While Duke sits poised as a leader in smoking cessation research, Washington Duke stands in the middle of Chapel Quadrangle with a cigar in hand-a reminder of Duke's long association with tobacco.
While Duke sits poised as a leader in smoking cessation research, Washington Duke stands in the middle of Chapel Quadrangle with a cigar in hand—a reminder of Duke’s long association with tobacco.
According to a report by researchers at the University of California at San Francisco School of Nursing published in the October 2004 issue of Academic Medicine, Duke is among a handful of top-tier universities that have not officially divested from tobacco stock. Cornell University, the University of Pennsylvania, Washington University in St. Louis and Yale University are the other four. Duke has no explicit policy prohibiting investment in, or accepting research funding from, companies such as Philip Morris and R.J. Reynolds.
“At different times, Duke has owned tobacco stocks and at other times we have not. It’s been a function of different decisions at different times by the many investment managers we work with,” said John Burness, senior vice president for public affairs and government relations.
Burness emphasized that the School of Medicine does not independently own any sort of stock because the endowments of Duke’s schools and programs are invested collectively by Duke University Management Company, a not-for-profit investment support corporation created by the Board of Trustees to handle Duke’s investments. DUMAC has no policy against investing in tobacco companies, and representatives from DUMAC declined to comment.
Paula Burger, a member of the Board of Trustees, said there has been no conversation at the Board level regarding the tobacco industry. “The conversations we have had really relate to the process by which we would address the issue of socially responsible investing,” Burger said. “I really believe that public health is served by people not smoking. How that translates into investment strategy is unclear.”
The Board of Trustees passed a set of guidelines governing University investments in February 2004 and approved the creation of two committees in October that would review concerns about the ethical implications of investments.
“We recognize that sometimes a corporation’s policies or practices can cause substantial social injury,” state the guideline for socially responsible investing. “For example, corporate actions may violate domestic or international laws intended to protect individuals and/or groups against deprivation of health, safety, or civil, political and human rights.”
The guidelines go on to explain that the actions the University takes may not materially affect an offending corporation, but “such actions may have significant symbolic value.”
Robert Steel, vice chair of the Board of Trustees, noted that the guidelines set forth will allow the University community to hear different perspectives about socially responsible investing. “I think all of us feel good about the framework that this new policy gives the University when addressing these issues,” he wrote in an e-mail. “Now there is a clear mechanism by which interested parties can raise, discuss and resolve these questions.”
Burger and Steel emphasized the complex nature of the issues surrounding investment policies. “One can’t fully appreciate the secondary and tertiary ramifications of investments that the University owns,” Burger said. “Whatever we can do to maximize the investments of Duke University, short of compromising ourselves, really ends up benefiting the students here. It is our fiduciary obligation to maximize our investment returns, but we want to do this in a socially responsible way.”
Over the past 15 years, other universities—including Harvard University, Stanford University, UCSF and Johns Hopkins University—have formally divested from their tobacco stock. In both 1991 and 1998, Yale considered divestment but ultimately voted against it. Stanford divested from its shares in major tobacco corporations in 1998 after assessing the financial and legal liability of its stocks.
“We pulled out because of the financial liability and risk. That risk can come in many forms—it can be a reduction in stock price or return on investment based on potential liability, corporate governance practices or reputational risk,” said Linda Kimball, manager of investment at Stanford.
At Duke, the subject of investment in big tobacco receives mixed reviews. “I believe that in general it’s Duke’s job to make prudent investment strategies and to increase our endowment and allow us to compete with older institutions,” junior Paige Sparkman said. “If that means investing in tobacco stock, I would trust Duke’s judgment. I don’t think that the University’s ties with tobacco are somehow exceptional or necessarily injurious to the student body if you look at our other peer institutions.”
Frank Sloan, J. Alexander McMahon professor of health policy, law and management, has a more conflicted view. “I personally would not invest in tobacco stocks, but these are just financial instruments of the University, and if we didn’t hold them someone else would,” Sloan said. “I think we could probably do fairly well without investing in tobacco stocks, but I don’t think we are going to make people healthier just by divesting.”
The complexity of the issue at hand is underlined by junior Jared Fish, president of Duke Democrats. “We must recognize that tobacco is a cultural icon in North Carolina, an important part of Duke's heritage,” Fish said. “At the same time, as a socially responsible investor, Duke should face the severe health impacts of smoking by financing state programs promoting profitable alternatives to tobacco.”
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