Penn tobacco-firm divestment proposal goes nowhere

Posted: June 22, 2014

A proposal for the University of Pennsylvania to divest its $7.7 billion endowment from tobacco stocks died Friday without a vote by the board of trustees.

Board chairman David L. Cohen said tobacco does not qualify as a "moral evil" - a criterion for divestment under Penn's policy - even though it causes serious health problems.

"Let me be clear," Cohen said on the floor of the trustees meeting on campus Friday, "I am no friend of tobacco. I don't use tobacco products. I've never used tobacco products. And I strongly prefer not to be around when others are using tobacco products."

But tobacco, he said during a less-than-10-minute discussion, does not fall in the same category as genocide and apartheid - two issues on which Penn's board in the past made decisions to divest from companies and which he agreed are moral evils.

"Tobacco presents a very serious public health issue, but that does not mean it meets this appropriately very high standard," Cohen said.

Only two other board members, NBC News anchor Andrea Mitchell and former board chairman James Riepe, spoke on the issue at the meeting, both siding against divestment. All three said board members have been discussing and thinking about the issue for months since faculty began advocating for divestment.

President Amy Gutmann did not speak on the issue.

More than 500 senior faculty members signed an open letter to the board citing deadly health effects from tobacco and inappropriate marketing efforts to vulnerable populations, including youths in other countries. Several professors and others presented a 17-page proposal for divestment, noting that Harvard, Stanford, Columbia, and several other universities divested from tobacco years ago.

University officials have declined to say how much of the university's endowment is tied up in tobacco stocks, though in a statement issued after the meeting Cohen described the amount as "negligible" and said it was "likely to diminish even further due to the fundamental headwinds facing the tobacco industry." Over the last five years, however, tobacco stocks have done quite well, outperforming the S&P 500 index as a whole.

Mitchell noted that she is a cancer survivor and "has advocated against tobacco use professionally, and has worked for decades to better inform the public about the hazards of tobacco use." But, she said, she supported Cohen's suggestion that the university use other methods to take a stand against tobacco than divestment.

Cohen said the university would continue and bolster efforts to discourage the use of tobacco in the campus community, use its proxy votes in tobacco companies to advance its views on tobacco, and direct new investment managers for the university that Penn does not wish to hold any tobacco stocks in its name. The university also will make its current investment managers aware of the proposal on divestment and the university's views, he said.

Cohen acknowledged that some other large universities have chosen divestment, but said he sees divestment as a gesture rather than a solution.

Riepe said the board must adhere to its fiduciary responsibility, insuring maximum returns on the endowment to support the university's education and research.

"The endowment is sustained by donors who reasonably expect that their gifts will be used in support of the university's academic and research mission in perpetuity, and not diverted for other purposes or to advance certain causes, however worthy those purposes or causes may appear to some members of our community," Cohen said in the statement following the meeting.

Susan Passante, one of the authors of the 17-page proposal on divestment who attended the meeting, said she was grateful that the board deliberated on the issue.

"It's complicated," she acknowledged.

Passante, senior executive director for research and research training at Penn's Perelman School of Medicine, said she would discuss the outcome with her colleagues.

"We have to regroup," she said.


comments powered by Disqus