Letter to the editor: Transparency in endowment is not so clear-cut

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Tuesday’s article “In Focus: Why NU fails to make the grade on endowment transparency” and Wednesday’s “Editorial: Students should demand advisory committee for NU” together attempt to persuade students to push for endowment “transparency” by creating of an advisory board including a broad cross-section of the Northwestern community to contribute to endowment investment decisions. Before we just go hopping on the “transparency” bandwagon – which incidentally seems to be The Daily’s answer to just about everything – I suggest the NU community give some thought to just what transparency actually means here.

The presumption in these two articles is that the endowment is invested in order to maximize return and thus grow the endowment most quickly, which the articles suggest can come into conflict with ethical values inherent to the mission of the University. There is little question that the University faces this type of dilemma in many investment decisions, but is transparency necessarily good here?

The fact is we are discussing a trade-off, not a unilateral improvement, if we move the endowment toward transparency: If we try to limit the power of the investment officer and his staff to invest in what makes the most money, we are saying the goal of the endowment is both the pursuit of investment gains and the pursuit of social ventures. This may be correct, but I raise two points: Firstly, the investment decisions as made now are not being made with blatant disregard for social repercussions, as evidenced by past concessions to limit investments in apartheid South Africa; and secondly, trying to tip the balance from returns toward social ventures will negatively impact overall returns if the investment committee is already maximizing returns given University mission constraints, and we need to see this loss of revenue as a consequence of transparency.

If we want to push for more moral responsibility in the endowment, we have to make up for the lost revenue somehow. And if you come to the bargaining table demanding an advisory board whose opinion is given weight in investment decisions without at least acknowledging that transparency has its costs, I wouldn’t blame our investors if they laughed you out of the room.

The advisory committee may very well be a an important step forward in advancing the social mission of NU, but its importance should not be touted as an unambiguous gain for the community.

-Kevin Soter

Weinberg junior