Baran: Debunking investment myths

This article has been corrected. You may view this article’s correction here.

The campus is abuzz in the wake of the highly successful launches of both the Responsible Endowment Project and of the Undergraduate Organizing Committee’s Nov. 18 sit-in outside the Investments Office with HEI hotel worker Jose Landino. To me, what’s been so striking and new about this work, which I have been a part of, has been the fresh and invigorated sense of possibility with which student activists have taken on this challenge, in sharp contrast to defenders of the University — both administrators as well as several conservative students — who have been rehashing a number of tired official narratives in these pages and elsewhere.

They have done so, moreover, with very little critical or careful engagement with either the facts of the particular investments being subject to scrutiny or with the actual history of University practices in this area.

One of the biggest myths promoted recently is that Yale’s process of investment review through the Advisory Committee on Investor Responsibility works because of its success in the case of South African apartheid. While I do not wish to dwell unnecessarily on the example of South Africa, I am compelled to address the utter falsehood embedded in this narrative. As apartheid only fell 14 years ago, this is by no means ancient history. We can and must take hold of the facts.

As we know, South Africa was the first major case of activists around the world seeking to use investments for the pursuit of social justice. One of the erroneous beliefs of our time is that divestment from apartheid was an “obvious” moral choice. We live in a world that has come to recognize the horror that apartheid was, so we project backward our own disgust, believing that people living in the 1970s and 1980s were equally horrified and compelled to action, and thus that the fall of apartheid was inevitable. That history is not the correct one.

Yale as an institution has tried to do take advantage of this failure of memory by repeating the claim that it truly divested from South Africa. ACIR Chair Jonathan Macey said as much in his column in this paper two weeks ago (“Yale invests responsibly,” 11/21), stating, “In 1978, the University rid its portfolio of its investments in many companies doing business in apartheid South Africa” in a matter-of-fact way, as if to suggest the ACIR process worked and there were absolutely no complaints or lingering questions about Yale’s behavior during this critical period of global efforts to defeat apartheid.

Yet the historical record, drawn from newspaper accounts, official university statements and the historical memory of anti-apartheid activists in New Haven tells a very different story. With the publication of “The Ethical Investor” in 1972 and the subsequent creation of the Advisory Committee on Investor Responsibility, Yale established its intellectual and theoretical leadership in the area of ethical investing thanks to students and professors at Yale in the late 1960s and early 1970s. But when it came to putting these principles into practice in the case of South Africa, Yale failed miserably.

What really happened in 1978? That year, the acting president established the Ad Hoc Advisory Committee on South African Investments at the request of the Yale Corporation to consider various issues raised concerning Yale’s investments in companies that did business in the Republic of South Africa. That body issued a report with a number of recommendations for comprehensively ridding the University’s investment portfolio of ties to South Africa.

The Yale Corporation responded by releasing a policy statement titled “Ethical Investment Policy and South Africa,” in which the University pledged to urge companies in which it was invested to sign onto the Sullivan Principles.

The Sullivan Principles were written by the Rev. Leon Sullivan, a member of the board of directors of General Motors, in 1977. They were quickly displaced by other standards that activists fought for, but they became a set of minimal guidelines that could be adopted, as the Corporation did. The Corporation went on to say that after a “reasonable amount of time,” the University could consider divestment from companies that did not follow these minimal guidelines or something “equivalent.”

Yet Yale never followed through on that pledge to work to implement the Sullivan Principles, according to four Corporation members at the time, including former Sen. Paul Tsongas, who were in the minority on South African divestment on the Corporation and who wrote a statement of dissent from the Corporation’s decisions on Nov. 2, 1985.

Students in the Coalition Against Apartheid wrote a research report that found that during the mid-1980s Yale still had over $300,000,000 invested in South Africa, which was confirmed by Yale’s vice president for finance in a 1986 public report. A full third of this money was invested in companies that were not complying with the Sullivan Principles — again, the minimal guidelines around at the time. One-fourth of this money was in banks that were lending directly to the apartheid government.

Moreover, as late as 1986, barely a month before the Republican-controlled Congress passed the Comprehensive Anti-Apartheid Bill over President Reagan’s veto, Yale was still publicly supporting a policy of “constructive engagement” with the South African government. This was long after many universities and institutions had divested. Thus, it was not until it was actually illegal to be invested in South Africa that our University was forced to divest.

The record also shows that students made numerous efforts in the 1980s to engage the Advisory Committee on Investor Responsibility on the issue of South African investments. At the end of the day, however, this body did not have the power to do more than make recommendations to the Corporation. Little, probably, could have overcome the fact that multiple Corporation members had significant financial ties to companies doing business in South Africa and refused to recuse themselves from decisions made on the matter.

Nothing has changed about the ACIR structure since it was created and since it proved such a dismal failure in the case of South Africa. Instead, Yale officially congratulates itself for “success” in divesting apartheid. But as is very clear from the historical record, Yale never complied with even the most minimal guidelines regarding South African investment, even after it publicly committed to doing so.

Those campaigning against South African apartheid in the 1970s and 1980s never thought they would see the system fall in their lifetime. This University, unfortunately, gave them little reason to see any hope.

If we’re going to seize on the progressive energies and possibilities of this moment here at Yale and beyond, we all need to take the failures of our institution to address past injustices more seriously when approaching University investments today, restoring to our discourse a critical spirit of inquiry that brings history into our analysis of the present.

Hugh Baran is a senior in Davenport College and a member of the Undergraduate Organizing Committee.


  • thank you!

    Great column.

    Too often we forget that acts of progressive change, which seem self-evident to later generations, would not have happened without sustained and persistent efforts from concerned activists. As Hugh pointed out, it is crucial that we learn the lessons of these past struggles.

    At the very least, we should strive not to demonize those who do choose to think critically about the institution we all care so much about.

  • Fact Check

    Yale's endowment was hovering around $2 billion in 1986. This article claims South African investment was $300,000,000, or 15% of the portfolio, an absurd claim.

  • RE: Fact Check

    On what grounds? You categorically claim the figure to be absurd, without providing any evidence beyond, presumably, it instinctively appearing so to you. To believe such a claim would be absurd.

  • Yale alumna

    This history may embarrass Yale, but it needs to be heard. For the future, the ACIR should be given the resources and information that it needs to do its job.

  • AviGandhi

    To that fact check guy:

    Actually, back in 1986, our endowment had JUST started to be managed by David Swensen, so it's likely that it wasn't spread between assets as well as it is now. Furthermore, South Africa was a major financial and business center, with many of its companies growing extremely quickly due to natural resources. 15% of the endowment in one country is not surprising; globalization had not taken hold to the extent that it has now, so South Africa was one of THE developing countries to be invested in (like the BRIC now)

  • Fact Check


    I don't need to provide evidence for that figure's absurdity any more than I need to provide proof that nobody has a 50-inch phallus. It is obvious to anyone who works with asset allocations.

    Yale currently invests around 20 to 25 percent of its money overseas. The University would not place so many of its eggs in one basket as to put 15 percent in one country.

  • BR'11

    Bravo. This is beautiful.

    It's good to be reminded of the history here (or in my case, and I suspect most people's, to learn it for the first time) because from what I've heard the ACIR mentions apartheid divestment as a major victory.

    Even if they did have a role in some of the implementation that was done, and had the best possible intentions, if we take the facts that Hugh presents it's pretty clear that the ACIR just does not have the power to make change. Which is deeply problematic it seems to me.

    PS I'm also interested in how this research was done. #2 (scornfully) wanted a Fact Check, and I'm not so doubtful, but I am curious how the research was done/where you get this information/has someone written a book about this that people can read?

  • re: Fact Check

    I think it's worth noting that Baran gave a source for the figure--actually, he gave two: a student report, which was verified by a public report by a Yale administrator.

    Do you think he is patently lying? He decided to make up a source out of whole cloth? I've been lucky(?) enough to take class with Hugh and the man is many things, but he is an incredibly serious student who would not do something as stupid as making up a source. It's equally unlikely that someone who had done the historical financial research as thoroughly as it seems to have been done here would accidentally add a zero and misunderstand the importance of the number $300 million.

  • Anonymous

    Great column. It seems that Yale behaves the same way any corporation would… willing to lie and break the law as long as it makes money and they think they can get away with it.

  • Fact Check

    I can't believe that I'm forced to explain why the figure $300 million is so absurd. According to the 2006 Yale Endowment report, Yale had an allocation of 75% domestic equity and bonds in 1986. This leaves 25% of the portfolio for all other asset classes, including foreign equity. The article claims that $300,000,000 was invested in South Africa out of the approximately $1.7 billion endowment at the time. This is 18%. So, assuming that Yale did not invest in any private equity or real estate, this would mean that nearly 75% of Yale's overseas holdings were in South Africa, a figure which seems absolutely implausible since the whole point of foreign investment is diversification. Exactly what report did this number come from, and where is it published?