Policies and Past Actions
Concept of "Social Injury"
At the heart of The Ethical Investor's approach to institutional investor responsibility is the concept of social injury. As defined in the "Suggested Guidelines for the Consideration of Factors Other than Maximum Return in the Management of the University's Investments" contained in the The Ethical Investor (the "Guidelines"), "social injury" means "the injurious impact which the activities of a company are found to have on consumers, employees, or other persons, particularly including activities which violate, or frustrate the enforcement of, rules of domestic or international law intended to protect individuals against deprivation of health, safety, or basic freedoms; for the purposes of these Guidelines, social injury shall not consist of doing business with other companies which are themselves engaged in socially injurious activities."
Guidelines for the Voting of Shares
With respect to the exercise of voting rights, the University relies on the Guidelines, which provide, in relevant part:
"The University will vote for a proposition which seeks to eliminate or reduce the social injury caused by a company's activities, and will vote against a proposition which seeks to prevent such elimination or reduction, where a finding has been made that the activities which are the subject of the proposition cause social injury. This paragraph will not apply to any proposition which seeks to eliminate or reduce social injury by means which are found to be ineffective or unreasonable."
"The University will not vote its shares on any resolution which advances a position on a social or political question unrelated to the conduct of the company's business or the disposition of its assets."
A more detailed summary of Yale’s approach to proxy voting as it relates to social issues can be found at the Annual Report page.
CCIR Statement on Proxy Resolutions
In 1989, the CCIR clarified further the University's policy with respect to proxy voting and advised the ACIR that shareholder action can be taken only in response to issues that involve "substantial social injury" and that are "susceptible to competent evaluation by the University under criteria reflecting broad moral consensus within the academic community." Votes in favor of proxy resolutions "should be preceded by a determination that the issue is one on which it is appropriate for the University to take a formal position as a shareholder."
In order to
give the Advisory Committee on Investor Responsibility guidance for the 1994
proxy season, the Corporation approved instructing the Advisory Committee to
vote in favor of well-constructed proxy resolutions relating to tobacco
In 1996, the
Corporation Committee on Investor Responsibility voted to supplement the
instructions provided to the Advisory Committee on Investor Responsibility in
February 1994, by instructing the Advisory Committee on Investor
Responsibility to vote, additionally, in favor of well
constructed proxy resolutions which:
The Corporation voting guidelines stem, in part, from a decision to exercise "voice" with respect to any harmful marketing and distribution practices.
Private Investments and Ethical Oversight
In the 2001-2002 academic year, the ACIR and the Yale Investments Office took up the important issue of ethical oversight of private investments by the Endowment. The University emphasizes private holdings in the Endowment, due to their diversifying characteristics and excess return opportunities. However, the shareholder resolution activity of the ACIR has no analog in private investment holdings. In the realm of private assets, where corporate control rests in a highly concentrated investment group, shareholder resolutions do not exist.
To address this issue, the Yale Investments Office, in consultation with the ACIR, developed a framework to address ethical issues relating to private investment that may arise. In particular, ethical investing policies recommended by the CCIR (as advised by the ACIR) and adopted by the Yale Corporation could be applied to both marketable securities and private investments. The University's response to ethical issues in private investments would differ in some respects from the process employed for publicly-traded securities, due to the varying nature of the investment structures and potential remedies. Oversight of policy implementation would remain with the CCIR for both marketable and private positions.
The Yale Corporation has articulated the following policy with regard to private investments:
"When the Yale Corporation, upon recommendation of the Corporation Committee on Investor Responsibility after its consultation with the Advisory Committee on Investor Responsibility, adopts policies regarding ethical investing, those policies will apply to both public and private investments. In the event that the Corporation concludes that Yale's private investment managers have engaged in socially injurious activity, the University will fashion an appropriate remedy including use of voice, disassociation from the offending investment manager, and, as a last resort, disposition of the tainted partnership interests."
“Yale will generally support reasonable and well-constructed shareholder resolutions seeking company disclosure of greenhouse gas emissions, analyses of the impact of climate change on a company’s business activities, strategies designed to reduce the company’s long-term impact on the global climate, and company support of sound and effective governmental policies on climate change.”