President Valerie Smith and Board Chair Tom Spock ’78: A Response to Mountain Justice’s “Conflicts of Interest”

valerie smith

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.

We write in response to the Feb. 25 guest opinion, “Board Members’ Conflicts of Interest in Regards to the Fossil Fuel Industry Leave Us No Choice but to Escalate”. Many of the assertions in the piece are unfounded and present a distorted picture of the efforts the Board and the administration have undertaken.

First, the Board and the administration are united in their deep commitment to climate action and agree that “it is necessary and urgent that Swarthmore take a leading role in the fight against climate change.” To affirm the significance and urgency of that commitment, in the last year, the Board has established a Green Fund; developed a sustainability framework for all future construction projects; and committed $12 million toward making the new Biology, Engineering, and Psychology building a model for environmentally intelligent construction practices and energy usage. Further, the College has expanded the office of the Sustainability Director and pledged to achieve carbon neutrality no later than 2035, as expressed through the Presidents’ Climate Commitment.

Second, we have encouraged and supported the carbon charge initiative that originated with the faculty and have already built this charge into next year’s budget. Our view is that a carbon charge is critically important, and that to be meaningful, the carbon charge must accomplish three objectives:

  1. It should hurt. Carbon charges are politically sensitive because they will cost real money. To be meaningful, our initiative should be no different.
  2. It should change behavior. More expensive carbon will reduce demand – the whole point of a carbon charge. We need to measure results and routinely adjust our plan to make sure our initiative is effective.
  3. It should be transferrable. Swarthmore’s plan should be designed as a template that can be adopted and improved upon by other institutions, sparking conversations and building toward an economy-wide charge for burning carbon.

The adoption of such a charge will limit carbon demand – our only hope for slowing global warming.

Third, we reject the tactic of singling out loyal members of our community who are deeply committed to the College and who have worked tirelessly on its behalf. The tenuous links between individual board members and the oil industry are not, in fact, conflicts of any kind, and the assertions amount to nothing more than spurious ad hominem attacks.

The further assertion that the consensus at which the Board arrived last May to re-affirm our 25-year-old policy of investing our endowment for greatest long-term return is somehow rendered invalid by the participation of these three Managers is untrue and ignores the fact that decisions reached by consensus require the input and acceptance of all 37 members of the Board.

Finally, whether fossil fuel divestment is a good moral choice for the College is a fair question, and a hard one. This is why the Board has spent more time on this subject than on any other single topic in the last couple of decades. The decision not to divest, originally made in 2013, was re-examined last year following an extensive series of conversations. At that time the Board reached a firm consensus reaffirming the Board policy, established in 1991, that we manage the endowment “to yield the best long-term financial results, rather than to pursue other social objectives.” It was a process of which the community should be proud, and no further discussion of divestment is planned (see http://www.swarthmore.edu/board-managers/sustainability-and-investment-policy).

It is the Board’s responsibility to ensure that both current and future generations of Swarthmore students have access to the financial resources required to (1) maintain our profound and historic commitment to make a Swarthmore education accessible to all qualified students, regardless of their families’ ability to pay; (2) attract and retain an outstanding faculty; and (3) sustain the support services necessary to allow students to thrive while in college. The weight of this responsibility is clearer than ever before in a year when our financial aid budget has increased by nearly 20 percent.

We affirm the right of Swarthmore students to disagree with the Board’s decisions. What we have experienced in the last few years is a disagreement over tactics, not overall objectives. It is our sincere hope that we can all refrain from the use of spurious allegations or individual attacks that separate us unnecessarily. Instead, we must all work together if we hope to stave off irreversible damage due to climate change.


Valerie Smith, President, Swarthmore College

Tom Spock ‘78, Chair, Swarthmore College Board of Managers


  1. “The tenuous links between individual board members and the oil industry are not, in fact, conflicts of any kind, and the assertions amount to nothing more than spurious ad hominem attacks.”

    Is this really the one-sentence explanation the student body deserves? The conflicts may be tenuous, and they may not actually be conflicts, but without any further detail or proof the claims feel hollow and purposely vague.

    • I agree. Can you please explain why they are not conflicts of interest? I would like to believe you but you have given no explanation.

      • The reason is simple (actually there are a lot of reasons, but here’s a pretty straightforward one). Several members of the Board oversee investment trusts that invest in, among thousands of other stocks, in the stock of investment companies. They don’t make decisions on which individual stocks to invest in; they help to choose portfolio managers who make those decisions. And those portfolio managers invest in a diversified array of stocks. That includes everything from fossil fuels to alternative energy to consumer goods to airlines. The purpose is to get a representative sample of stocks across the economy. Claiming that the Board is conflicted because they oversee Trusts that invest, among a whole lot of things, in fossil fuel stocks is like claiming that anyone who invests in a mutual fund that has any holdings in Citigroup is responsible for predatory lending– it’s just total nonsense.

        The insinuation that the members of the Board are conflicted because of this just shows a complete lack of understanding of the investment fund industry. Which by itself is fine! But Mountain Justice members are wielding their ignorance as a cudgel to denounce members of the Board as compromised at best and insidious at worst, which is really pretty offensive.

  2. interesting how President Smith and Mr. Spock say the carbon charge is necessary because “it will hurt,” yet say that divestment is a bad decision because it may hurt the endowment.

    Luckily, divesting would not hurt the endowment, as investments bank HSBC has warned that remaining invested in the fossil fuel industry is a dangerous bet that might hurt investors. Northstar, Professor Mark Kuperberg of Swarthmore and Don Gould of Pitzer have all refuted the argument that divestment would hurt the endowment.

    The carbon charge is a positive change, but simply is not enough and cannot hope to serve as a replacement to divestment. Insisting that the only way to combat climate change is through the supply side may have worked fifty years ago, before Exxon and climate lobbyists funded climate denial for so long that we are truly on the brink of planetary suicide. At this point, we must fight the battle against climate change on every front.

    While the carbon charge is a positive initiative, it does not acknowledge the crimes wrought by the fossil fuel industry, an industry that indirectly causes millions of deaths each year, primarily among frontlines communities, and has caused catastrophic oil spills and incited resource warfare worldwide.

    By failing to divest, you are betting that international climate agreements will not be upheld, that we will fail to stay below 2 degrees Celsius warming, the threshold set at the Paris Climate Talks in 2015, and that we will fail to keep oil in the ground. If the agreements are upheld, fossil fuels will be devalued and will pose an enormous risk to the schools “long-term financial standing.”

    Swarthmore, the carbon charge is too little too late, and this weak reply does not excuse your moral duty to take every necessary step to combat climate change and divest from fossil fuels.

  3. This whole affair has been really disappointing and doesn’t paint this segment of Swarthmore students in a good light. More broadly, it reflects an increasingly disturbing theme among followers of supporters of certain politicians that involves attacking the motives of those that disagree with them rather than probing into substantive issues. It’s particularly appalling when it’s directed at members of the Board, whose service is purely voluntary, and who share all of our commitment to the environment and sustainability.

    So yes, the explanation of Board members’ “conflicts” need not be explained, because the charge itself is insulting in how shallow, hollow and bad-natured it is. Any investment company that puts together representative stock portfolios will invest in energy stocks, including fossil fuel stocks. That’s not because they love Shell or Exxon, or necessarily support their actions, but because those are two of the biggest companies in the world, and investing in them is unavoidable for any representative portfolio. Claiming that portfolios overseen by members of the Board have holdings in these stocks demonstrates absolutely nothing, and calling it a conflict is wrong (and not arguably wrong– just flat-out wrong).

    On the question of cost, the answer is more nuanced, but the question has already been answered. Re-litigating it shows that those raising it haven’t thought about that answer, and aren’t ready to engage in critical reflection. It’s entirely possible that fossil fuel stocks are a bad long-term play. Or they might be a good long-term play. If anyone, whether it be Professor Kuperberg or Don Gould of Pitzer, knew, they’d have made a lot of money off of that knowledge (though, knowing Professor Kuperberg, he’d never claim to know). What IS certain is that the Swarthmore endowment is not managed internally– it is managed by external fund managers that charge management fees. Specialized endowment restrictions, such as, for instance, avoiding fossil fuel stocks, would force those external managers to create separate accounts for Swarthmore, and those separate accounts would charge higher fees because they would require more active management. Those higher fees represent a loss to current Swarthmore students– it means less money for social justice initiatives, less money for financial aid, and less money for capital projects. And all that may be worth it if divestment actually forced fossil fuel companies to change their behavior… but it won’t. Because Swarthmore’s endowment of a bit under $2B represents roughly 0.5% of the market cap of just one fossil fuel company, ExxonMobil.

    So yes, feel free to argue that the symbolic impact of divestment is worth paying higher fees to investment managers that drive down the endowment’s performance. But don’t claim that divestment doesn’t have costs (if you really believe that, you should go into the market and short fossil fuel stocks yourselves), or that members of the Board are acting in bad faith– it’s petty, it’s appalling, it’s insulting, and it’s intellectually lazy. Swarthmore taught you better.

    • I disagree that “Swarthmore taught you better”. The amount of hype and mis-information distributed by the investment management industry is overwhelming. It is not in the colleges charter to argue otherwise. Hopefully, students are being taught to think for themselves, or just plain think, so that one day they can see through all the smoke and mirrors of an industry that amounts to nothing more than a high-priced casino.

      • I deal with this industry every day. Setting aside the question of whether there’s a lot of “hype and misinformation” or “smoke and mirrors” (sorry to let you down, but there really isn’t much; what funds can and can’t do or communicate is pretty tightly regulated), it’s generally true that mutual funds largely don’t justify the fees they charge (which is why people move toward low-cost index funds like those offered by Vanguard).

        But the reason funds do charge those fees is because they’re actively managed. If you ask them to actively manage your portfolio (by oh, say… divesting from fossil fuel stocks) in a particular way, you’re going to pay a fee to do that. Your claim is that by “negotiating,” you can negotiate yourself a free lunch where investment managers will divest from an industry without charging a fee. That doesn’t, can’t, and won’t happen.

  4. While Socially invested portfolios require a bit more care, they need not cost more. That is a function of negotiations between Swarthmore and whatever advisor they choose. Negotiations with multiple possible advisors could indeed deliver lower fees. The advisors that these board members are affiliated with offer such mandates to their clients who request same.

    As to the performance, one need only look at socially responsible mutual funds to gain some insight. A single advisor offers socially responsible domestic equity, international equity and fixed income investments. While the bond and domestic equity portfolios underperformed their benchmarks, for the last 5 years, the international equity fund outperformed. It is more than likely that a social filter would have little statistical significance on investment performance. The boards concern about providing the best “long-term financial results” is laudable, but most likely unaffected by such filters. At minimum, I doubt these board members have offered proof that socially responsible investing will compromise that goal.

    Financial sucesss and social responsibility – you can have it all !!

    • Negotiating with multiple advisers isn’t exactly a novel idea. No matter which way you cut it, negotiating separate investment restrictions for your account is going to be more costly than not doing so. There’s no way around that– what you’re suggesting is that you can “negotiate” your way into separate accounts for no additional charge. That’s a fantasy. It’s possible that “socially responsible” funds will perform no worse than ordinary funds. It’s not “more than likely”– that, again, is a fantasy. But what’s certain is that the fees on such funds will be higher than investments without that filter. When you add up the difference in fees, the real impact on returns is significant.

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