Nunes: Northwestern should prioritize profit over social agendas

Caleb Nunes, Op-Ed Contributor

In a recently published op-ed, Richard Reif argued Northwestern should divest from all firearm companies. This demand for divestment is shortsighted and should be met with a defense of a shareholder theory of capitalism.

Implementing social change is not the purpose of a University endowment. Endowments are crucial to the financial stability of private universities like NU, because they aren’t backed by the state. Reif advocates for the University to pressure any mutual funds or exchange-traded funds it has invested in to remove gun manufacturers from NU’s basket of stocks. But if gun stocks are an advisable long-term investment that makes a good addition to an investment portfolio, mutual fund or ETF, financial managers shouldn’t divest from them. 

Given that college endowments are used for conducting innovative research, supplying scholarships and hiring new professors, any financial decision that decreases the University’s investment returns conflicts with the interests of the shareholders, faculty and students.

Unfortunately, NU’s financial report doesn’t detail where it has invested its endowment. But even if gun manufacturers only make up a small portion of the University’s investments, giving a small but loud voice of anti-gun advocates influence over the school’s financial decisions sets a poor precedent for future complaints about NU’s investments. With an endowment of $14.1 billion as of last June, the University is certainly comfortable financially and removing gun stocks from the endowment may only have a minor effect on its value. Nevertheless, any successful demand for divestment could be used to exact more concessions and compromises in the future, putting the stability and success of NU’s investments at great risk. 

One might ask why private organizations should prioritize profit over “social good.” The answer to this question lies in truths laid out by Greek philosopher Aristotle. Aristotle argued a “telos” exists for everything — that is, everything has a purpose or end, and understanding an institution or practice means comprehending its end goal. Thus, a private organization actually does social good when prioritizing profits. When Reif calls for the University to change its investments based on personal opinions, he is ignoring the telos of a university endowment. The purpose of a university’s invested wealth is not to implement social change. Rather, endowments serve to sustain a private university’s existence and provide sustained funds for the school to further the education of its students. 

An all-too-common trend in certain parts of corporate America is its distraction by social agendas. From the invention of Environmental Social and Governance scores used to direct investment towards socially and environmentally aware companies to the demands Reif lays out in his op-ed, the primary function of private enterprise is under attack. 

Nobel laureate and libertarian economist Milton Friedman, known for his work in monetarism, wrote a 1970 New York Times article, “A Friedman doctrine– The Social Responsibility Of Business Is to Increase Its Profits,” that makes controversial assertions about the nature and purpose of private organizations. Rather than stressing the power of government and social justice, Friedman emphasized the legitimate purpose of private enterprise: increasing profits. Friedman does write that private enterprises should follow law and ethical customs when making decisions, but I believe this means businesses should not mistreat workers, deceive the public nor design unsafe products and services. 

Any decisions related to NU’s endowment should be left in the hands of financial experts, rather than being influenced by gun control advocates. Reif’s assertion that “every dollar invested in gunmakers is a potential death warrant for innocent victims” is hyperbole and not backed by evidence, so it should be discarded as any moral or ethical defense of divestment. Thinking the thousands of shootings occurring every year in cities like Chicago will be reduced by mutual fund and ETF managers removing gun manufacturers from their investment baskets is not backed by any evidence I can find.

Ultimately, NU — and all other private universities or corporations — should adhere to the Friedman doctrine when making investment decisions. If University investors stray from their telos each time alums or students present a complaint, the long-term future of NU will be greatly diminished at its own students’ expense.

Caleb Nunes is a McCormick freshman. He can be contacted at [email protected]. If you would like to respond publicly to this op-ed, send a Letter to the Editor to [email protected]. The views expressed in this piece do not necessarily reflect the views of all staff members of The Daily Northwestern.