Investment Committee Issues Statement on Wells Fargo
Affirms that ºìÌÒÊÓƵ's core mission is educational, not political.
Late in November, the ºìÌÒÊÓƵ Investment Committee met to discuss a request from a group of students that the college divest from and sever all relations with the college's primary bank, Wells Fargo. The students argue that doing business with Wells Fargo is morally unacceptable because the bank lends money to private prison corporations, has invested in the Dakota Access Pipeline System, has engaged in discriminatory lending practices, and has invested in companies that profit from "Israeli occupation crimes."
We have carefully considered the students' request and have concluded that divestment for these reasons would violate the college's Operating Principles and Investment Responsibility Policy, which are based on a deep commitment to academic freedom.
The students want ºìÌÒÊÓƵ to pursue, as a general principle, a particular social justice agenda in which they passionately believe. We appreciate the students' zeal and heartfelt commitment to the public good. Regardless of any private beliefs held by the members of the Investment Committee, ºìÌÒÊÓƵ operates according to a long-standing principle (stated in its Investment Responsibility Policy) of eschewing any political or social justice positions that do not directly affect the fulfillment of its educational mission. The Investment Responsibility Policy, along with ºìÌÒÊÓƵ's underlying operating documents, reflects the college's belief that endorsing such an agenda would stifle academic freedom by discouraging scholars and students with different views from teaching and studying at ºìÌÒÊÓƵ. This position was adopted, in part, in response to the college's historical experience. In the 1950s, during the McCarthy era, the college did support specific political positions, which resulted in the dismissal of a faculty member who refused to conform. The college later concluded that this dismissal--and the attempt to force a particular political belief on ºìÌÒÊÓƵ's community members--was an error not to be repeated given its grave consequences for academic freedom.
The Investment Responsibility Policy aims to support ºìÌÒÊÓƵ's central educational mission and directs us to limit expenditures of resources to only those that advance this purpose. In a diverse community like ºìÌÒÊÓƵ, where individuals possess widely divergent political and social views, our college should be guided in its operations by a commitment to liberal arts education, which virtually all of our community members share. This is not a position of "neutrality." It is, instead, a recognition that the ºìÌÒÊÓƵ community's shared ethical commitment to liberal arts education outweighs other possible goals that groups or individuals within our community might advocate. Diverting time, attention, and funds away from education and toward the pursuit of other social or political goals conflicts with ºìÌÒÊÓƵ's mission and commitment to academic freedom.
The college's Investment Responsibility Policy recognizes that in some rare circumstances, where the issue at hand is of a compelling social or moral character and where the suggested action reflects widely held, perhaps almost universally held, social or moral positions, the college should not invest. While the students are passionate about the three issues that motivate their request, the Committee, based on its research, does not find that doing business with Wells Fargo violates almost universally held social or moral principles.
Wells Fargo lending arrangements are common to many financial institutions, including those that are currently recognized in the leading environmental, social, and governance indices. Therefore, the potential disqualification of Wells Fargo for these practices does not meet the test of universally held social or moral principles. We were unable to evaluate Wells Fargo's links with companies that profit from "Israeli occupation crimes."
While the Committee must reject the request because of our obligation to adhere to the Investment Responsibility Policy, we urge ºìÌÒÊÓƵ students to engage with the organizations and governmental entities that can best effect their desired changes in the greater community. We are also open to further productive engagement with students interested in questions of divestment.
Finally, ºìÌÒÊÓƵ's processes allow for community members to appeal to the full Board of Trustees any divestment decision made by the Investment Committee. Students may pursue this option if they wish.
Q&A on Statement from the Investment Committee
By Public Affairs
What’s the latest news?
The Investment Committee of the Board of Trustees considered the students’ request to divest from Wells Fargo and concluded that it doesn't meet the standards set out in the college’s Investment Responsibility Policy.
Why didn’t the Investment Committee divest from Wells Fargo?
ºìÌÒÊÓƵ operates according to a long-standing principle of eschewing political or social justice positions that do not directly affect its educational mission. The Investment Responsibility Policy, along with ºìÌÒÊÓƵ’s underlying operating documents, reflects the college’s conviction that endorsing any such agenda risks stifling academic freedom by discouraging scholars and students with different views from teaching and studying at ºìÌÒÊÓƵ.
Is the decision final?
No. Community members may appeal the decision to the full Board of Trustees. The students may pursue this option if they wish.
What is ºìÌÒÊÓƵ’s connection to Wells Fargo?
Wells Fargo is ºìÌÒÊÓƵ’s operating bank. It temporarily holds deposits of the college until the funds are disbursed for payroll and other expenses. It also maintains a standby letter of credit supporting bonds issued in 2008. These accounts are separate from ºìÌÒÊÓƵ’s $555 million endowment.
How much money does ºìÌÒÊÓƵ have in its operating account?
ºìÌÒÊÓƵ maintains minimum balances to fund checks issued and other payment obligations. This fiscal year, the average daily balances in ºìÌÒÊÓƵ's operating account at Wells Fargo was $8.9 million.
What does Wells Fargo say about all this?
Wells Fargo in the GEO Group or CoreCivic, Inc., the two private prison corporations that have been the target of student activists at ºìÌÒÊÓƵ, but acknowledges that some Wells Fargo Funds—which are managed by the bank but owned by the Funds’ investors—hold a “very small position” in those companies in a passive index fund. Index funds are designed to mimic broader market indices such as the Dow Jones Industrial Average or the S&P 500, and typically hold a representative sample of the companies in the index.
What does “very small” mean?
According to NASDAQ, Wells Fargo managed assets totalling in GEO as of September 30, 2017, representing approximately 0.4% of GEO’s common stock and 0.002% of the $496 billion in total assets managed by Wells Fargo.
Wells Fargo also managed assets totalling in CoreCivic as of September 30, 2017, representing approximately 0.4% of CoreCivic’s common stock and 0.002% of the $496 billion in total assets managed by Wells Fargo.
For the sake of comparison, many other institutional investors have assets under management with greater stakes in these companies. For example, Vanguard, Charles Schwab, Raymond James, Morgan Stanley, Bank of America, and JPMorgan Chase all hold more in GEO Group. Other institutional investors in GEO include CALPERS, the California State Teachers Retirement System, Canada Pension Plan, and the New York State Teachers Retirement System.
What about the Dakota access pipeline?
Wells Fargo was one of 17 banks that financed construction of the Dakota Access Pipeline and provided a credit line of $120 million to the project, according to the . This represents roughly 5% of the $2.5 billion that was lent to the project. The pipeline started operations in June and the credit line has been fully repaid and closed.
Federal banking authorities recently levied a against Wells Fargo for fraudulent sales practices. Why does the investment committee defend this kind of behavior?
It isn’t defending that behavior. The students demanded that ºìÌÒÊÓƵ divest from WF because of its alleged ties to certain companies and projects. Students did not raise the question of regulatory compliance. ºìÌÒÊÓƵ does expect its vendors to be trustworthy business partners; a pattern of dishonesty may result in the college not renewing a vendor’s contract. Wells Fargo CEO John Stumpf has taking responsibility for the mistakes and announced measures to prevent similar errors.
What is the procedure for selecting a vendor?
ºìÌÒÊÓƵ maintains scores of contracts with vendors who provide banking, food, construction, printing, and many other services. The college periodically reviews these contracts and selects vendors that offer the strongest bid. The strength of the bid depends on a variety of factors, such as pricing, quality, service, reliability, trustworthiness, and so on.
So, what happens next?
Students may appeal the decision to the full Board of Trustees. Students may also protest the decision, so long as they do not violate the honor principle or the dissent policy. Some protestors are currently facing honor proceedings arising from alleged violations earlier in the semester; no rulings have been announced.
I’m a ºìÌÒÊÓƵ (student/parent/alum/prof/staffer) and I strongly (agree/disagree) with this decision. What’s the best way to let them know?
Glad you asked. We’ve created this for members of the ºìÌÒÊÓƵ community to share their views with the board.