From the book, Philanthropy: Voluntary Action for the Public Good, by Robert L. Payton

This essay is from the book, Philanthropy: Voluntary Action for the Public Good by Robert L. Payton. Adapted from Change, May/June 1987, pp. 55-60. Reprinted with the permission of the Helen Dwight Reid Educational Foundation. Published by Heldref Publications, 4000 Albemarle St., N.W., Washington, D.C. 20016. Copyright 1987.

Returning to academic life after an absence of ten years in the world of corporate philanthropy, I was disappointed to read that "anti-apartheid students" at the University of Virginia had disrupted a closed meeting of the Board of Visitors and held an overnight vigil in the rotunda. The students reportedly demanded that the board withdraw university investments in companies doing business in South Africa or face continued disruption of its meetings.

I was disappointed, but not surprised. Reports from campuses around the country for several years have made it clear that political theater is the chosen style of discourse for advocates of divestment. I suspect it is because their "movement" has never attracted broad interest, much less strong support. To have their way they must rely on intimidation. Using such tactics does serious harm to what I believe to be the university's central mission: to develop and clarify social thought and to uphold and improve public discourse.

The quality of public discourse is one aspect of my concern. The other follows from my recent experience with the ethical implications of divestment for universities as well as for corporations. My example is drawn from Harvard's decision to announce last October 3rd that it would divest $158.7 million of stocks and bonds held in nine companies. Five of those companies were oil companies, and one of the oil companies was Exxon. At the time, I was president of the Exxon Education Foundation (and continue to serve it as a consultant). Because I am also a former college president, I was asked by Exxon management for my comments and suggestions.

It is convenient at times to use Harvard and Exxon to illustrate the divestment controversy because both are symbols of great power, wealth, and responsibility. They can easily withstand the heat of controversy. I have great respect for both institutions, although I am on Exxon's side in this case and critical of Harvard. I speak only for myself, of course, in all of the opinions expressed.

• Given the fact of Harvard's divestment of Exxon's stock, should Exxon continue to make philanthropic grants to Harvard?

• Given Harvard's action, indeed, should Harvard be willing to accept philanthropic contributions from Exxon? (For the sake of argument, set aside Exxon's decision last winter to leave South Africa.) And, in recognition of the recent events at the University of Virginia, the ancient question:

• What is the role of the university in taking stands on specific public issues that have no direct bearing on the university's activities?

There are important practical as well as moral consid­erations involved, and it is the kind of messy problem that defies simple answers. "The spirit of liberty," as a Harvard document quotes Judge Learned Hand, "is the spirit which is not too sure it is right."[1] I am not at all sure that I am right, but then I'm not too sure that Harvard is. I am most certain that the methods of the protestors at Virginia are wrong.

Harvard announced that it would divest Exxon's stock because there was a possibility that Exxon was selling products that were being used by the South African police and military to implement the system of apartheid. In the spring of 1985 Harvard had decided that that was the bottom line: it would divest from companies whose products or services might be used in that way. Harvard had to assume that Exxon's products were being used by the police and military because Exxon was precluded by South African law both from refusing to sell its products to the government and from making public the details of what it sold.

Harvard was uncomfortable because of "the strong record of the five oil companies and Ford [Motor Company] in opposing apartheid and adopting progressive labor policies." Until this action, Harvard's selective divestment policy was aimed at companies that failed to take the Sullivan Principles seriously. Exxon had always earned the highest rating by Reverend Sullivan's criteria. None of that balanced the requirements of the new policy, however. Harvard praised the companies but denounced the consequences of their work. Harvard recognized that its actions might not be well understood and that "the broader community will not perceive the subtleties of this complex matter." Harvard also admitted that its action could "stigmatize the companies involved. . . ."

Harvard expressed the hope that its arguments would withstand careful scrutiny: "Consistency in the application of our policies is essential for our position to stand against repeated assaults, and we are obviously not pleased if our supporters are bruised in the process by our actions."

Those words are in a letter from Harvard to an oil company (not Exxon), which had posed the awkward question of whether Harvard intended to accept philanthropic support from a company whose stock was deemed unacceptable on moral grounds:

In light of your favorable comments ... and our past relationship, we must point out that part of the financial support you have received from us is generated by the earnings of our affiliate in South Africa, and this shall continue to be the case in the future. Before we consider any new commitments, in view of your strong feeling concerning the morality of [your] decision, we would appreciate knowing whether you wish us to continue our financial support.

Harvard's response followed:

... the specific answer I would like to offer is—yes, Harvard would like to continue its longstanding relationship with [your company], despite the fact that we will be disposing of our security holdings in your company over the next 12 months.

In a separate exchange, a different company posed a similar question to another university:

The question we must ask ourselves now is what we ... should do about future payments in light of the action taken by [your] university....

You can understand our dilemma. We would not wish you to take money from a company you consider to be act­ing immorally. We would not wish to contribute to an academic institution that is seeking to use its economic power as a political weapon to compel us to follow policies that would jeopardize the jobs of our employees. We would un­derstand, but hardly sympathize, with an action taken simply to avoid trouble.

The same question has been posed to other divesting col­leges and universities and invariably has received the same response: Yes, we cannot hold your stock for moral reasons, and yes, we will be happy to continue to receive your support.

The rationale for the different perspectives has been put this way by a university president in what may become a classic text:

A business corporation exists to make a profit; a university exists to advance an ideal. Your decisions necessarily involve calculations of costs and benefits; ours, though cognizant of economic realities, can take basic moral values into greater consideration. You are constrained by statute and some sense of public image; we face additional constraints imposed by our statement of mission and responsibility to our many disadvantaged constituencies.

Thus on issues like South Africa investment we must adhere to different standards from the ones you espouse....

Another college argues that it doesn't impugn the company's motivations in doing business in South Africa and "we would hope that you would not impugn ours for dissociating ourselves from all business activities in that troubled land."

In spite of these professions of virtue and efforts to avoid appearing moralistic, it seems to me clear (a) that the colleges and universities have made South Africa a moral issue, and (b) that they see themselves in a position morally superior to that of business corporations.

In a guide to the divestment controversy published by the American Council on Education in May 1985, "the argument for divestment" was summarized this way:

Arguments for divestment are based, first, on moral grounds. Along with churches, colleges and universities are expected to reflect in their actions a concern for social values and basic human rights. Thus, responsible investment policy should preclude an investor's profit at the expense of its moral convictions.[2]

It is of such stuff that moral majorities are made. It is presumptuous for universities to take on a moral role when there is such profound division within them—both about the content of that moral role and about its tendency to impose intellectual conformity on faculty and students.

Should corporations stop making grants to Harvard and to other divesting colleges and universities? Should univer­sities decline to accept gifts and grants from companies that fail to measure up to (changing) standards of behavior in South Africa?

When I tried to assess my own thoughts on the matter, my first reaction was to say that Harvard should refrain from seeking support as long as Harvard is caught up in basing its investment decisions on a narrow moral position. My conclusion after thinking about the question for six months remains substantially unchanged. To borrow a term used by moral philosophers, I question Harvard's moral seriousness. As I understand it, to be morally serious means to be prepared to accept the consequences of one's moral position. I take that to mean in this case that Harvard should deny itself the benefits of corporate philanthropy when that philanthropy is in part dependent on what Harvard has condemned as ill­gotten gains.

Less "consistency in the application of [its] policies" would mean that Harvard return to the more balanced and broader approach to investment in companies doing business in South Africa. The appearance of moral arrogance would be avoided, and both parties could return to disagreements reflecting their different perspectives.

Unlike those who think it is possible to purge investment decisions of all social values, I believe that "ethical investment" is a defensible practice—if one accepts the consequences. If I choose not to invest in gambling casinos because I believe that kind of business to be morally corrupt, I can invest in a "cleaner" business and risk a lower rate of return on my investment. There are, in other words, not only individual companies I would not invest in, there are whole industries I want no part of. If that means I cut myself off from their philanthropic support as well as investment income, so be it. Benevolence may not cost anything; beneficence does.

There are lots of reasons, good and bad, for making investment decisions. Some of the reasons are cast in moral terms. The more one bases economic decisions on moral values, the more difficult it will be to survive economically. I have to be prepared to accept the economic consequences of my non‑economic values.

And it is a hard world out there. As Derek Bok advised his colleagues at Harvard:

Unless we choose to live like hermits in the desert, we must all be linked in indirect and innumerable ways to the wrongs of the world—through the goods we buy, the taxes we pay, the services we use, the investments we make.[3]

The problem facing multinational business corporations in today's world is that some of them—like Exxon—often are doing business in as many as a hundred countries. On any given day, Amnesty International will be reporting on human rights violations in many of those countries, and Freedom House will have classified most of them as oppressors of free speech and democracy. (There is also the problem of residual evil from past sins: There are those who have not forgiven the Germans for Hitler, the Russians for Stalin, the Japanese for Pearl Harbor, the British for imperialism, the Americans for Viet Nam, etc.)

Doing business successfully at all in the modern world is difficult. Being ethically sensitive makes it more so. To the extent that being ethical means being consistent, a moral stand on one issue requires a similar stand on similar issues. Knowing where closure comes is difficult.
I conclude that Harvard should not accept support from companies whose stock it disqualifies on moral grounds. Harvard's argument—that there is a fundamental difference between its active role as an investor and its passive role as a recipient of grants—does not wash. Harvard does not want to launder the reputations of the morally unworthy, directly or indirectly.

What about Exxon? Exxon announced earlier this year that it was selling its interests in South Africa and the question is now moot. Exxon is presumably again qualified to be welcomed back to Harvard's portfolio. The question of Exxon's response is still worth asking, however academic it may have become in the meantime.