Politics & Policy

Campus Movement

Toward terror-free university investment.

We who appreciate the beneficence of free markets are wary of efforts to curtail independent investment activities, including divestment drives. But as Hillel Halkin observes of boycotts in general, they are justified when “aimed at the right targets.” “When Nazi universities in the 1930s fired all their Jewish staff,” for instance, “a boycott of them would have been entirely appropriate.”

Likewise, in face of the most immediate danger now facing the United States: an increasingly bellicose and reckless Iranian regime. Here, too, a divestment policy directed against publicly traded companies engaging in dealings with Iran is entirely appropriate, and the idea is rapidly gaining traction in the public arena.

For example, Sen. Frank Lautenberg (D., N.J.), taking aim at pension systems, said: “It is unconscionable . . . to permit investment . . . in companies that provide revenues, advanced equipment and technology to countries that threaten our vital security interests.” And presidential candidate Mitt Romney has called on private sector and state officials to divest from Iran and to “cut off the resources [it] uses to fuel terror.”

Peter Huessy, president of GeoStrategic Analysis, a defense and national-security consulting business, puts a finer point on it: “Tolerating investment in fanatic states like Iran intent on killing us is nothing less than a policy of suicide.”


The Iranian government is channeling hundreds of millions of dollars per year to help non-Iranian terrorist organizations, notably Hezbollah, Hamas, and Palestinian Islamic Jihad. As Sen. Joseph Lieberman details in an account of the regime’s “increasingly brazen behavior,” our military declared that Iran is training, arming, and funding its proxies in Iraq in the amount of $3 million a month and Iranians are implicated in the deaths of at least 170 American soldiers. It has incarcerated four American civilians, including the esteemed 67-year-old scholar, Haleh Esfandiari, on trumped-up charges. It has abducted a popular trade unionist as well as kidnapped, tortured, and liquidated many other Iranian civilians, and seized 15 British sailors at sea. Its Revolutionary Guard has been discovered delivering weapons to the Taliban and explosives to both Shiite and Sunni terrorists in Iraq, and Iran is also reported to be harboring top-level al Qaeda leaders — and this, as Joshua Muravchik notes, in spite of Shiite–Sunni enmity. “All of these surprising actions,” he writes, “are for the sake of bleeding the U.S.”

Facing such a threat, we should be using every resource at our disposal — including our investment dollars — to force the Iranian powers-that-be to cease and desist. Failing to act would be the historical analogue of standing idly by while Hitler remilitarized the Rhineland. A systematic divestment drive is a critical and proven tool in asserting pressure, as demonstrated by a similar drive that played a vital role in the fall of South Africa’s apartheid regime.


Kenneth R. Timmerman, author of Countdown to Crisis: the Coming Nuclear Showdown with Iran, explains that the divestment campaign “will complicate Iran’s quest for the investment capital and technology it needs to keep its oil industry afloat,” rendering the regime quite vulnerable. For even though Iran has an abundance of oil, it is not refining enough gasoline for domestic use. Its susceptibility on this score was borne out by the riots from this summer’s gas rationing, coupled with an inflation rate of more than 22 percent and an unemployment rate that may be running as high as 30 percent.

Given these weaknesses, it is plausible, as a recent survey of the Iranian people by Terror Free Tomorrow suggests, that a stringent global boycott would increase the potential for revolt against Ahmadinejad, or, at least provide an impetus for internal change in the state.

The moment is thus right for the U.S. and the international community to pressure Iran, in particular by targeting Iran’s banks and the companies controlled by its military-industrial complex. Already this year the U.S. Treasury has blacklisted and applied asset freezes against at least 15 Iranian entities. The objective of such sanctions is to force the regime to abandon, or at least slow the rate of, its crazed aggression, or to effect a regime change. One seasoned Middle East expert, Dennis Ross, believes that this policy could be critical in changing Iran’s policy on nuclear weapons.

U.S. investors, including public bodies such as universities, must now do their part in winning the War on Terror and deprive terror-sponsoring nations of their financial life’s blood. Above all, it is imperative to cast the spotlight on those publicly traded companies doing business with this odious terror-sponsoring regime. “Divest Iran” is a movement whose time has come.

Spearheading this campaign is the Center for Security Policy (CSP), which has identified more than 400 companies that furnish equipment, technology, and revenue streams to four terrorist-sponsoring governments (i.e., Iran, North Korea, Syria, and Sudan). CSP even highlights a “Dirty Dozen” of these companies to illustrate how their behavior indirectly aids and abets terrorism.

The CSP rightly urges each of us to demand that our investment funds don’t support companies that do business with Iran. Its call to arms casts the spotlight equally, and at last, on university endowments, instead of only on taxpayer-funded retirement systems.


Congress will likely soon pass legislation that will make it easier for state pension funds to divest from firms doing business in Iran, in spite of the opposition of pro-regime lobbyists and fund managers. A coalition of larger fund, collectively controlling $570 billion in assets, has begun to urge companies to reconsider their relations with Iran.

More than a dozen state legislatures have passed laws or are considering measures that would require public pension funds to divest holdings in firms doing business in Iran’s energy sector. California has passed a bill targeting its public-employee and teachers’ retirement system, and a similar bill has been proposed in New York.

Legislation in Louisiana is especially notable. Sponsored by Rep. Pete Schneider, the legislation authorizes the governor to contract with Wall Street firms to create terror-free funds. Roger Robinson, president of Conflict Securities Advisory Group, the preeminent independent research and data provider in the field of terror-free investing, underscores the importance of this legislation:

The “pooled” investment funds of Louisiana can be transferred to these new terror-free products. The major advantage of this state’s approach is that it explicitly calls for the creation of terror-free products that can be made available to every American investor. Such products should be coming to market soon.

Once such a fund is established, in other words, it has the potential to become what Morris calls “the gold standard” for divestment by all.


It is difficult to determine the actual extent to which universities, many with immense endowments, are investing in firms that sustain terror-sponsoring states. The institutions themselves, which normally engage money managers to invest and manage their endowments, generally post only cursory summaries of the overall performance of their investments. Detailed information about which securities are held in these portfolios is seen as being proprietary in nature since it reflects the specific philosophies, strategies, and techniques of the managers involved, and is therefore not usually published.

However, one may glean a sense of the enormous amounts of money involved. My analysis of data compiled by the National Association of College and University Business Officers, with 765 public and private colleges and universities reporting, shows that the total market value of these institutions’ endowments in 2006 was $340 billion. The top 20 of these campuses represent close to 50 percent of the total of all reporting institutions.

Because the need of the hour is great, significantly increased transparency about university-investment decisions is also in order. The SEC’s terror watch list, which enumerates only companies traded on U.S. exchanges, includes companies, mostly foreign, with many readily recognized names, such as Unilever, Cadbury, HSBC, Nokia, Siemens and Total. (Note that there are exceptions in U.S. law which permit American corporations under certain circumstances to do business in terrorist-sponsoring states, and, of course, foreign companies listed on the U.S. exchanges are not subject to American sanction acts.) These large multi-national enterprises are likely candidates for inclusion in any well-diversified portfolio. The magnitude of these 20 endowment funds is such that a large percentage of them, like pension funds seeking broad diversification, are almost certainly investing, to some greater or lesser degree, in firms benefiting the Iranian regime (and the other states on the terror watch lists).

Not included on the SEC’s list, as Robinson remarks, are companies such as Sinopec, Gazprom, and China National Offshore Oil Company, which routinely act as instruments of state policy. He also estimates that large public pension funds — again in this respect likely comparable to university endowments — were generally found to have between 10-20 percent of their portfolio exposed to this present financial risk.

The nation’s higher-education governing boards must exert far greater scrutiny and prudential judgment over their trust funds. University trustees have a fiduciary obligation to ensure the prudent investment of endowments. In that capacity it does not suffice to merely hire a management firm and leave everything to that firm’s discretion. Boards should know how the moneys are being invested and set parameters for their managers.

In addition to fiduciary considerations, however, higher education exists for purposes above and beyond accumulating material wealth. Central to its mission is to serve high civic and moral purposes and to establish high ethical standards for all. Consequently, in addition to risk factors, trustees have the authority to establish moral and value-based parameters for investments, as long as the parameters are not inconsistent with prudent management.

What is more basic to the commonweal, and fundamentally moral, than vigilance in time of war — when the very survival of the republic is at stake?

It is urgent that the nation’s higher-education leaders muster the will to demonstrate their institutions’ high purposes by participating in the Divest Iran movement. The largest institutions should point the way for all our colleges and universities by pledging not to invest in companies there and elsewhere whose business dealings benefit Iran and other terrorist states. Higher education’s example would no doubt lead others to follow suit.

Will campus boards rise to the occasion? Recent responses to an inquiry by the Senate Finance Committee into certain investments in offshore tax havens by Harvard, Yale, and Stanford are not encouraging. For instance, John Longbrake, a Harvard spokesman, replied the university does “not discuss investment structuring.” Chris Yates of Stanford commented vaguely that the university “probably” uses intermediary companies, and Yale’s Karen Peart had no immediate comment.

Trustees must promptly undertake an examination of the investment portfolios of the institutions they serve, and they must publicly declare the philosophy underlying the portfolios. In addition, there can be little excuse for not publishing the details regarding all investment holdings while protecting any proprietary information that might disclose strategies or policies employed by the various money managers.

It would be the height of irresponsibility — and perverse irony — for higher education, whose sacred duty it remains to guard and transmit civilized values and life, to continue to invest in civilizational suicide.

– Candace de Russy is an expert on higher education who blogs at NRO’s Phi Beta Cons.”


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