Peniongate: The Emerging Crisis of Church Investments; C. Dickson

Why should the returns on the portfolio of ELCA clergy be so much less than the money earned by similar programs operated for corporate and government employees? Are ELCA pastors being short-changed by the investment philosophy of a Church Council which divests itself of many com panies with a history of high yield perforDr. Dickson is an ELCA clergyman and college teacher who writes for national magazines and journals. mance in favor of lesser ones with whom it may be in philosophical agreement? Re cent lawsuits brought against the ELCA and its Board of Pensions by a group called the Pension Defense Fund allege that this prac tice, termed "social investing," is precisely what is happening and they are asking to withdraw their funds. Their requests have been summarily rejected by church author ities, thus precipitating the lawsuits. Under the leadership of Pastors Tom and Matthew Basich of 8t. Paul, Minnesota, and Judith Boal of Beaver, Pennsylvania, the growing roll of plaintiffs now includes clergy and layworkers from 17 states acting as one voice, to ask that not only they as plaintiffs, but that all pension plan members, be given the right to withdraw their pension accumu lations upon demand. Such a right is already guaranteed to corporate and other employ ees who participate in plans which operate under a 1974 federal law called ERISA (Employee Retirement Income Security Act) but from which church pension plans are exempt.

This exemption from regulations allows such plans considerable flexibility to "run their own show" without having to justify their decisions to any outside governing board or agencies including the body of contributing members whose money is be ing spent. In the ELCA situation this trans lates into a 35-member Church Council, under the direction of Bishop Herbert 453 454 THE FREEMAN • AUGUST 1994 Chilstrom, who have the final say in regard to both policies and investments. This absence of regulations has also meant that this governing board is under no obligation to divulge either the names of corporations in which the pension monies are invested or the amounts invested. All attempts to secure such documentation by various contributing members have met with failure. Despite maintenance of a closed-door policy there has been some leakage of in formation that has served further to fuel the controversy. The fundamental dispute going on in the ELCA appears to involve those who, as Pastor Basich points out, "believe that the conventions, pulpits, and money of the church should not be used in support of any political agenda, left, center, or right."

The plaintiffs in the litigation allege this is precisely the case. They point to the invest ment blacklists (screens) drawn up by the Lutheran Office for Corporate Social Re sponsibility in cooperation with the Inter faith Center on Corporate Responsibility which are forwarded to the ELCA Commis sion for Church in Society. Blacklisted cor porations approved by this commission are then forwarded to the ELCA Church Coun cil which imposes its divestment decisions on the Board of Pensions. One ELCA cler gyman in learning of this process, com mented, "It really upsets me greatly to think that my pension contributions may still be at risk of being used for somebody else's political agenda. " In the divestment process ELCA officials have dropped some of America's most eco nomically sound corporations in favor of much less profitable ones, but who are more philosophically acceptable to the Council.

Some "blue-chip" companies which have felt the ax include Borden, Colgate-Palmo live, Goodyear, 3-M, Bristol-Myers, John Deere, and Mobil. As one official of the Board of Pensions lamented, "We had to sell off the cream of the crop. " This selloff, members of the Pension Defense Fund maintain, is resulting in significantly dimin ished returns to members of the plan. In a report by Judith Boal, a clergywoman with experience in life insurance products and securities, eight generic plans offered in the secular market were compared to the church plan. The report demonstrated that a member could start with the same lump sum, plan to take 10 percent a year off the previous year-end balance, and in each of the secular plans, end up with a total figure that far outstrips the ELCA plan, plus leav ing a sum to heirs as well. These findings appear to be supported by other independent studies such as that re ported by analyst Marcia Berss in a June 24, 1991, issue of Forbes. Berss wrote, "There is evidence socially-conscious investors un derperform the market. Five mutual funds with sociallyresponsible portfolioshave been around at least five years and not a one has done as well as the Standard & Poor's 500."

Signals to Investors Rates of return in financial markets are like prices in other markets. They are signals to investors of the relative values, in the judgment of the general public, of alterna tive uses of investment funds. Church offi cials who ignore those signals substitute their subjective value judgments of the mer its of competing investments for the collec tivejudgment of millionsof ordinary people. That is not morality, it is hubris. Church officials responsible for such so cial investing justify their actions by stating they are producing a "Christian witness" by selling the stock of companies with whose policies they disagree. This was par ticularly true with companies who either operated in or did business with South Africa. Church officialsfelt that divestment of stock in such companies was a means of punishing them. In reality, opponents of this approach have discovered that those who are ultimately being punished are the thou sands of clergy and lay people whose con tributions no longer benefit from the once solid investments of the many "blue chip"

companies which have been deleted from the portfolio. Those who oppose what they believe are high-handed policies on the part of church DO ENGLISH CATHEDRALS NEED GOVERNMENT HELP? 455 leaders do so not only because they feel such policies have proven to be economically unsound, but also in the belief they are ethically and morally indefensible. While they rejoice with the church hierarchy that South African apartheid has ended, they do not feel divestment of high-yield stocks was an appropriate way to go. For them punish ment by divestment is a way of dealing with a human problem that is, as H.L. Mencken put it, "an answer that is clear, simple, and wrong." They point to a Gallup Poll in 1989,which revealed that 95 percent of the white popu lation and 82 percent of the blacks in South Africa opposed sanctions, and to a survey by Harper's magazine which found that since 1980, three and a half million South African blacks lost their jobs as a result of divestment.