HMC is given great freedom to invest the University’s endowment. But it is a freedom that does not come without caveat. Harvard’s investments in companies like Avenue Entertainment and various tobacco companies have drawn widespread attention to the ethics of HMC’s investments.

The only legal standard for university investing was set out in the “prudent man rule,” established in the 1830 case of Harvard College v. Amory.

The case required trustees of the University to “exercise judgment and care” which “men of prudence, discretion, and intelligence” would exercise in the management of their own finances. Trustees must also balance probable income and probable risk of the endowment capital.

Legal jargon aside, HMC has had to weigh its financial interests against its moral obligation to represent Harvard in the public eye.

Former president Nathan M. Pusey ’28 established the University’s first committee on shareholder responsibility after a controversy over Harvard’s stock in General Motors company in 1970—the first such “shareholder responsibility” campaign in the country.

Pusey concluded that Harvard’s aim should be to play the role of “good citizens in the conduct of [their] business,” and not invest in companies that violated “fundamental and widely shared ethical principles.”

In response to protests over Harvard’s investments in Gulf Oil and involvement in Angola in 1972, Harvard established the Advisory Committee on Shareholder Responsibility (ASCR) and the Harvard Corporation Committee on Shareholder Responsibility (CCSR) to make proxy decisions for the University on shareholder responsibility.

Those decisions are influenced heavily by established precedent according to Benjamin D. Tolchin ’01, who served as the undergraduate representative on the ASCR for the past two years after being selected by the Undergraduate Council.

CCSR and ACSR members are each assigned several resolutions to research and present at the meetings, before the committee debates whether to support a resolution.

In only 18 of 108 proxy votes last year did the CCSR go against the ASCR’s recommendation, even though a prohibition against investment in the tobacco industry is the only blanket policy that has been set out by both ASCR and CCSR.

“We try to influence the process rather than walk away. Once you walk away you have no influence,” Daniel says, citing Harvard’s pullout of investment in South Africa during apartheid during the 1980s.

When Desmond Tutu approached Harvard after apartheid ended to ask for help pressuring companies to reinvest in South Africa, the University had sold all of the stock in companies that did business with South Africa.

“The University as a shareholder had no influence anymore, that was the irony,” Daniel recounts.

A stickier situation, Daniel says, is when the University discovers that an external manager has invested money in questionable businesses—especially when the University learns of the investment after the fact.