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April 25, 1996

New option reviewed for investment policy

In its own small way, Pitt may have helped to topple South Africa's white-minority government.

In March 1987, the Board of Trustees voted to purge Pitt's endowment of holdings in companies doing business in the then-racially segregated nation. The ban remained in effect until June 1994, when the trustees rescinded the policy in response to South African reforms.

But Pitt paid a price for its social conscience. Because of restrictions imposed by the South Africa policy, Pitt's investment return during those years was approximately $2.5 million less than it otherwise would have been, according to an estimate by Pitt's Office of Finance.

Now a subcommittee of the trustees' investment committee is drafting a policy to deal with future calls for placing non-financial limits on investments.

Essentially, the proposed policy would formalize the investment committee's traditional rule of thumb: Unless the full board (or its executive committee) instructs otherwise, the investment committee's job is to see that Pitt invests its endowment money in a way that maximizes returns without taking unacceptable financial risks. Social issues do not come into play.

But the proposed policy, in its current form, would add a new element. People who donate to Pitt would be given the option of earmarking their gifts for a "socially conscious" investment fund within the endowment.

According to written materials distributed to investment committee members at their most recent meeting on March 21, the proposed policy would have the following advantages:

* It would give trustees firm, yet flexible, guidelines for dealing with activists seeking to further their causes by limiting Pitt investments. During the late 1980s and early 1990s, U.S. anti-apartheid protesters pressured numerous university boards into selling off South Africa-related investments. According to a Pitt investment committee member who spoke on condition on anonymity, some trustees now expect advocates of other social causes to pressure the board to ban investments in tobacco companies, weapons manufacturers, nuclear power producers and businesses that experiment on animals, to cite a few examples. Just this week, the American Medical Association urged investors to rid their portfolios of tobacco stocks and shares from mutual funds that invest in tobacco stocks.

* The proposal might inspire donations to Pitt from socially conscious people who otherwise would not contribute.

* It would protect trustees against charges that, by placing non-financial limits on Pitt investments, they were failing to fulfill their fiduciary responsibilities.

Among the materials distributed to investment committee members last month were reprints of a Barron's article describing a 1991 lawsuit against the governing council of the Minnesota-based Evangelical Lutheran Church. A group of dissident church members charged the council with breach of contract and neglect of fiduciary duty, alleging that the council's 1989 ban on South African-related investments was retarding the investment performance of the church's $2.7 billion pension fund. In December, the Minnesota Court of Appeals threw out the lawsuit, but the dissidents plan to petition the Minnesota Supreme Court to hear an appeal.

The Pitt board's investment committee plans to discuss, and possibly vote on, the non-financial investments policy at its next public meeting on June 4 in 107 Cathedral of Learning. The public meeting will follow a closed-door session that is scheduled to begin at 9 a.m.

The committee can institute the policy without bringing it before the full Board of Trustees, said Robert Dunkelman, secretary to the board.

— Bruce Steele

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