Editor's note: This article is part 1 of a 3-part series on divestment. Parts 2 and 3 will appear in the IDS Wednesday and Thursday.
Six million dollars is only a drop in the bucket for the IU Foundation.\nIt’s an insignificant amount, not enough to affect returns on a billion-dollar endowment fund. But while growing numbers of activists call for the Foundation to reconsider the $6 million it has invested in companies linked to genocide in Sudan, officials at the Foundation say they will not divest the money in question. \nHowever, the number of divested universities both in the Big Ten and nationwide is growing. \nWith $6 million making up less than 1 percent of total Foundation investments – the Foundation manages more than $1.6 billion and collected $147.4 million in the last fiscal year alone – leaders such as Foundation President Curt Simic said they are not worried about how divesting a relatively small amount could affect overall financial returns for the University. Rather, they worry about setting a precedent that would allow activists to sway Foundation officials – a precedent officials said could just be the beginning of “a slippery slope.”\nWith so many groups on campus, each with its own agenda, the Foundation doesn’t want to become beholden to these activists, which could potentially hurt the University’s bottom line.\nYet more than 50 universities across the country have either divested from companies linked to Sudan or put pressure on those companies to stop doing business with the Sudanese government, including the University of Illinois and the University of Wisconsin System. And while IU Foundation officials say their $6 million is not enough to make a difference in the genocide, many schools have divested far less.\nCharles Pruitt is the regent vice president for the University of Wisconsin System, which manages any donation made to Wisconsin schools not earmarked for a specific campus. He said he never worried about setting a precedent that might encourage more activist groups to pressure the board of regents in the future.\n“When you’re dealing with genocide and the situation in Darfur,” Pruitt said, “the slippery slope argument was just not persuasive.”
Globalizing genocide\nThe money trail to Darfur – a blood-lined one, activists say – stretches from corporate boardrooms to investment managers to the ravaged wastelands of Sudan.\nAt least some funding for the genocide comes from an international flow of currency stemming from global corporations invested in the Sudanese government, which has been charged with carrying out violence against its citizens. At least 200,000 people have died in the violence, and some counts measure the death toll much higher. \nBoth the Indiana and federal governments have disapproved of companies that have direct and indirect ties to the Sudanese government since a recent wave of violence began there in 2003. In some cases, the governments have put pressure on companies to stop doing business in the embattled country. In more extreme cases, both governments divested from problematic companies completely. \nBut the Foundation’s stance is clear.\nThe money the IU Foundation raises keeps IU’s wheels turning: It funds research, provides scholarship opportunities and raises money for an array of academic departments. Much of this money comes from private donations, especially from alumni. It is the Foundation’s job to make sure donations are invested and handled responsibly to maximize returns.
Little escape from University politics \nEven if Simic wanted to divest, it’s a matter that is largely beyond his control. Simic reports to the Foundation’s board of directors, which has the final say on issues such as divestment.\n“The board of directors has told us, ‘Don’t go down that road,’” Simic said. \nComprised of business leaders, prominent donors and some current trustees, the Foundation’s board mostly agrees with Simic that divesting now could open the door to both a headache and a pocketbook pinch in the immediate future.\n“How do you define what company to divest from?” Simic asked, shooting an occasional glance at Gary Stratten, vice president for investments, seated on the adjacent winged-chair in Simic’s corner office at the Foundation’s headquarters. “Do you say they have to have operations in Sudan, or is it something as far-fetched as Coca-Cola, where you know there is a can of Diet Coke being sold in Sudan somewhere?”\nSimic said he tries to avoid University politics. As a separate nonprofit corporation, the Foundation largely escapes IU’s bureaucratic gridlock. But with four current trustees and IU President Michael McRobbie all serving on the Foundation’s board, lines between the University’s agenda and the private corporation trying to support the institution inevitably begin to blur.\nIndiana’s government has already divested pension funds for all state employees and public school teachers.\nDivestment discussions between activists and Foundation and University administrators began in November. Pressure from students and faculty increased soon after and the Bloomington Faculty Council voted for University divestment in February. STAND, the student group devoted to ending genocide in Darfur, has also had talks with both the University and the IU Foundation about relinquishing questionable investments.\nThe Foundation has yet to budge.\n“If not genocide, what conceivably could ever get us to change our policies?” said STAND faculty adviser and IU professor Steve Weitzman. “And $6 million is a very small amount, relatively speaking, but this is part of a larger movement, and at some point, these small gestures can reach a tipping point.” \nWeitzman has become a central figure on campus in the fight for divestment.
A question of priorities\nIn divestment, activists such as Weitzman see a chance to put pressure on problematic corporations.\nBy insisting that IU adopt a policy that addresses the social responsibility of investments, Weitzman believes the University could join the growing list of schools that are already taking action against the genocide. IU’s choice to adopt a policy of social responsibility could add momentum to an already dynamic movement.\nBecause the Foundation is a separate, private entity, its investments are not released to the public, so activists cannot pinpoint specific problematic companies. That’s why Weitzman wants the University to adopt a comprehensive policy that monitors investments and ensures none are tied to the genocide. \nWeitzman said such a plan could mirror the one already in place at the state level. That plan is based on the divestment model developed by the Sudan Divestment Task Force, a national organization dedicated to genocide intervention, which monitors companies that do business in Sudan and keeps a list of problematic companies, updated quarterly. The plan encourages investment managers to put pressure on companies to stop doing business that supports the Sudanese government. If companies refuse to stop such business, the state plan forces investment managers to divest. \nSimic and others at the IU Foudation call divestment a “feel-good” measure, one that lacks the ability to realistically make a difference. And with University pressure on the Foundation to perform financially, Simic said he has precious little time to waste dancing around “symbolic gestures.”\n“What can we do that really makes a difference?” Simic asked. “I’m not into symbols.”\nSimic’s logic is financially sound, said Utpal Bhattacharya, an associate professor of finance at the Kelley School of Business.\n“Six million dollars is peanuts,” he said. “So I don’t think they can make much of a difference by divesting, except by a symbolic thing, where all the schools can say, ‘We don’t have any investments in these horrible companies that do business in Sudan.’ But it won’t make any difference.”\nThe board of regents for the University of Wisconsin System took a different approach to the issue.\n“We didn’t spend very much time talking about how much money was involved,” said Regent President Mark Bradley. “We talked about the policy of socially responsible investing.”\nThe University of Wisconsin system divested $1.2 million and the University of Illinois divested $2.3 million, far less than the $6 million IU officials have said wouldn’t make a difference.\nBoth Simic and Bhattacharya insisted the IU Foundation could do more good by becoming vocal shareholders in the problematic companies. By retaining the current investments, they said, IU could use its pull as a shareholder to convince these companies to sever ties with Sudan. So far, neither Simic nor the Foundation have put any pressure on these companies.\nWeitzman said he understands the effectiveness of vocal share holding.\n“But no one is doing that,” he said.\nIt’s unlikely the Foundation will ever take that step, Stratten said. Rather than making “social statements,” Stratten said it’s more important for the Foundation to maintain IU’s assets.\nThe attitude is heartache for idealists, but as Simic sees it, it’s a no-frills approach keeps the institution growing.\nYet activists both locally and around the country agree that a refusal to divest speaks to the social conscience of the University.\nThe contrasting logic activists such as Weitzman use and those at the IU Foundation might illustrate differences in priorities between these two groups.\nIt’s a balancing act for University and Foundation officials. Because of this conflict, a question of priorities awaits the entire University.
