimination on the basis of sexual orientation in its equal employment opportunity policy, the company announced its plan to add sexual orientation to the policy. Two years later, the Committee was instrumental in getting two more Fortune 500 companies to also broaden their equal opportunity policies. These actions demonstrate the positive impact achieved through engagement with companies.

We invite members of the Swarthmore community to communicate their concerns about particular companies to the Committee on Investor Responsibility, to assist that committee in proposing recommendations on key issues, and to engage in dialogue with those companies directly. Please consult the committee’s web page here.

—Suzanne P. Welsh, Vice President for Finance and Treasurer 


  1. Suzanne,

    Thank you for this letter. Regardless of whether students are satisfied with this response or not (I imagine there will still be discontented folks aplenty), your explanation of Swarthmore’s investment policy was clear, informative, and helped me to better understand aspects of the college’s investments that don’t seem to jive with its mission (MJ isn’t the only group looking into this).

    Please continue to communicate with us like this. While I (now) understand why some aspects of Swat’s investments are confidential, any further transparency you can provide is appreciated by me, and presumably many others.


  2. You mean it’s not as simple as the evil, no-good Swarthmore administration realizing the error of its ways and making amends by vowing to never, ever, ever be involved in anything that’s damaging to anything ever again?

  3. Here’s a better one:
    Regardless of the means through which Swat chooses to manage their endowment, divesting from a handful of companies because their product is nonrenewable is pointless and counterproductive.

    First, what’s the goal of divestment? A corporation has gained all the money they’ll ever earn from a share the minute they issue it, so all that divestment can hope to accomplish is to indirectly influence the price at which those stocks are sold and thus reduce the profits a company will make on the sale of future stocks.

    Bearing this in mind, Swat could divest either by selling their shares or tossing them in a dumpster… but throwing away your stocks outright just reduces the number of shares outstanding, increasing the market price (by a negligible amount), so the only alternative is to sell it, And when Swarthmore sells a stock, someone has to buy it, right? Even if Swat invested one hundred percent of the endowment into Exxon and sold it at once, they wouldn’t be capable of inflicting downward pressure on Exxon’s stock price – people buying Exxon shares are doing so for a share of the profit, and we can assume that the share price reflects the ability of Exxon to yield profit for its shareholders.

    Are there circumstances in which divestment would work? Sure, when there’s a coordinated attempt by the international community to correct an egregious infraction of law or human rights – as South Africa found out thirty years ago – divestment might be used in lieu of legal avenues. Though Mountain Justice might like to pretend otherwise, the business that Exxon engages in is entirely legal. The most effective ways that MJers can condemn Exxon for ethical and/or legal concerns are through their own consumption habits and the courts (respectively), not through financial markets.

    In the future, Mountain Justice members should at the very least make an attempt to have their investment proposals reflect a basic understanding of equity markets.

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