Op-Ed: Open letter to Stanford on investment transparency and the Paradise Papers

March 7, 2018, 5:00 a.m.

To the Stanford Board of Trustees:

Over the past few months, we have become deeply concerned about the revelations of the Paradise Papers and, more recently, Stanford’s latest tax returns. In principle, we agree with President Tessier-Lavigne and Provost Drell that the “endowment at Stanford provides essential support for our core academic mission, including research, education and student financial aid. Those things, in turn, provide immeasurable benefits to the economy, health and culture of our country.” In practice, we worry that Stanford’s investments may be doing harm. Stanford has the legal right to minimize its tax burden within the limits set by the law, but it also has the duty to invest its endowment in line with both its mission statement and its statement on investment responsibility. As students, we cannot hold the university accountable without basic transparency, a value that we believe is incompatible with opaque investments in tax havens and blocker corporations.

That brings us to an important question: Can Stanford invest transparently and meet its fiduciary obligations? Absolutely. First, over the last ten years — according to the limited data provided by Stanford Management Company — Stanford’s merged pool has generated annualized returns of 6.7 percent. If we take into account reinvested dividends, that means that Stanford underperformed both the Dow Jones Industrial Average and the S&P 500 over the same period. What Stanford does through hedge funds in the Caymans, it could do through in-house investments in blue-chip stocks at home. Second, we already have an example of a fund far larger than Stanford’s that has better returns and far more transparency. Norway’s sovereign wealth fund, Government Pension Fund Global (GPFG), outperformed Stanford last year while making nearly all of its investment information publicly available and readily accessible. If GPFG can invest more than one trillion dollars with near-total transparency, we believe that Stanford can do the same with an endowment a small fraction of the size of Norway’s.

At the core of Stanford’s mission statement is the promise “to promote the public welfare by exercising an influence in behalf of humanity and civilization.” According to Stanford’s statement on investment responsibility, the Board “recognizes that the preservation of a community in which ideas may be freely and openly debated on their merits is central to the University’s academic mission.” Stanford is a 501(c)(3) that claims to serve the public interest. In many ways we believe it does, but socially irresponsible investments serve neither humanity nor civilization, and a free and open debate on the merits of Stanford’s investments requires access to information. Stanford has an opportunity to set a precedent for investment transparency and an obligation to meet its own standards for investment responsibility. If Stanford has nothing to hide, it has no reason not to release the details of its investments.

Chapman Caddell ‘20, 19th Undergraduate Senate

Ana Queiroz ’20, 19th Undergraduate Senate

Kimiko Hirota ‘20, 19th Undergraduate Senate

Cole McFaul ‘20, 19th Undergraduate Senate

Erica Scott ‘20, 19th Undergraduate Senate

Kojoh Atta ’20, chair of the 19th Undergraduate Senate

Katherine Hufker ‘18, 19th Undergraduate Senate

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