C O M M O N   Q U E S T I O N S
The following are questions that we frequently encounter during our campus presentations.

Isn’t the fiduciary duty of university trustees limited to just investing the endowment for maximum profit with the least risk?
The “Prudent Man Rule” is the fundamental principle that has guided trustees, money managers and other fiduciaries since the 1830s. In the case of Harvard College versus Amory, Massachusetts Supreme Court Justice Samuel Putnam declared, "Those with responsibility to invest money for others should act with prudence, discretion, intelligence, and regard for the safety of capital as well as income.” This guideline reinforces the need for fiduciaries to recognize the effects of environmental, social and governance issues on the type of long-term investments made by endowments. Shareholder engagement enables trustees to fulfill this aspect of their fiduciary duty as prudent men and women.

Won’t shareowner engagement hurt our endowment investment returns?
No. Shareowner engagement does not involve any changes in investments, therefore, it does not impact endowment investment returns. The goal of shareowner engagement is to seek substantial improvement in corporate policies through dialogue with corporate management. The university endowment’s position of power with the company comes through its status as a shareholder. If the endowment sold its shares in a company, it would lose its voice as a shareholder and be unable to influence that company’s policies.

Won’t shareowner engagement interfere with our investment managers’ strategies?
No. Investment managers are tasked with finding the best investments and shareholder engagement does not involve any changes to their investment strategies. Rather, shareholder engagement capitalizes on the rights and responsibilities that universities have by virtue of owning corporate stocks. By engaging with a company, an endowment is not buying or selling its shares, it is simply opening a dialogue with the senior management and board of directors. While more formal than dialogue, the filing of shareholder resolutions adheres to the same principles about engagement.

The university trustees and administrators are very busy and do not have time to handle proxy voting. How will this work?
While the trustees retain the fiduciary responsibility for university endowments, the advisory committee on shareholder responsibility can handle the research and due diligence on upcoming shareholder resolutions requiring a vote. The committee can then present its recommendations to the trustees in a succinct report that outlines the reasoning behind the recommendations. At many schools with committees, the trustees spend a short time handling proxy voting and are eager to meet with students and other committee members to discuss their recommendations. Furthermore, the university should not have to allocate significant staff time because shareholder responsibility committees rely on volunteer members who do their own research and write their own reports. For example, schools such as Swarthmore, Vassar and Williams all operate successful committees without needing to employ additional staff.

The issues are too complex and we do not have the expertise to handle voting.
In most cases, shareholder resolutions are quite straightforward—they are filed by other shareholders and required to be 500 words or less. Proponents of resolutions are aware that an overly technical resolution will confuse other investors and reduce support for the resolution. Moreover, subscription services are available that offer in-depth background reports on each subject as well as on each specific resolution.

Won’t the alumni community and university donors object?
Not likely. In 2005, the Goldman Sachs Global Markets Institute commissioned a survey of the perceptions of university endowment donors. They found that 75% of donors are in favor of endowment disclosure and transparency while only 21% would prefer to allow universities the “freedom to invest in funds that do not disclose which companies they invest in.” Anecdotally, many prominent alumni and university trustees have commented that they are excited about how shareholder responsibility committees offer a unique educational opportunity. They see shareholder engagement as providing an effective way for the university to align its endowment investments with campus policies and values.