No ‘golden rule’ for ethics policy

Statement attempts to use feedback to guide investment decision making

Vice-Principal (Operations and Finance) Andrew Simpson says governing responsible investing aren’t entirely inconsistent with the University’s fiduciary duties.
Vice-Principal (Operations and Finance) Andrew Simpson says governing responsible investing aren’t entirely inconsistent with the University’s fiduciary duties.

The University’s statement on responsible investing, released four months after it was originally to be presented to the Board of Trustees, isn’t meant to be a guideline as to what constitutes ethical investing, Vice-Principal (Operations and Finance) Andrew Simpson said.

“It’s not a policy that says we will or will not [invest in certain companies],” he said. “If you have a concern, here’s how you can raise it, and here’s how the University will respond.” Simpson said the need for a statement on responsible investing arose from the negative feedback Queen’s received from students concerned about some of the companies the University invests in.

In 2007, the University administration responded to calls by the group Students Taking Action Now: Darfur to divest from PetroChina and China Petroleum, companies connected to the Sudanese government in Khartoum.

The purpose of the statement is to set down the principles which govern investments at Queen’s and to provide details on the process under which non-financial factors will be considered in investment decisions, but Simpson said the statement isn’t meant to be a guideline as to what constitutes ethical investing.

“The challenge we faced was how you take feedback from the community and engage on that particular issue in such a way to guide in potential decision-making,” he said. “What this statement tries to do is identify the process for that but it also establishes a framework for the University-wide level.”

The document states that Queen’s has sought legal advice regarding the non-financial factors in making investment decisions, resulting in the suggestion that responsible investing policies aren’t consistent with the University’s fiduciary duties of loyalty and prudence to the Pension Fund, Pooled Endowment Fund and the Pooled Investment Fund.

“The assets of the pension plan derive income that pay the pensions of former employees of Queen’s University. The pension committee has a fiduciary responsibility to ensure that those returns are optimized in some fashion,” Simpson said.

“What we sought legal advice on is if you restrict in any kind of way the investments that generate that revenue to the point where you’re not maximizing, is there a question of legality?”

Simpson said issues of governing responsible investing aren’t entirely inconsistent with the University’s fiduciary duties.

“Case law, as in real judicial rulings on this over the last 15 years has to be looked at very closely to determine what the parameters of that are,” he said. “There’s no single golden rule to say ‘there is the line.’ Every decision must be carefully weighed.”

According to the statement, the University can take special action with respect to a specific investment or a series of investments under exceptional circumstances.

“The investment policy fits the notion of the soundness of those values and principles, and then says from time to time it may take special action, which may come in the form of different approaches,” Simpson said. “One can be more engagement. The other can be divestment of current holdings.”

Simpson said special action would depend on the concept of “social injury,” whose definition Queen’s adopted from Yale University. Social injury measures a company’s negative effect on consumers, employees or others, including activities that break domestic and international laws “intended to protect individuals against deprivation of health, safety or basic freedoms.”

“What somebody determines as socially responsible has a very broad definitional base to it. If you take a look at the Sudan situation, there’s a particular issue where it talks about social injury, but that’s different than it might be around a company that has,” Simpson said. “Social injury can take a very broad stance. Different groups may have cause to say ‘We’re very uncomfortable about what we’re seeing in this particular area.’”

But divestment, Simpson said, isn’t necessarily the most ethical or socially responsible way for the University to respond to company practices they don’t agree with.

“Increasingly what we’re finding is that pension plans or major endowments are trying to have a positive objective upfront and then managing along with others in the areas where companies seem to be failing,” he said. “With the Canadian Pension Plan, you’d find they don’t have a divestment policy, what they do is they work with others in putting pressure on the shareholders and the board of directors on major companies where they think they’ve stepped out of line.”

The statement on responsible investing requires a documented submission identifying the social injuries Queen’s would sustain in its investment decisions. The submissions must be accompanied by a petition of at least 300

individual signatures, with a minimum of 25 signatures made up of at least three of five constituencies: faculty, administrative and support staff, students, retired Queen’s employees and alumni.

“If there was situation where there was a company we had holdings in that we were unhappy about, some issue of performance, it might be employee practices or whatever it may be, at times it might seem wise to divest from the company, but that sends no message at all to the company … how can you actively make the point and influence appropriate behaviour.”

Simpson said the draft will go to the Board of Trustees for final approval in December, and between now and then the University will be accepting feedback via letter or e-mail from students, staff, faculty and alumni.

“Any feedback will be read and hopefully responded to, and it may be we do make changes as a result of feedback,” he said. “There may be amendments depending on feedback.”

For a copy of the statement on responsible investing, go to To submit feedback, e-mail or write to the office of the Vice Principal (Operations and Finance), Dunning Hall Room 113, 94 University Ave., Kingston, Ontario, K7L 3N6.

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