May 31, 2006
Survey Starts to Pry Open Black Box of University Endowment Holdings and Proxy Voting
by Bill Baue
The survey, conducted by the Sustainable Endowments Institute, finds the vast majority of
universities and colleges veiling their holdings and proxy voting records in secrecy.
Anecdotal evidence, which the academic community spurns in favor of hard data, suggests that
universities and colleges take a black-box approach to investing their endowments by shrouding
their holdings and proxy voting records from the public--and even their own students. Yesterday,
the Sustainable Endowments
Institute started to lift the veil hiding academic investments by releasing hard data from a survey of the 331 largest
US university and college endowments--all those with $100 million or more in assets.
"The survey found that universities and colleges haven't been transparent in where
they're investing or, even more interestingly, in how they're voting," said Mark Orlowski,
executive director of the institute, which is a special project of Rockefeller Philanthropy Advisers.
Of the 216 colleges
and universities that responded to the survey (whose combined assets total $193 billion),
two-thirds disclose endowment holdings only to trustees and senior administrators while less than a
quarter (22 percent) disclose this information publicly. The remaining 12 percent limit disclosure
of endowment holdings to students and the school community.
Many universities and
colleges claim that disclosing their holdings will compromise their competitive advantage, arguing
that private equity investments in particular (where endowments are increasingly concentrated)
require secrecy to thrive. However, Mr. Orlowski points to the 73 institutions surveyed--with
roughly $65 billion in assets--that do disclose their holdings and therefore do not buy the
competitive advantage argument.
While the Sustainable Endowments Institute released only
aggregate survey data as a condition for participation by many of the schools, Mr. Orlowski cites
information from independent sources to contextualize this issue.
For example, some
institutions use a time lag system to get around the competitive advantage issue. Mr. Orlowski
cites his alma mater, Williams, which
posts a list of endowment holdings (without asset allocation information) on a special section of
its website accessible by the college community and alumni a few months after the end of its fiscal
year. Who would want to trade on stale information?
Columbia holds an open forum where it hands out a list of
holdings with asset allocations down to the penny. Also included is "very long list" of private
equity and hedge fund holdings, with notations of which names are held in private equity, which in
hedge funds, and which in both.
"Columbia, with their more than $5 billion endowment,
doesn't feel like this disclosure compromises their investing strategies," Mr. Orlowski told
On the other extreme, Mr. Orlowski points to colleges such as Tufts and Bowdoin, which are very progressive in instituting campus
sustainability programs and greenhouse gas reduction policies, but lag on endowment holdings and
proxy voting disclosure. Positive action on campus can be dwarfed and counteracted by inaction on
the investment front.
"Bowdoin has a full-time campus sustainability coordinator, is
reducing campus emissions significantly, and also announced this month that it is buying renewable
energy credits for 100 percent of their energy use--all of which is fantastic, but compared to the
impact of their $700 million endowment portfolio, it really begs the question of where are the
college's priorities?" asked Mr. Orlowski.
Bowdoin and Tufts are not alone in withholding
their proxy voting records. The survey found that nearly three-quarters (74 percent) of the
responding institutions keep proxy voting records private, and about the same (73 percent) do not
actively vote their proxies.
"I think that in the long term, active proxy voting can
encourage good governance, which is linked to enhanced shareholder value," said Mr. Orlowski. "If
you look at many of the corporate scandals that have happened, there was a lack of good governance
and a lack of oversight by active shareholders."
"Dartmouth does a very good job of active proxy voting and
disclosing its record," said Mr. Orlowski. "It has a website online, it puts out
annual reports, and in the last two years it voted in favor of all climate change and energy
efficiency resolutions--that's a very impressive record!"
The survey also reveals that
only five percent of surveyed schools have shareholder responsibility committees (which help vote
proxies) that are open to students. Among the institutions implementing this best practice are Brown, Columbia, Dartmouth, Harvard, Pomona, Stanford, Swarthmore, UPenn, Williams, and Yale .
Middlebury, which is progressive on sustainability issues
like Tufts and Bowdoin, is moving in the direction of best practice by proposing a shareholder
responsibility committee, according to Mr. Orlowski.
responsibility committees are not the norm yet," said Mr. Orlowski. "The 95 percent of schools
without such committees are missing a tremendous educational opportunity that requires minimal
staff time and administrative cost.
"These committees represent incredible, hands-on
learning opportunities for students, and schools that don't have them prevent their students from
exploring these avenues of knowledge and experience," he continued. "These committees don't make
endowment investment decisions, they simply advise the trustees and therefore there's not a
question of negatively impacting investment returns."