Phillips Academy’s Board of Trustees has adopted a new ethical investment policy that will compel Andover to divest from companies directly involved in unethical activities. This decision was made in response to concerns raised by Barbara Chase, Head of School, over how Phillips Academy should respond to crimes supported by the government of Sudan in the country’s western region of Darfur. Oscar Tang ’56, President of the Board of Trustees, said, “The principle purpose of the endowment is to support the operations of the school and we must invest as best we can to do so. But, in unusual circumstances, a situation arises from which we may see large negative consequences, so we will take that into consideration.” Phillips Academy will use this policy, made effective immediately, to screen its endowment holdings for any companies that do business with the Sudanese government, among them energy giants PetroChina and Sinopec, according to Amy Falls ’82, Chief Investment Officer. “[They] buy oil from the Sudanese government, so they are really one of the major sources of finance for the government’s campaign in Darfur,” said Falls. “These companies are clearly doing direct financial transactions and that money is clearly being used in a military campaign.” For all accounts Andover directly controls, it will divest immediately from the six companies identified as business partners of the Sudanese government. For accounts that Phillips Academy does not directly control, Falls said that the school would communicate with the managers of those accounts to inform them of its decision not to invest in those companies. “We know that we don’t own any of those six companies at this time directly, and we don’t believe that we own [shares in] any of them indirectly,” said Falls. However, Falls said that previously, “We owned [a stake in] Berkshire Hathaway, which owned PetroChina at one point. But the major holding at Berkshire Hathaway was in a manager we terminated two years ago.” The school’s new policy is not only applicable to the situation in Darfur, but to any situation constituting “grave social injury,” as defined in the resolution. To call for a divestment, the Investment Committee must first inform the entire Board of Trustees of any company involved in “grave social injury.” Afterwards, the Board decides what to do with its investment. The Investment Committee can take measures short of divestment, such as exerting pressure on the management of a company as a shareholder. However, in order to mandate a divestment, the entire Board must vote on the action. “Very rarely, I would say, would something become egregious enough for us to take specific action to divest,” said Tang. In making the decision for divestment, the Board must consider its responsibility to ensure the fiscal health of the school. At the same time, Falls said that the Trustees must also find the situation “so diametrically opposed to what this institution is about that we wouldn’t want to in any way aid and abet that situation.” Stephen Carter, Chief Financial Officer, said, “It’s tricky. . . The job of the Trustees is to get as high a return as possible so the donors can have the biggest effect here, so there’s a kind of tension. It’s a very narrow margin to walk, when you pull your investment and when you stay in.” “It’s a judgment call. The situation is going to be very different in each case,” said Tang. “You just have to arrive at some general guidelines and then try to apply those guidelines as best you can in the specific situation when that comes up.” The turn towards ethical investments first arose when Chase approached Falls and Carter with the proposal. Carter said, “Mrs. Chase has actually been very interested in this for the last four years, and it was one of the things that she asked Amy and myself and the Investment Committee to develop as quickly as possible so we would have something in place should we need to apply it.” According to Falls, the Investment Committee first presented its research to the Board of Trustees at their winter meeting. Falls said that the concept of ethical investment originated from a book published at Yale University titled “The Ethical Investor: Universities and Corporate Responsibility,” which some Seniors taking Economics are currently reading. “We’re sort of piggybacking on their process and using a lot of their recommendations, if there are places in the world that we shouldn’t be investing in and looking at companies that are doing something unethical,” said Carter.
