As it started, by targeting the legacy of one dead white male, the ‘Rhodes Must Fall’ campaign claimed morality. As it progresses, by targeting the activity of two living white males, the rump of campaigners cannot claim credibility. Members of a university as distinguished as UCT might have been expected to prefer substance over sloganeering.
Clearly, however, the campaigners either ignore or are ignorant of how pension funds operate. To accuse UCT councillors Ian Farlam and Max Price of having “blood on their hands” is nonsensical, whether or not they were trustees of the university’s independently-run fund when it approved the investment in Lonmin. Some basics:
The board of a pension fund comprises trustees, half of whom are nominated by the employer and half by fund members. In this case, the members would be UCT employees. They’re entitled and encouraged to vote for trustees who, in their view, will best serve their interests. The board as a whole informs the fund’s investment strategy which is obliged (under Regulation 28 of the Pension Funds Act) to include environmental, social and governance (ESG) criteria in making investment decisions;
If the trustee board fails to consider ESG criteria, it fails in its fiduciary and legal duties. But trustees can hardly be expected to have anticipated a Marikana outcome any more than they could be expected to anticipate the movement in a share price;
Lonmin has been punished by a fall of over 80% in its share price since Marikana. Thus the members of pension funds invested in Lonmin have been punished accordingly. Arguably, it would be counter-productive to disinvest from Lonmin at the share’s bottom price (and so to converting a paper loss to a capital loss, also denying the receipt of dividends likely to improve as the commodities cycle improves). Moreover, unless noise is a factor for consideration, it would be inconsistent to single out Lonmin as the sole company for disinvestment on grounds of relative ESG non-compliance;
A fund is obliged to formulate an investment-policy statement. It is entitled to set out standards for “ethical” investment. For instance, it can adopt a policy of “negative screening” so that its asset manager may not invest in say tobacco. But here too lies a problem. One of the best performers on the JSE, and invariably included in prudent portfolios by virtue of its large market capitalisation, is British American Tobacco. To have excluded it (impossible anyway where a fund partially uses passive-investment strategies) would have been ultimately to the detriment of fund members’ retirement benefits. Members can vote, if they want, for trustees who stand for a reduction in ultimate benefits;