By Benjamin Parke
Daily Bruin Reporter
With the UC Board of Regents set to consider excluding tobacco
stocks from their investment portfolio next week, some regents say
there appears to be enough support on the board to take such an
action.
But their individual reasons for doing so may differ ““
with some justifying a vote for exclusion on financial grounds, and
others believing the university must take responsibility for a
public health issue.
For Regent John Davies, the board’s responsibility for the
investment fund’s well-being overrides social concerns.
He said the UC’s interim-treasurer will soon report as to
whether investment in tobacco stocks is financially prudent.
“I’m expecting that a recommendation will be made
that the policy be so revised on the basis that they are poor
investments,” Davies said. “If that’s the
judgement, then fine.”
The board faces such a decision because its portfolio is being
restructured. UC investments were previously managed in-house,
under former UC Treasurer Patricia Small, who resigned under
pressure in August. The university held no tobacco stocks under her
management.
The university is now moving a portion of its investments into a
cross section of stocks known as an index fund, which include
tobacco stocks.
The regents’ investment consultant has said that excluding
tobacco stocks from the funds would be feasible, although it would
result in a slightly higher margin of error in tracking those
indexes. The consultant, Wilshire Associates, also said the regents
would need to avoid a “slippery slope” in which other
stocks would become excluded, making it harder to manage the
index.
With various groups calling for public funds to divest in
companies doing business in Burma or using sweatshops, the regents
could encounter pressure to exclude such stocks as well.
“I don’t worry so much about slippery slopes,”
Davies said. “They’d have to make the case that
they’re bad investments in some way.”
Regent Markell Kohn said although such matters can be “a
bit unpredictable,” he also believed there would be general
support among the regents to exclude tobacco stocks at their
meeting in San Francisco next week.
“It seems clear to me that a significant number of members
of the board are sensitive to the public health issue, as well as
the appearance of the university being involved with tobacco
stocks,” Kohn said.
The regent has seen what tobacco can do up close. As a
practicing oral and maxillofacial surgeon, Kohn said that he has
dealt with cases resulting from the effects of smoking for
years.
“Just last week I resected a rather significant portion of
a lady’s upper jaw because of her smoking,” Kohn
said.
The woman was from the Philippines, where the practice of
“reverse smoking” is more prevalent. In that particular
method ““ “from the old school,” as Kohn described
““ the cigarette is smoked with the lighted end inside the
mouth.
“To me the far more pressing issue is the public health
issue,” said Kohn regarding university investment in tobacco
stocks.
If the regents do vote to exclude tobacco stocks from the
university’s investment portfolio, it won’t be unique
among public funds. Other universities have done so as well, and
the California Public Employees’ Retirement System took such
an action last October.
“Primarily it was just the long-term financial impact of
investing in tobacco stocks that led to the decision,” said
CalPERS spokesman Brad Pacheco.
“It was the cost impact of regulation of the tobacco
industry and lawsuits affecting the tobacco industry,”
Pacheco said.
Student Regent Justin Fong said he saw a responsibility for the
university to stay away from tobacco stocks for both moral and
financial reasons. He noted that the university is not encountering
such an issue for the first time.
“The UC divested from South Africa and it did not end
responsible fiscal management of our investments,” Fong
said.
Last year, the university successfully defended one of its own
professors from a lawsuit by Californians for Scientific Integrity,
a group partially funded by the tobacco industry.
The group contended that Stanton Glantz, a UC San Francisco
professor, was using state funds for political advocacy on tobacco
issues. The case was eventually decided in the university’s
favor, after the state Supreme Court declined to review it.
Glantz said he doesn’t care why the regents exclude
tobacco as long as it gets done. He said it annually kills a
half-million people in the U.S. and 3 million people worldwide.
“It’s antithetical to what the university stands
for,” Glantz said.