Hidden Sudan investments

By: Aaron Martel

Posted: 5/1/08

Hopkins is virtually alone among prestigious American universities: Out of the "top 15," only Hopkins and CalTech lack a public policy on Darfur. Over 1,000 students have petitioned Hopkins to divest from companies funding the violence in Darfur. Students, alumni, faculty and groups have endorsed "targeted divestment," calling for a portfolio review, corporate engagement and divestment as a last resort.

In a recent interview, President Brody reiterated the administration's case against Sudan divestment: "You can't divest if you don't own anything." Yet the status of Hopkins's Sudan holdings remains uncertain; last year, chief investment officer Kathryn Crecelius ruled out a review of managed funds. If Hopkins has no problematic holdings, then there are few barriers to a targeted restriction of future investment.

JHU STAND's model does not target Coca-Cola or Pepsi, as Dr. Brody implied. The Sudan Divestment Task Force and Calvert maintain rankings of the "worst offending" candidates for divestment. As of April 2008, the list includes PetroChina, Petronas, ONGC, Sinopec, Lundin Petroleum, Aref Investment Group, Petrofac, Dietswell Engineering and KSTB. Consumer goods, agriculture, medicine and education are explicitly excluded. The social cost of Coca-Cola divestment would outweigh any political benefits, as Coke employs Sudanese civilians and provide goods to consumers.

Brody also asked, "Should we invest in companies in Russia or China because they don't promote democracy?" This analogy is problematic; systematic ethnic cleansing and non-democratic governance cannot be compared in terms of urgency, controversy or human suffering. Foreign direct investment (FDI) in China has lifted hundreds of millions of people out of poverty. In Sudan, FDI is siphoned to military expenditures, contributing little to civilian employment, infrastructure or health. In this way, Sudan is a rare example of effective targeted sanctions.

Arguments against Sudan divestment echo objections to the ultimately successful South Africa and tobacco divestment campaigns. In the 1980s, the administration and Board of Trustees grappled with the decision to divest from South Africa. Executives argued that Hopkins was not structured to conduct social action or rally a political consensus. Student anti-Apartheid activists advocated "blanket" divestment; there were concerns that such a policy could harm blacks economically. Decision-makers also argued that stock ownership gave the University leverage to influence corporate conduct. Hopkins thus initially engaged companies on the Sullivan Principles, a set of requirements for the equal treatment of black employees. This establishes a clear precedent for engagement of companies operating in Sudan.

The Public Interest Investment Advisory Committee (PIIAC) played a major role in the decision to divest, advising the Board of Trustees on the conduct of companies operating in South Africa. PIIAC, a group of six students, five faculty members, and two administrators, was formed in 1972 to advise trustees on socially responsible investment. Hopkins's divestment resolution acknowledged that investment is a tacit social position; stock ownership in a company is a kind of implied consent of business practices. By the mid '80s, many firms had already left South Africa for economic and political reasons. Hopkins thus selectively divested from companies that would not phase out operations in South Africa.

Until 1991, tobacco stocks comprised 1.5 percent of Hopkins's investment portfolio. In 1990, PIIAC advised the Board of Trustees to divest tobacco holdings, arguing that divestment would "give new meaning" to Hopkins's mission to improve human health. The Board of Trustees subsequently formed an ad-hoc Committee on Tobacco Stock Divestment to evaluate the proposal. Hopkins's divestment deliberations provoked a high-level response from tobacco firm Philip Morris (PM). Internal documents indicate that PM worked to "contain and interdict" divestment at Hopkins. PM talking points cited the "slippery slope," moral relativism, tobacco contributions to research and returns from tobacco stock. If divestment is futile and ineffective, why did tobacco firms react so strongly?

The Committee on Tobacco resolved that tobacco stock ownership was "incompatible with the University's mission," and that divestment would "ensure compatibility of the actions of Johns Hopkins with its public position." Trustees were concerned that divestment would set a precedent for other social issues, and that Hopkins would be perceived as dictating social policy. The Committee thus recommended that divestment be "carried out quietly," with no press release or disclosure of company names. Similarly, today's administration may be concerned that divestment from Chinese oil firms may threaten the Hopkins/PRC partnership in Nanjing. It is also possible that Hopkins has "silently" divested from Sudan, consistent with the Board's policy on tobacco.

The genocide in Darfur is uniquely urgent, uniquely tied to foreign investment and uniquely susceptible to sanctions and international scrutiny. For these reasons, the Investment Office should substantiate claims of no Sudan holdings. The Board of Trustees should publicly restrict investments in complicit firms until humanitarian criteria are met. The administration should institutionalize genocide studies through an endowed lecture series or fund for undergraduate humanitarian projects. President Brody is positioned to galvanize these actions prior to his departure in December.