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;

A rough-and-ready way for trustees to check on ESG compliance is through the JSE’s Socially Responsible Investment index. As at end-November 2014, when it was last updated, Lonmin was on this SRI index. Further, at the time of assessing Lonmin, trustees might have been further comforted by assuming that Cyril Ramaphosa (then a director on Lonmin’s main board) was promoting ESG issues;

Should a fund adopt “negative screening”, it might not be left with an abundance of investment choices. There are 82 constituents of the JSE SRI index, most of them companies with large market capitalisations and thus appropriate for pension funds. It’s possible to pick ESG holes in probably all of them, such as a bank which grants loans to a company using fossil fuels;

Once on the road to ESG purity, there’s no end in sight. Commonly employed as the practical alternative to disinvestment is for pension funds (usually through their asset managers) to engage with investee companies so that they’re brought to higher standards of ESG compliance. They also have the sanction of voting at shareholder meetings, oversight of executive remuneration being a case in point;

Any pension fund invested in Lonmin is in persuasive company. The Government Employees Pension Fund, perhaps the most prominent of active shareholders through the Public Investment Corporation as its asset manager, holds Lonmin shares. Similarly, at last count an array of trade unions’ funds (the Mineworkers Provident Fund being one) held stakes in various gold, coal and platinum miners including Lonmin;

Because pension funds are long-term investors, and particularly given the JSE’s relatively small universe of investable shares, an activist approach is preferable to jumping from one share to another on short-term disapproval of company behaviour.

That said, the pension-fund system as it functions has glaring defects. Amongst them:

It’s been almost two decades since, at the behest of Cosatu, the Pension Funds Act was amended to allow for 50/50 employer/member representation on funds’ boards. Since then, there’s been a paucity of members to stand for election as trustees and turnouts at elections are usually pitiful. Worse, surveys reveal that most members don’t even know or care to know who are the trustees of their funds;

The competence of trustees is often patchy. They’re commonly elected on grounds of popularity, not skill, and are none-the-wiser in the formulation of investment mandates;

There is no requirement that members be informed, or even be made aware, of the companies in which their pension funds are invested. Were it otherwise, they might be less inclined to go on strike against these companies and rather to take their disputes as shareholders into company boardrooms. It’s paradoxical that trade unions rarely walk through the door that they themselves have opened.

The residue of campaigners for ‘Rhodes Must Fall’ are preening themselves on hindsight being a perfect science, notably when they focus on one shareholding in one fund at one time. If trustees of the UCT fund have “blood on their hands” because of the investment in Lonmin, then so too must all trustees of all pension funds similarly invested.

And so also must the fund members who, having neither stood for election as trustees nor voted in trustee elections, now shout from the sidelines at those with lesser inertia. To be a trustee requires sacrifices in time and dedication in effort, with minimal or no financial recompense, but facing personal liability nonetheless.

At present, there are over 3 500 active funds with each having a minimum of four trustees representing a total of more than eight million members. Pension funds are the largest single category of investors in JSE-listed companies. The scope for fund members to instigate programmes of shareholder activism is therefore formidable.

If only the remaining ‘Rhodes Must Fall’ campaigners realised it, they wouldn’t be barking up the wrong tree. Presuming that they are indeed members of the UCT fund, not exclusively students purportedly concerned for the reputation of UCT but whose publicity quest damages it, they should rather be looking to themselves at rights they’ve neglected to exercise.

Let them explain why.

Allan Greenblo is editorial director of Today’s Trustee (www.totrust.co.za), a quarterly magazine mainly for trustees of retirement funds.

This article first appeared on GroundUp, and then the Mail & Gaurdian online.