Berea College’s Investment Policy: A Case-Study in Hypocrisy or the Ends Justifying the Means?

NOTE: This article was published in two segments in Berea College's (BC) student newspaper, "The Pinnacle," in April 2005. I was actively involved in pushing for an investment policy more consistent with the College's mission for several years, and this article was unfortunately my final word on the topic.


The question posed by this article’s title is one that every member of the BC community should wrestle with. After all, the income generated from the College’s endowment funds a tremendous portion what BC does, from the salaries of its professors and staff to our tuitions, many of the community service programs the College administers, all the way down to the laptop on which I am typing this article.

Shouldn’t we, the beneficiaries of the College’s investment policy, be at least interested in knowing how all this money is generated? What if we learned that all the BC goodies we so often take for granted are based upon profits from the pornography, gambling, or alcohol industries, from weapons-makers, environmental destruction, or sweatshop labor? Such a revelation might not affect our decision to be part of this institution, but it might bestow a greater sense of responsibility on our part; of course, it might also sully the College’s hard-won public image.

Like many troubling ethical questions, the complexities and implications of the College’s investment policies lie mostly hidden from public view, at times it seems intentionally so. After the 1980s, when divestment from South Africa’s Apartheid-based economy was all the rage amongst U.S. colleges and universities, there was little discussion about other societal evils BC may be supporting via its investment policies.

That silence came to an end in 1998, when a group of students, staff, and faculty garnered the support of the Student Government Association and the General Faculty and demanded that the College re-examine the issue of ethical investment. As often happens in bureaucratic institutions, a “fact-finding committee” was formed. In fact, over the course of 1999-2002, the Executive Council formed two separate on-campus committees to address these concerns. The rationale for forming a second committee, one can only surmise, is that the President and Board of Trustees Investment Committee were not satisfied with the results of the first one, which suggested, among other things, that:
• the College’s Christian foundation demands an intentional investment standard which reflects these values
• an ongoing ethical investment committee should be formed to work directly with the Board of Trustees to further study and recommend ethical investment standards

Unfortunately, these recommendations were considered by only a few people from the administration and a small subset of the Board of Trustees. The second on-campus committee, appointed nearly two years later, undertook a more thorough examination of the College’s investment policy and how it affects funding of the College’s programs and mission. Yet its conclusions were strangely familiar:

“…that Berea College appoint a permanent Ethical Investment Committee within the shared governance structure of the College… The goal of the process and the committee would be to incrementally increase the allocation of long term investments into areas where the College could make a positive impact in socially responsible areas while keeping the return and risk characteristics of the overall portfolio consistent with the investment policy and philosophies of Berea College.”

This committee also pointed to the College’s moral obligation to take its investment policies seriously, given BC’s mission and Christian commitments. One member of the committee, Loretta Reynolds (Campus Minister), stated that: "If our motto is more than just a motto: ‘God has made of one blood all people of the earth’ then it seems difficult to believe that we can invest in things that destroy or inflict harm on some of 'those people of the earth'. It is not only that we care about being socially correct but social responsibility should be an intrinsic part of who we are because of our foundational commitments."

Meta Mendel-Reyes, another committee member and head of the College’s service-learning programs, noted that: “The bottom line for me is that we agreed to recommend a permanent ethical investment committee. Despite the concerns about Berea's unique dependence on its endowment, all of us were persuaded that a committee is needed to assess, on an ongoing basis, what filters would allow us to achieve both fiscal and social responsibility. The reason for socially responsible investing goes beyond the fact that it is increasingly common in higher education; I believe that Berea's mission essentially requires it.”

Yet despite these sentiments and the wide range of options laid before the College to assist us in pursuing an investment policy commensurate with our stated mission, the response by President Shinn and the Board’s Investment Committee has amounted to little more than stonewalling. After basically ignoring the findings of the first on-campus committee, then waiting nearly two years to appoint a second committee, the President and the Investment Committee then sat on their recommendations for almost a full year before even discussing them. This long-awaited discussion amounted to a conference call (rather than taking the issue up during one of their regularly-scheduled meetings) and a flat refusal to implement or further consider the committee’s recommendations. We appreciate your concerns, thanks for your work, have a good day—end of discussion.

Though the Investment Committee’s official response to Jeff Amburgey (Vice-President of Finance) has not been made public, we did receive an inkling of their perspective from President Shinn’s January 2005 “President’s Report”:

”While trustees recognized the merits of selective investing to promote certain Berea core values, they simply could not see a way this could be done responsibly and practically given the way an endowment of Berea’s size must be managed.”

This statement does not satisfactorily explain why the 1980s-era Ethical Investment Committee was allowed to lapse, why repeated pleas to re-establish it have been denied, and why we are now essentially being told that discussion of this issue has run its course.

Stating that one can “not see a way” that something can be accomplished does not so neatly equate with discontinuing the search to find that way. Further, boiling the issue down to the practicality or impracticality of “selective investing,” which the President has repeatedly done, is a gross oversimplification of the range of options potentially available to the College, and one which obscures the issue in order to interrupt further, more informed conversation.

If President Shinn and the Board of Trustees Investment Committee were taking these concerns seriously, there are a number of important steps they could take to move us forward rather than bringing this conversation to an end. What follows are only a few of many possible steps:

• Utilize wider discussion of socially responsible investing (SRI) as an educational tool
Given that many of us will have to grapple with the complexities of ethical investment in our lives, and that this issue is one which is reflected in some of the College’s core programs (e.g., service-learning, sustainability, entrepreneurship for the public good), why not foster discussion that can thoughtfully involve much of the campus community rather than hiding the issue from public view? Why has the Investment Committee to-date failed to involve the entire Board of Trustees in the conversation? Why haven’t they made their full discussion on this issue public? How about a convocation or some academic-based seminars dedicated to this topic? How about giving us a peek at what companies or money managers BC has invested in, and how those money managers have voted as shareholders when issues that would be of concern to the BC community have been raised—that’d certainly make for an interesting conversation-starter?

• Form partnerships with sister institutions facing similar struggles
BC is not the first institution in history seeking to walk the fine line between making money and accomplishing a societal good. This question is one that many educational institutions and religious communities are grappling with, and we should look to them as partners in this struggle. Organizations and associations exist for just this purpose, such as the Interfaith Center on Corporate Responsibility, the Coalition for Environmentally Responsible Economies, and the Investor Responsibility Research Center, just to name a few. Thus far, the College has done little if anything to even open discussion with these organizations.

• Consider a wider range of options for potential action
Given the College’s reliance upon its endowment revenue, it may be that certain options are not available to us. But it’s hard to believe that we’ve given adequate consideration to the entire range of options. The SRI movement is a growing and evolving community of intelligent and creative people, and they have had several decades now in which to develop a variety of approaches to this problem. These approaches include selective investing, but they also include community investment, shareholder advocacy, and a greater diversification of one’s investment holdings (which thereby allows for “experimentation” with investment alternatives without seriously endangering overall revenue), among others. Once the full range of options has been examined, and a complete explanation offered as to why these would or wouldn’t work, only then should we be satisfied that the issue has been adequately addressed.

• Re-establish an ongoing ethical investments committee
It’s telling that two different groups of people have come away with the same conclusions, and we should hear them out. What harm might it do to establish a joint Campus-Board of Trustees committee to study socially responsible investment, make occasional recommendations, and involve the campus in ongoing discussions? To some, the idea of such a committee is probably deeply threatening because it highlights undemocratic structures which exist in the College’s governance. To others, there’s likely concern that examining this issue might open up a Pandora’s box of uncomfortable questions and realizations. But these consequences are trivial in the face of continuing to live a lie, which is exactly what BC does by keeping its investment policies hidden.

I recently received an action alert from a group called Corporate Accountability International (CAI). In the email they talked about how Coca-Cola is draining water resources from many of the world’s poorest communities for use in bottled water and soft drinks. This Spring CAI has plans to raise the issue at Coke’s annual shareholders’ meeting, and was asking for help from Coke shareholders. It saddened me to think that my education might be funded by the type of exploitation that Coke and many other corporations are guilty of, but what seemed a worse prospect was not even knowing if this is the case. If BC does own stock in Coke, it’s highly unlikely that our money managers can be relied upon to act on behalf of the world’s poor and in accordance with BC’s motto. Perhaps at its base, the ability to claim innocence through ignorance is what our current investment policy is really about. But I didn’t become a part of this community in order to learn how to use ignorance as a shield for my actions—did you?

POSTSCRIPT: Berea's grade on the College Sustainability Report Card, a project of the Sustainable Endowments Institute, has been stuck at a stubborn C+ for the past three years. Despite the College's ambitious efforts in other realms, its scores on "Endowment Transparency," "Investment Priorities," and "Shareholder Engagement" have been dismal.