Suddenly it's 1981 again as college faculty and staff debate whether to require their schools and their pension funds to divest from companies doing business in genocidal and repressive countries. Then the issue was South Africa; now it's Sudan and Iran.
Below are the texts of two e-mails: the first being one forwarded to me by my boss and apparently written by one Herschel Grim, and the second one being my response. "STRS," by the way, is the State Teachers Retirement System of Ohio.
Here is the e-mail I received:
I received notice this morning, from Terri Bierdeman, STRS Ohio’s Director of Governmental Relations, that H.B. 151 has been passed out of committee to the floor of the House. It is expected that the bill will have a floor vote this week.
As a reminder, this bill requires divesture of STRS Ohio funds from any company doing business in Iran. On the surface, this would seem to be a good idea. However, looking deeper, it is in reality a political mandate directing investment policy involving YOUR MONEY in your retirement account. Should the bill pass, in its present form, STRS Ohio stands to loose millions of dollars that, current law requires, should be used to fund your current or future retirement benefit and the Health Care Stabilization Fund.
Information on HB 151 has been posted on the STRS Ohio website – www.strsoh.org.
We are again asking STRS Ohio and Ohio SERS members, both active and benefit recipients, to contact their representatives IMMEDIATELY requesting their vote AGAINST this bill,
Remind them that:
- This is your money.
- If this is a moral issue, why is it a moral issue for Defined Benefits recipients only and not for everyone else.
- If there is a global risk involved, why is the risk for certain companies only and not for all. In other words, why are Honda, Halliburton, and others excluded.
If you would appreciate assistance in this contact, go to the OFT website (http://oh.aft.org ) and click of the STATEHOUSE LINK for all the information you will need.
THANK YOU for your help in defeating this dangerous piece of legislation.
OFT Health & Retirement Consultant
Here is my response:
In response to the e-mail you recently circulated urging STRS members to oppose divestiture of stock in companies doing business with the genocidal regime in Sudan and the repressive regime in Iran, I too urge people to contact their state representatives and senators about the bill.
In my view, however, this bill should be SUPPORTED by STRS members. I hope that people receiving this e-mail will ENCOURAGE its passage--and perhaps come to question whether the STRS board is representing its members' best interests.
At the outset, I note that the e-mail and attachment I received refers only to the section of the bill that requires STRS and other state funds to divest from Iran. In fact, the bill requires divestiture from Sudan as well. I suspect that this was NOT mentioned in the e-mail because the atrocities being committed by the Sudanese regime in Darfur and elsewhere are more ethically repugnant to some than the behavior of the Iranian regime in its pursuit of nuclear weapons. Still, this dishonest omission of any mention of Sudan in the e-mail or its attachment should make STRS members wonder what else the board is not being honest about.
Opponents of this bill make three flimsy and poorly-expressed arguments.
The first is that "this divestiture mandate puts a foreign policy objective above the board’s fiduciary duty to invest in the sole interest of the membership."
Note the two assumptions implicit in this argument.
The argument assumes that "the interest of the membership" does not include opposing genocide. I wonder on what basis the STRS board has concluded that its members are not interested in so doing. If indeed the board's concept of "interest" here is limited to the financial, then there are certainly a wide range of ethically and legally dubious investment options open to them. I give teachers more ethical credit than that.
The argument also assumes that investing in counties ruled by isolated, unstable, and unpopular genocidal governments is wise and profitable investment strategy. These certainly don't sound like great places to put our money to me. The board's assumption is also undermined by the fact that mutual funds which pursue a "socially conscious" investment strategy tend to outperform funds that are supposedly politically blind.
The second argument made against this legislation is that "there will be costs of complying with this mandate, costs borne by the membership and not the public." This is essentially a rehash of the above assumption, viz., that we STRS members stand to lose money if we divest from Iran and Sudan.
The board has announced that it calculates that compliance with the proposed law will cost $5 million in "transaction fees" and $75 million annually in lost investment returns. Unsurprisingly, the STRS board has NOT released the methodology by which these figures were arrived at. They are apparently based on the assumption that money divested from companies doing business in Iran and Sudan will simply be put under the mattress and will not, in fact, earn a higher rate of return elsewhere. Further, it appears that the board's figures do not take into account how much any short-term losses will be balanced by the longer-term gains involved in investing in countries that are NOT currently the targets of U.N. sanctions.
There are costs associated with any investment decision, whether that decision is to buy, to sell or to hold. By failing to treat STRS members like intelligent, educated adults and supplying them with a detailed financial analysis of the proposed divestiture, the board has instead opted to make vague and unsupported assertions designed to scare more than to enlighten.
The third argument being made by STRS is marked by such a significant deviation from logic that one questions whether some of the board members there ought to be replaced by people more conversant with the basic principles of reason. This argument is that "the bill sets a dangerous precedent of using trust fund money to achieve political or social agendas."
In other words, choosing to invest in a company that supports a genocidal regime is not a political act and doesn't set a dangerous precedent, but choosing NOT to invest in such a company is and does. This is but another example of STRS' infantilization of its membership; they apparently hope no one will see the inherent hypocrisy and contradiction in their position.
To which I should add a few more points here.
I would be more comfortable with a bill that imposed sanctions only on companies doing business in Sudan. This is not because I think that Iran is not engaged in sponsoring terrorism or that it is not a repressive theocracy. Rather, it's because I see engagement with Iran as a more likely way of bringing about change there. Engagement has no chance, however, in Sudan--and the human rights situation there is far graver than in Iran. Politics, however, is the art of the possible, and it may be that to get any bill out of the Ohio legislature it will be necessary to include both countries.
There were also a couple of throw-away arguments made in Grim's commique. He wonders why, if this legislation is so necessary, it doesn't apply to all funds under the state's control. He also says
If there is a global risk involved, why is the risk for certain companies only and not for all. In other words, why are Honda, Halliburton, and others excluded.
The first point can be addressed by the maxim that most folks learn in first-year logic and rhetoric about not letting the perfect become the enemy of the good. The second point is fairly garbled in its presentation and content, but it seems also to be a claim that the proposed legislation is hypocritical because it doesn't go far enough. Bear in mind, this argument is being made by a guy who is apparently AGAINST making investment decisions based on social and political considerations. 'Nuff said.