Investments: Who, Why, What Next

This spring, for the third consecutive year, consumer organizations will write to the President of Harvard University, asking him to throw Harvard's sizable shareholdings and still larger influence behind their proxy resolutions.

They know that history is against them.

During its 334-year existence, Harvard has seriously considered the proxy resolutions of only one consumer organization: Campaign GM. It has considered Campaign GM's suggestions twice. It has rejected them twice.

Both times the decision was predictable. The Harvard Corporation, which made the decisions for the University, is dominated by corporate lawyers, men not unsympathetic to the interests of big business.

And George F. Bennett '33, treasurer of the College, who made the decisions for the Corporation, is perhaps the most business-oriented of all.

Bennett has influenced the Corporation so heavily in matters of investment policy for several reasons. First, as treasurer and manager of Harvard's investment portfolio, he speaks with the authority of the man who knows, the man that others must ask. Investment policy is a complex and highly specialized field. Because Bennett is both treasurer and investment manager, he has established a monopoly on knowledge of Harvard's financial intricacies.

Bennett's multiple roles have been criticized. The University Committee on Governance's "Harvard and Money" pamphlet, the Austin Committee report on "University Relations with Corporate Enterprise," and the Andrews Committee report on "The Organization and Functions of the Governing Boards and the President's Office" all question the propriety of one man's occupying so many top offices.

"The fact that the Treasurer, Financial Vice President, Investment Manager, and Managing Partner of the State Street Investment Corporation are all one person and a member of the Corporation raises not only the familiar problem of overload but doubt about how the rest of the Corporation is to achieve the human distance to monitor his judgment and performance over the full range of his extensive responsibilities," the Andrews Committee wrote.

Sensitive on this point, Bennett disagrees sharply. He sees no conflict of interest between his State Street and Harvard functions. And he has an argument that convinces many Harvard officials, especially in these days of financial troubles.

"Harvard's procedure has been very successful," Bennett said in an interview. "Harvard's financial strength isn't an accident. Why is it the last of the largest institutions to run into the red? It's because we've had good financial management."

Because Bennett's numerous duties provide him with an unequaled understanding of Harvard investment policy, and because this policy has been successful, the Corporation has readily followed most suggestions of the Treasurer's office.

Sometimes that office has acted without bothering to inform the Corporation. Last year, while Bennett was out of the country, the Corporation halfheartedly discussed the Gulf Angola Project resolutions, which opposed Gulf Oil's involvement in Angola and other Portuguese colonies in Africa. The debate was limited, Hugh Calkins '43 Fellow of the Corporation, said, because the Fellows "weren't sure what Mr. Bennett had already done." Agreeing, John Morton Blum '43, Fellow of the Corporation, said afterwards, "It was a ship that passed in the night."

One reason the ship could pass unnoticed was President Pusey's reluctance to act affirmatively in the field of investment policy and corporate responsibility. He left that to the treasurer. As Bennett observed, he and Pusey agreed on the fundamental issues.

Recently the private suite that Bennett occupied has opened to other tenants. The Overseers last May created a standing Committee on University Financial Policy. Its members--George Putnam '49, committee chairman and president of Putnam Management Corporation; Andrew F. Brimmer, governor of the Federal Reserve Board; Albert H. Gordon '23, partner of Kidder, Peabody and Co.; and C. Douglas Dillon '31, president of the Board of Overseers and former Secretary of the Treasury--are all very experienced in investment management. But while they may occasionally question Bennett's judgment in financial decisions, they are unlikely to disagree with him on social responsibility matters.

The other newcomer to the University financial scene is Stephen B. Farber '63, assistant to President Bok. Last March the Austin Committee recommended that a "fact-finder" be empowered to "sift suggestions from all members of the University with respect to what might be termed the non-financial aspects of the University's role as investor" and then report to the Corporation.

Rather than appoint a new officer immediately, Bok asked Farber to scout out upcoming proxy battles. 'Obviously, whether Steve will be able to handle it alone will depend on what happens this year," Bok said. "On the basis of last year, I wouldn't think a full-time person was needed."

While Farber's main duties for the Bok administration will concern educational reform, he is not unprepared to investigate and evaluate consumer-group proposals. Twenty-nine years old, he has worked with community action groups in Washington and New Jersey, and he is currently the chairman of People for Auto Insurance Reform, a citizens' group in New Jersey.

His background contrasts sharply with Bennett's. In 1943 Bennett started with State Street; he became a partner three years later. He began his Harvard financial career as deputy treasurer under President Conant in 1949 and became treasurer under President Pusey in 1965. As an investment manager, a director on the Boards of many corporations, a man deeply enmeshed in the world of big business, Bennett naturally has a businessman's orientation.

Less saturated in the corporate ethic, Farber may decide to support some dissident proxy resolutions. But so far he has made no commitments. Details on forthcoming proxy statements are still fuzzy.

Since most corporations hold their annual meetings in the spring, consumer groups have not yet drawn up their proxy resolutions. Farber expects an increase in the number of proxy fights. Last year, the Episcopalian Church introduced a resolution requiring GM to wind up operations in South Africa. (Harvard voted against it; like the GM proposals, it was defeated by a wide margin.) This year other churches and foundations may join consumer organizations on the proxy battlefield. Farber said Harvard will be prepared.

"Shareholders have an obligation to vote on matters before them," he commented, indicating that the days of nocturnal ships may be over.

The Austin report recommended that "the University should vote its stock on occasion in favor of change for the symbolic effect of a great university's taking a position on a social problem."

Farber has endorsed that statement. Bennett's views diverge from it.

"If you're satisfied with management, I don't see why you should rock the boat," Bennett said. "If you think the Board is a good Board, if it's supervising well and it's been a good investment, then I see no reason to change. Why innovate for innovation's sake?"

Following that reasoning, Bennett has rejected all dissident resolutions on the GM proxy statement. Farber may reach different conclusions. Without the President's support. Farber will get nowhere; Bok has thus far emphasized his open-mindedness and said nothing definite. If Farber and Bok decide together to press for an anti-management vote by Harvard in some proxy battles, Bennett may oppose them. What would happen next is anybody's guess.

Social responsibility issues have been presented vigorously only during the last two years. So far Harvard has been unprepared and unresponsive. The Pusey administration had neither the staff nor the inclination to examine the questions. The Bok administration has more of a staff. Whether it has more of an inclination remains to be seen.STEVEN B. FARBER '63