STERN: What’s fueling their decision?

A Stern Perspective

If there’s one thing the members of the Yale Corporation understand, it’s self-interest. Not everyone agrees this is a bad thing, of course — in the corporate world that many Corporation members inhabit, many herald self-interest as a way of life. Self-interest is why they were successful at the companies they lead or recently led: Pepsi, Chanel, Time Warner, Goodyear, J.P. Morgan, Bain Capital.

scott_stern_headshot_peter_tianBut self-interest is why the movement to divest from fossil fuel companies is bound to fail.

The remarkable irony of the Yale Corporation — especially when it comes to divestment — is that they claim to be in their positions precisely because they are free from self-interest. While a student might advocate only for student issues, and while a faculty member might only advocate for faculty issues, as the argument goes, the Corporation members are wise outsiders, unblemished by self-interest.

Yet it is difficult to make this argument when several members of the Corporation — most notably Charles Goodyear ’80 and Paul Joskow GRD ’72 — have direct financial ties to the fossil fuel industry. When the Corporation is discussing the issue of divestment, these members must recuse themselves.

I will not make the argument in favor of divestment here in part because that argument has been made in the News and across campus far more eloquently than I could do. Further, the science is irrefutable and many studies, including a recent one conducted by three Oxford economists, found that divestment helps to stigmatize the fossil fuel industry and hurts companies financially. But, most importantly, I don’t need to argue in favor of divestment because, no matter which side of this debate you support, you should want unbiased individuals making such a weighty decision.

Goodyear’s interest in the issue is the most troubling. He is one of the world’s foremost investors in fossil fuels. Goodyear was the CEO of BHP Billiton from 2003 to 2007, a company that extracts and sells fossil fuels. He is now a member of the National Petroleum Council and a board member of Anadarko, one of the largest fossil fuel companies in the world, which compensates him very generously. Anadarko just settled a lawsuit for $5 billion over health problems wrought by its pollution.

Paul Joskow also has ties to the industry. For years, he was the director of TransCanada, a large oil and natural gas company and the force behind the controversial Keystone XL Pipeline. Currently, he sits on the board of Exelon, an energy company with holdings in fossil fuels.

And, disturbingly, Joskow is a member of the Yale Corporation Committee on Investor Responsibility (CCIR), the body that, according to its website, “makes recommendations to the Corporation on policy matters related to ethical investing.” The three members of the CCIR — Joskow, Neal Leonard Keny-Guyer SOM ’82 and Catharine Bond Hill GRD ’85 — are tasked with making a recommendation on the issue of divestment.

Goodyear and Joskow may not want to hurt their bottom lines by taking a financial stand against their own industry, and they also may not want to hurt their reputations or those of their friends in the same industry.

It is worth remembering that, in the 1980s, the Yale Corporation repeatedly delayed divestment from apartheid-era South Africa because at least four Corporation members had financial ties to the country.

Discussion of Corporation members’ self-interest is especially important considering that Fossil Free Yale’s proposal is far more conservative than proposals at other schools. Corporation members, however, might not know that. They might, instead, be making decisions guided by financial interest or other motivations, not careful research.

“When we met with Indra Nooyi, she told us that she had looked through our website,” said Patrick Reed ’16, Treasurer of Fossil Free Yale. “However, she asked us questions about issues that had already been handled, conflated our proposal with those of other schools and generally didn’t seem too knowledgeable about the specifics.” Reed also said that other members of the Corporation told Fossil Free Yale that they had read its report, but that, based on their questions, it seemed as if they hadn’t.

If Corporations members are guided by self-interest and aren’t aware of Fossil Free Yale’s specific proposal, that might explain some of their recent actions. At a meeting last Friday of the CCIR, as well as the Advisory Committee on Investor Responsibility (ACIR), President Salovey, Provost Polak and others, the Corporation members present declined to make a decision on the issue of divestment.

Perhaps you disagree about the necessity of divestment, but regardless of your views on the issue, we can all agree that whoever makes the ultimate decision should not have a financial stake in the industry. Goodyear, Joskow and perhaps others should recuse themselves in all future discussions of divestment.

Scott Stern is a junior in Branford College. His columns run on Wednesdays. Contact him at scott.stern@yale.edu .

A previous version of this article incorrectly stated that BHP Billiton had recently settled a lawsuit over health problems settled by its pollution. In fact, Anadarko was the company that recently settled this lawsuit. 

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