New York Medical College (NYMC), founded in 1860, is a health sciences university which recently joined the Touro College and University system – the largest university in the United States under Jewish auspices. I was appointed Chancellor of NYMC in 2012.
Shortly after my appointment, the Jewish values of NYMC were tested. Two of the investment choices in our pension plan are mutual funds sponsored by Teachers Insurance and Annuity Association – College Retirement Equities Fund (TIAA–CREF). TIAA-CREF’s products include two “socially responsible mutual funds” which purport to invest based on a company’s record on environmental, labor, and social justice issues.
Early in 2012 reports appeared that TIAA-CREF had sold $72 million of Caterpillar stock because of “controversy over the Israeli army’s use of Caterpillar, Inc. bulldozers to demolish Palestinian homes.” This was a “key factor in a corporate rating agency’s decision to drop the American manufacturer in its list of socially responsible companies.” TIAA-CREF contracts with the MSCI – Morgan Stanley Capitol International Agency, leading provider of investment decision support tools to investment institutions, to rate the degree of “social responsibility” displayed by a company’s actions, and makes buy and sell determinations based on that rating.
On June 25, 2012, MSCI stated that “the key factors determining the rating included a January 2012 labor dispute and subsequent plant closing in Canada, an ongoing controversy associated with use of the company’s equipment in the occupied Palestinian territories, management in environmental issues, and employee safety.” The Boycott, Divest, and Sanction (BDS) Israel Movement touted the stock sale as an “unequivocal victory”.
Subsequently, TIAA-CREF partially backtracked, describing their action as “a purely mechanical response” to the ratings change by MSCI. MSCI sent a mixed message stating, on the one hand, that they used an index called the “Environmental, Social and Governance (ESG) rating”. This index included an assessment of a corporation’s “human rights issues” which accounts for 10% of the rating. MSCI reported that “Caterpillar was involved in a long-running controversy regarding the use its bulldozers by the Israeli Defense Forces in the occupied Palestinian territories” and they were “monitoring” the lawsuit related to the death of a U.S. citizen, Rachel Corrie, in 2003 during her participation in a demonstration opposing actions of the Israel Defense Forces (IDF).
I asserted that Israel’s rights to self-defense and self-preservation are not a matter for an investment research company to judge. Neither MSCI nor TIAA-CREF could provide me with equivalent examples of “monitoring” the behavior of any other country. TIAA-CREF’s claim that the sale of Caterpillar from the social responsibility mutual funds was “a mechanical response” was an attempt to “pass the buck”. (In fairness, however, while TIAA-CREF sold about $73 million in Caterpillar stock they continue to hold approximately $420 million in their other mutual funds.)
Our College’s Faculty Benefits and Compensation Committee authorized me to terminate our pension plan’s offering of TIAA-CREF social responsibility funds. Dialogue with representatives of MSCI and TIAA-CREF continued along with the supportive involvement of officers of the Council of Presidents of Major Jewish Organizations, the Jewish Community Relations Council, and Hadassah. Several other Jewish organizations, however, professed little interest in the issue or satisfaction with MSCI and TIAA-CREF’s explanations.
Before I took action to terminate our offering of the TIAA-CREF funds, MSCI notified me on October 15, 2012, that they had “recently updated” their “statement regarding Caterpillar’s status on some of MSCI ESG indices.” References to Israel had disappeared from the statement. A week later MSCI advised that now they know “of no current lawsuit relevant to Caterpillar concerning the use of Caterpillar equipment in the West Bank. The lawsuit brought by the family of Rachel Corrie that implicated Caterpillar directly is no longer active, according to MSCI ESG research guidelines, and the lawsuit brought against the Israeli Defense Forces by the Corrie family does not implicate Caterpillar.”
Our college is a relatively old institution that has very recently become Jewishly affiliated. Consistent advocacy on multiple fronts by NYMC and our partners, the firm action taken by NYMC’s Faculty Committee, and mutually respectful dialogue with MSCI and TIAA-CREF have achieved clarification on the issue of the sale of some of TIAA-CREF’s Caterpillar stock. Neither MSCI nor TIAA-CREF assert that the actions of the IDF had anything to do with the sale of Caterpillar stock from two mutual funds and they clearly state that the precipitating event is related to a labor dispute. The assertions of the BDS advocates are false. I am pleased that NYMC, a multifaceted institution made up of good people of all backgrounds, was able to advocate for truth and integrity in achieving this result.
Edward C. Halperin, M.D., chancellor and chief executive of New York Medical College, is also provost for biomedical affairs at Touro College and University.
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