Board of Pensions head says divestment could violate law
By John H. Adams, The Layman Online, September 1, 2004
The General Assembly’s call for divestment of stock in companies that do business with Israel may run into a legal roadblock, according to Robert W. Maggs Jr., president and chief executive officer of the Board of Pensions of the Presbyterian Church (USA).
“Even if there were such a [divestment] policy, the Board of Pensions must, under current laws, act for the sole and exclusive benefit of plan participants,” Maggs said in a “Divestment Discussion” newsletter to Plan members on August 13.
The Board of Pensions, which provides health and retirement benefits for Presbyterian ministers and employees, has a $6.2-billion investment portfolio and must meet federal requirements intended to protect the plan’s beneficiaries.
The other major investment corporation in the Presbyterian Church (USA) is the Presbyterian Foundation with a $1.1 billion portfolio. It is not governed by the same laws and can make investments based on social policy. The foundation’s investment returns provide the bulk of the revenue for the denomination’s mission program.
Maggs said the Board of Pensions “manages a portfolio so that plan members can and will receive the benefits to which they are entitled. That is our goal as fiduciaries of benefit plan money. The Board of Pensions, while free to adopt principles of socially responsible investing, cannot manage the portfolio entrusted to it with any end in mind other than ends related to the future availability of benefits to participants. It is far from clear that such a divestment policy would or could be ‘in the sole or exclusive benefit of plan participants.'”
The 216th General Assembly did not consider the legal restrictions on the Board of Pensions when it voted on a disinvestment policy as a punitive action against Israel because of its actions against Palestinian attacks and suicide bombings.
In a statement crafted largely by the Advisory Committee on Social Witness Policy and the Presbyterian Peacemaking Program, the General Assembly voted to refer
- “to Mission Responsibility through Investment Committee (MRTI) with instructions to initiate a process of phased divestment in multinational corporations operating in Israel, in accordance to [sic] General Assembly policy on social investing, and to make appropriate recommendations to the General Assembly Council for action.”
Currently, Maggs said, “there is no policy of the denomination to divest securities of companies profiting or investing in Israel.”
Maggs did not identify investments that might be targeted by the social policy seeking to punish Israel. But one that was mentioned during floor debate on the proposal by the General Assembly’s Peacemaking Committee – which was approved by a vote of 431-62 – was Caterpillar.
Both the Presbyterian Foundation, which provides funding for the denomination’s mission program, and the Board of Pensions own stock in Caterpillar, which sells Israel earth-moving equipment that is used to clear the path for the wall that separates Palestinian and Israeli areas. The PCUSA news release on the caterpillar holdings said Caterpillar sells Israel “armored” construction equipment, but the armor to protect Catepillar operators is added by a subcontractor.
The foundation owns 36,900 shares of Caterpillar stock worth $2.7 million as of Monday’s share price of $72.25. The Board of Pensions owns 200 shares worth $14,500.
Maggs said there are other factors that might make the implementation of the General Assembly’s call for divestment difficult. “Moreover, since conglomerates and other multinational companies do not routinely report cross-border profits or specific country investments to shareholders, the General Assembly’s request may be quite difficult for the Mission Responsibility through Investment Committee to implement and administer.”
The Board of Pensions has staff and elected representatives on MRTI who “will be diligent, prayerful and thoughtful advocates on behalf of the members of the benefits plan of the Presbyterian Church (USA),” he said.