Selling stocks for political reasons could hurt PCUSA pensions, programs
By John H. Adams, The Layman Online, August 12, 2004
One of the companies that came in for intense scrutiny when the General Assembly called for divestment of the denomination’s stock in corporations that do business with Israel is Caterpillar, the world’s largest manufacturer of construction equipment.
While the clamor against the General Assembly’s resolution has focused primarily on the denomination’s disdain for Israel’s defense measures against Palestinian terrorism, the issue of divestment of stock in companies such as Caterpillar raises another question: Is the Presbyterian Church (USA) undercutting investment returns for its pension program for ministers and mission program by divesting certain stocks for moral or political reasons?
The denomination’s watchdog for politically and morally correct investments is the Mission Responsibility through Investments Committee, which argues that careful investment in selective companies that meet the PCUSA’s standards still ensures high returns.
But that’s not always the case, and Caterpillar is a good example.
Since February of 2003, the price of a share of Caterpillar stock has risen from $40.73 to $71.26 at the close of trading Tuesday. The denomination owns 37,100 shares of Caterpillar stock, including 36,900 in the portfolio of the Presbyterian Foundation and 200 in the denomination’s pension fund.
Caterpillar’s stock has had its ups and downs – not unlike other corporate stocks during the past two years. But the value of the stock has risen by 74.9 percent since February 2003. Assuming that the Presbyterian Church (USA) owned an equal number of shares in February of 2003, the PCUSA would have turned a profit of $1,132,292 as of Tuesday. And much of that money would have gone into the mission budget, which has had a freefall since 2001 (from $144 million to $130 million).
Ben Vernon, a retired Charlotte businessman who once was a member of the investment committee for the foundation operated by the Presbyterian Church U.S., believes the PCUSA’s commitment to “social investments” – mostly to reflect liberal causes – is rarely helpful. He terms it a violation of “our fiduciary responsibility.”
“It’s fine to make social and political judgments as individuals,” Vernon said, “but not when you are responsible for the nest eggs of others.”
The commissioners to the 216th General Assembly wanted Caterpillar on the hit list because it sells earth-moving equipment to Israel. Caterpillar equipment, in turn, is customized with armor by other contractors to protect operators from attacks by Palestinian terrorists.
The sin of Caterpillar, according to the General Assembly, is that its equipment is being used to help clear the way for the “separation barrier” between Israeli and Palestinian settlements, which is Israel’s effort to protect its citizens from suicide bombers and other acts of violence.
Now, the staff of MRTI is going through the process that could lead to divestment of Caterpillar stock, even though Caterpillar is a nonpolitical player in the politics of the Mideast.
“The resolution passed by the recent General Assembly calling for the divestment of stocks in multinational corporations doing business in Israel makes a political statement that could negatively affect the returns beneficiaries of our church agency funds might receive,” Vernon told The Layman Online.
Vernon has continued to monitor the process. And he cites a clear example of how the PCUSA’s liberally biased investment policies negatively impacted previous investments.
“Some years ago, MRTI prohibited the use of GE stock because 25 percent of their revenues came from sales to the military,” he said. “Investment managers were told that there were plenty of comparable stocks to choose from. Maybe Westinghouse, which at the time was about the same price as GE.”
What happened?
“GE stock in the next few years appreciated fivefold, while Westinghouse declined in half,” Vernon said. “How would you feel if your pension fund was used to make a political statement?”
Also, he added, “to promote the abolishment of apartheid, Ford Motor Company was pressured to withdraw from South Africa. Ford closed a plant that employed 5,000 workers and gave the plant to South African owners. Six months later, the plant closed. Did our pressure on companies doing business in South Africa help the people there? Of course it did not.”
The Evangelical Presbyterian Church, a denomination of Presbyterians who broke away from the mainline church in 1982, does not have a political litmus test for its investments, which may explain one advantage for its pastors. If an EPC minister dies before his or her spouse, the spouse receives 100 percent of the minister’s pension benefits. In the PCUSA, the surviving spouse receives only 50 percent of the minister’s pension benefits.
“It is hard enough to make good investment decisions based on investment data,” Vernon said. “But to overlay a moral component developed by political liberals is a disservice to the beneficiaries of our denomination’s investments.”