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April 30, 2004
Jewish Institutional Investors Form Shareholder Engagement Network
    by William Baue

The Jewish Shareholder Engagement Network is based on the notion that Jewish tradition supports such shareowner action as active proxy voting and dialogue with companies.

"There is no such thing to my mind … as an innocent stockholder. He may be innocent in fact, but socially he cannot be held innocent. He accepts the benefits of the system. It is his business and his obligation to see that those who represent him carry out a policy which is consistent with public welfare."

These words of Louis Brandeis, an early 20th Century Jewish Supreme Court Justice, encapsulate the tenets of the newly-formed Jewish Shareholder Engagement Network (JSEN), a group of institutional investors with assets of more than $1.3 billion. The project, believed to be the first Jewish institutional investor group devoted to shareowner action, had its founding meeting in November 2003.

The JSEN is affiliated with the Interfaith Center for Corporate Responsibility (ICCR), a coalition of more than 270 Protestant and Catholic organizations that promote shareowner action. JSEN member Nathan Cummings Foundation provides significant support for the project. Other network members include the Naomi and Nehemiah Cohen Foundation, the Forward Foundation, and the Union of Reform Judaism Pension Fund.

"There is a strong basis in Jewish tradition to support shareholder activism," said Rabbi Mordechai Liebling, the lead organizer of the network and "Torah of Money" director for the Shefa Fund, a Philadelphia-based Jewish community development organization. "It is based on the principle that there can be no dichotomy between our economic and spiritual lives."

"As the Talmud says, the first question you will be asked in heaven will be, 'How did you conduct your business affairs,'" he continued.

There are three direct principles in Jewish tradition that support shareowner action, according to Rabbi Liebling. First, people cannot profit from forbidden activities, such as pollution, which endangers human health, or underpaying workers. Second, people cannot partner or assist others in doing such forbidden acts. And third, people should prevent their assets from causing harm, and one is responsible if they do.

"The classic Talmudic example is about oxen: if ten people hold shares in an ox and that ox causes damage, each shareholder is liable to pay a share, proportionate to his or her holding, no matter how small and where or not he or she was actively involved in handling the ox," Rabbi Liebling wrote in a memo he sent to "You cannot transfer responsibility for the effects of your assets."

This flies in the face of modern notions of capitalism.

"The modern corporation separates the identity of the shareholder and the corporation--the concept of limited liability--the corporation and not the person is liable for damages is a fundamental aspect of corporate economics," Rabbi Liebling writes. "This allows a transfer of moral responsibility, thus shareholders feel that they have no responsibility for illegal or immoral acts."

"Jewish tradition does not accept the separation so easily," he states.

The JSEN seeks to enact Jewish tradition by practicing active ownership, for example by engaging in dialogue with companies over responsible corporate behavior or actively voting proxies. The American Jewish World Service, a JSEN member, is working to encourage other Jewish institutions, which collectively own an estimated $30 billion in equities, to support shareowner resolutions addressing the HIV/AIDS pandemic. The JSEN also recommends support for shareowner resolutions on executive compensation, transparency in corporate political participation, global warming, prescription drug affordability, and equal employment opportunity.

"Proxy voting is not only a matter of public policy but a matter of fiduciary duty, essential for protecting and enhancing the value of the assets managed on behalf of
others," says Nell Minow, a member of the JSEN Advisory Committee. Ms. Minow is also editor and founder of The Corporate Library (TCL), an independent research firm that provides corporate governance data, analysis, and risk assessment tools.

"The Reform Pension Board has long felt that our financial investments have a social component," said Rabbi Stacey Offner, chair of the socially responsible investment committee of the Reform Pension Board, the largest Jewish institutional pension fund in the US. "We are delighted to join hands with other Jewish institutional investors in an effort to give voice to our shared Jewish values, that we might better invest not only in our financial future but in the kind of world that future will look like."


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