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PCUSA’s Selective Divestment Strategy Faces Legal Roadblock

It is far from clear that such a divestment policy would or could be 'in the sole or exclusive benefit of plan participants.'"
( [email protected] ) Sep 02, 2004 09:27 PM EDT

The plan to “selectively divest” Presbyterian funds from companies that profit from Israel’s separation barrier may face several legal challenges in addition to the social criticism it reaped within the months since it passed. According to the president of the Presbyterian Church (USA)’s Board of Pension, which has a $6.2 billion investment portfolio, the divestment project may not meet the federal standards required to protect the Pension’s beneficiaries, and may thus be halted.

Several months ago, the PCUSA’s General Assembly called for a divestment of stock companies that do business with Israel. The decision sparked a firestorm of criticism from Presbyterians, Christians, Israelis, and outside observers who said the PCUSA is unnecessarily entangling itself in the political arena. Many others charged the PCUSA of unfairly “singling out” Israel, and ignoring the other players in the field.

The August 13th statement by the CEO of the Board of Pension, however, focused not on the social or ethical aspects of the divestment. CEO Robert W. Maggs Jr. explained that the Board of Pensions, which provides health and retirement benefits for Presbyterian ministers and employees, must follow the federal regulations set to protect the plan’s beneficiaries.

"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.

Maggs said the Board of Pensions 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.'"

Meanwhile, the other major investment corporation in the PCUSA, the Presbyterian Foundation, is not governed by the same laws as the Board of Pensions, and is free to make judgments based on social policy. The Presbyterian Foundation has only $1.1 billion in its portfolio, compared to the Pension’s $6.2 billion.

However, when it comes to companies that work in Israel, such as Caterpillar, the Presbyterian Foundation holds a greater share. 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 also explained that there are even more factors that make the “divestment” policy difficult to undertake.

"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,” said Maggs.


Whatever the conclusion may be, Maggs said the members of his board will be diligent, prayerful and thoughtful advocates on behalf of the members of the benefits plan of the Presbyterian Church (USA).”

As a reference, the following is the “selective divestment” policy adopted by the PCUSA’s General Assembly:

"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."