Penn trustees to consider tobacco divestment

By the fall, CVS will remove cigarette displays like this from its stores as the chain halts sales of cigarettes, cigars and chewing tobacco.
By the fall, CVS will remove cigarette displays like this from its stores as the chain halts sales of cigarettes, cigars and chewing tobacco. (File)
Posted: June 21, 2014

Few would argue that tobacco has any redeeming qualities, but is it a "moral evil"?

That's the question members of the University of Pennsylvania's board of trustees likely will grapple with Friday when they consider a proposal to prohibit the investment of university endowment funds in tobacco products.

The discussion follows an open letter signed by 530 senior Penn faculty members, urging divestment from tobacco companies, and a 17-page proposal authored by Penn professors and several others.

Penn's policy on divestment states that areas to be targeted must represent "a moral evil" causing "substantial social injury." The concern must outweigh the board's fiduciary responsibility to invest with the strategy of maximizing revenue for education and research.

Proponents of divestment argue that tobacco companies meet the definition because of the product's addictive qualities and deadly effects - the World Health Organization blames it for six million deaths annually. Marketing to vulnerable groups, including youngsters in other countries, only compounds the societal injury, they contend.

"If all of that doesn't constitute a moral evil," said Peter Conn, a retired Penn English professor who helped organize the letter campaign, "then we're not sure what the definition of moral evil would be."

Penn president Amy Gutmann and board chairman David L. Cohen declined to comment, but university officials said trustees would discuss the issue at Friday's meeting.

Penn officials have declined to say how much of the university's $7.7 billion endowment is tied up in tobacco companies. Proponents of divestment noted that senior officials have acknowledged at least some, which is why they pressed their proposal.

The debate at Penn comes as universities increasingly find themselves under pressure to divest from products or companies that are environmentally or socially offensive. But the majority of schools still do not consider such issues when developing their investment strategy, says the National Association of College and University Business Officers.

Of 835 colleges and universities that responded to a survey, less than a third said they considered environmental, social, or governance factors, the group said. Of institutions with endowments in excess of $1 billion, however, it was a bit higher - 36 percent.

"Historically, there's a view that investment managers, the people you hire to invest your endowment, should be given the maximum flexibility to get the highest return they know how to," said Matthew Hamill, senior vice president of the association.

Penn actually is a little late to the tobacco debate. Harvard divested from tobacco companies in 1990, followed by Columbia, Dartmouth, Stanford, and others. Of the top five medical schools in the country, Penn is the only one without a divestment policy, proponents point out.

In recent years, scores of student groups at colleges around the country, including Swarthmore, have protested investment in fossil-fuel companies.

"That's a much more difficult issue to grapple with," Hamill said, noting their prevalence.

Penn twice before has voted to prohibit endowment investments: In 1986, the university ruled out companies that did business in apartheid South Africa, and in 2006 it targeted oil companies working in Sudan because of genocide.

Gutmann, who was at the helm in 2006, supported the divestment, calling it "an extreme measure" that should be used "rarely."

Not all universities that have considered tobacco divestment have acted. Yale opted against the move, deciding that it could better influence policy as an investor and that its primary responsibility was to grow the endowment.

U.S. tobacco stocks have done very well over the last five years, outperforming the overall S&P 500 index, according to Kenneth Shea, senior analyst, global food, beverages, and tobacco, at Bloomberg Industries. From June 30, 2009, until May 30, 2014, the S&P 500 Tobacco index generated a cumulative return of 185.3 percent, compared with 131.9 percent total return gain for the overall S&P 500 index, he said.

At Penn, support for divestment on tobacco has been building for several months. The Faculty Senate executive committee voted, 30-0, in favor this year. University Council, made up of faculty, students, and staff, later voted 51-6 in favor, with two abstentions, including Gutmann. The 530 professors who signed the petition represent about a fifth of the 2,575 standing faculty at Penn.

Professors who support divestment said they hope the board of trustees will act.

"To me, it just seemed like a really important issue, a pretty clear one," said Sharrona Pearl, assistant professor of communication and one of the authors of the proposal.

Donald Berry, a professor of chemistry and a former smoker, signed on.

"Even when I smoked, it's not an issue I would have disagreed with," he said.

He noted that the action, if passed, would have little effect on the tobacco business.

But, he said, "it can't hurt."

Not everyone who signed views tobacco as a moral evil.

Marybeth Gasman, an education professor, is unsure that label fits, but believes the product has done enough harm to many different kinds of communities that it deserves to be the target of divestment.

"There are times in life where you need to take a stand," she said. "I think this is one of those times."



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