Put Your Endowment Money Where Your Mission Is

As published in The Chronicle of Higher Education

By Terra Lawson-Remer and Dan Apfel


The 2012 election season is just behind us, but before the next one begins, we need to take a serious look at the increasing role that money is playing in influencing political outcomes.

This year official federal-election spending was projected to surpass $5.8-billion, compared with $3.1-billion in 2000. And in the wake ofCitizens United, the Supreme Court case that barred the government from restricting the amount of money that corporations could spend on political campaigns, unidentified groups shelled out over $200-million to influence campaigns, with the likely real (unreported) amount several times larger.

The danger in giving money an outsized role in shaping politics is that it has the potential to foster a government that is most responsive to interest groups with access and resources. Hidden and unaccountable political spending is especially worrisome.

Colleges and universities, which control over $400-billion in endowment investments, have a clear and urgent responsibility to ensure that the companies in which they are invested are engaging in political activities that align with colleges’ core missions.

As shareholders, colleges have a duty to ensure that profits are not made at the expense of the environment, human rights, democratic accountability, and the larger public good. It is crucial that colleges behave like responsible investors, to model appropriate standards for the students of today—the leaders of tomorrow.

After all, the primary mission of colleges is to educate the next generation and to provide the best preparation possible for people to lead meaningful and rewarding lives. This includes shaping ethical global citizens who will use their knowledge and skills to serve the broader community.

That is why the New School Advisory Committee on Investor Responsibility last month submitted a letter to the Securities and Exchange Commission calling for disclosure of political spending by public corporations.

The committee, known as ACIR, is a body of trustees, faculty, staff, and students charged with incorporating consideration of social, environmental, and corporate-governance issues into the management of our endowment investments. We have joined the growing chorus of over 300,000 shareholders, corporate-law experts, and citizens urging the SEC to use its rule-making authority to require disclosure of corporate campaign financing.

At present, companies are not required to disclose any information regarding the money they spend to influence political outcomes. Without mandatory disclosure, it is impossible for shareholders or taxpayers to effectively monitor the use of corporate resources for political activities.

As the Supreme Court recognized in Citizens United, “prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters. Shareholders can then determine whether their corporation’s political speech advances the corporation’s interests in making profits, and citizens can see whether elected officials are ‘in the pocket’ of so-called moneyed interests.”

In other words, disclosure of material corporate political spending would allow shareholders to track the spending practices of the corporations they own, provide the information necessary for colleges to invest prudently and in line with their missions, and illuminate the activities of corporations in the elections that govern this nation.

The ACIR of the New School, working with the Responsible Endowments Coalition, is making this issue a priority because we believe that our democracy is being harmed, and that as investors we have the right and need to know if and how the companies in which we are invested are paying to play.

Despite the Supreme Court’s endorsement of spending disclosure as an alternative to the spending limits that the court overturned, not a single federal law or rule requires disclosure for corporate “soft money” political donations—no matter how astronomical the sum. The Disclose Act, which if passed would require organizations to disclose their financing sources, has languished in Congress.

Although a few states, like Massachusetts and California, now require independent expenditure campaigns to disclose their donors, the haphazard patchwork of state rules is woefully inadequate in the face of the big-money deluge for federal elections and the special-interest lobbying that spans state borders. And while some major companies, among them Intel and Target, have given in to pressure from shareholders including state pension funds and foundations to agree to some limited political-spending disclosure, those voluntary efforts cover just a small share of corporate political spending.

New, mandatory SEC disclosure rules would require meaningful political-spending openness for all publicly traded companies, and would be a critical step toward restoring accountability.

In the meantime, institutions of higher education can join the New School in supporting shareholder resolutions calling for political and lobbying expenditure disclosures, now pending at over 100 companies. As major investors and institutions with a modicum of credibility, colleges should vocally support both the mandatory and voluntary initiatives.

Money’s role in influencing elections might only increase in years to come, which is why there has never been a more important time for colleges to demand to know how their nearly half a trillion dollars are being spent.

Terra Lawson-Remer is chair of the Advisory Committee on Investor Responsibility and an assistant professor of international affairs at the New School and a fellow at the Council on Foreign Relations. Dan Apfel is executive director of the Responsible Endowments Coalition.