Investing Responsibly

Harvard should look into allegations of worker mistreatment at HEI properties

This past December, Brown University’s Advisory Committee on Corporate Responsibility in Investment Policies issued a statement recommending that Brown not reinvest in HEI Hotels and Resorts, a prominent hospitality investment company often charged with mistreating workers. In an e-mailed statement to the Brown’s Student Labor Alliance, Luiz F. Valente, Chair of ACCRIP, wrote that, given the "persistent pattern" of allegations against HEI, the situation raised questions about whether Brown's association with such a company was consistent with the ethical principles intended to govern its investments.

HEI Hotels and Resorts owns and operates 30 hotels in the U.S.; the company values its real estate holdings at $2 billion. It boasts $1.2 billion in equity funding from “prestigious university endowments,” which contribute to a private discretionary fund that HEI uses to acquire new hotels quickly and efficiently. Harvard, Yale, and Princeton all invest in the fund.

Unfortunately, as Brown’s corporate responsibility body reported, HEI’s workers have complained of mistreatment; pro-union activists within the labor core have especially complained of harassment by the company’s management. The letter names one case in which the company agreed to reinstate a dismissed worker who had been encouraging unionization. Additionally, a report by United Students Against Sweatshops cites that workers at a number of HEI locations claim that the company saves money by paring back staff to an unreasonable level.

In response, student groups at a number of universities who are involved in HEI have urged their administrations to reconsider the investments, including Harvard’s Student Action Labor Movement, the Notre Dame Campus Labor Action Project, Princeton for Workers’ Rights, the University of Pennsylvania Student Labor Action Project, University of Chicago Students for a Democratic Society, University of Chicago Students Organizing United with Labor, and Vanderbilt Students for Non-Violence.

This should go without saying, but Harvard should advocate for workers' rights in the companies it invests in. Unions play a valuable role in maintaining fair working standards for employees, and the allegations that HEI is hindering their presence within its hotels should call Harvard’s relations with the company into question. Additionally, while we understand that any company that acquires and manages labor-intensive businesses necessarily needs to be concerned with cost-cutting, we expect that this does not come at the expense of decent treatment for workers. Although many of the universities that invest in HEI have also recently experienced allegations of worker mistreatment—including Harvard—labor rights violations of any kind are inconsistent with Harvard’s standard of social responsibility.


In this vein, the Brown University committee’s efforts at investigating the situation with HEI are to be commended, as its courage to act on its findings and take a stance against HEI.

As to how Harvard should respond, the right course of action has yet to become clear.

On the one hand, we feel that divestment would be an inappropriate course of action. Although allegations of worker mistreatment are unsettling, they are hardly on the scale of the other atrocities that have led the Harvard Management Corporation to divestment, a rare occurrence in the University's history. Examples of past "divestments" include Harvard's partial divestment from apartheid South Africa in the 1980s and, in 2005, from PetroChina, a firm whose state-owned parent company had worked extensively with the Sudanese government to produce oil at the same time as that government was accused of having committed genocide. These circumstances far transcend the scope of worker mistreatment, and divestment in every ethically ambiguous situation might very well diminish what should be a profound gesture.

On the other hand, Harvard is an institution with significant financial influence and a strong interest in social responsibility, and--if worker mistreatment cannot be called as "serious" as apartheid or genocide--perhaps it is time to abandon such a rigid calculus altogether. Indeed, in the future, HMC might consider a more liberal policy for divestment proceedings to ensure a more socially responsible endowment. At this point, we do not advocate immediate divestment from an investment such as HEI, but Harvard’s administration should seriously consider whether this may become a more palatable response in the future. In a sense, weighing which wrongs are more worthy of public reproach seems as anachronistic as it does beside the point, for wrongs are wrongs that must be acknowledged as such.

Although Brown ACCRIP findings are startling, however, before Harvard refuses to re-invest in HEI, it should conduct its own investigation into HEI policies and practices. Relying on Brown's findings is simply not enough, even though if HEI is truly below Brown’s standards of ethical investment, it is likely below Harvard’s as well. In the months that come, we call on HMC's Committee on Shareholder Responsibility--the HMC’s social responsibility organ--to investigate the allegations against HEI at its spring 2011 session. If the CCSR does find a basis for claims of worker mistreatment, we urge it to issue a statement emphasizing that Harvard will no longer tolerate labor rights abuses by this particular company. After all, it has the unique ability to request that the companies HMC invests in reform practices deemed unethical under threat of non-reinvestment.