United Methodists twice rejected resolutions on Wednesday (May 2) that called for the denomination to divest from companies accused of contributing to the Israeli occupation of Palestinian territories.
Neither vote was particularly close, with about two-thirds of the 1,000 delegates gathered in Tampa, Fla., through May 4 rejecting the calls for divestment.
Back in 2004, I wrote a column for TCS entitled Those Divesting Presbyterians, in which I roundly criticized the Presbuterian Church (USA) for its decision to divest from multinational corporations doing business in Israel. (The Church later backtracked from its divestment effort.) I wrote that:
Let's start with a basic question: Will the PC(USA)'s decision "work"? In other words, do divestment campaigns tend to achieve their proponent's goals? The clear answer from the empirical literature is "no." ...
If the PC(USA) mavens who passed this proposal were simply dealing with their own investments, who could gainsay their right to shoot their portfolios in the foot? Apparently, however, the plan encompasses divesting the retirement funds of Presbyterian pastors and workers invested in denominational pension plans. As such, their decision illustrates a perennial problem of institutional investment; namely, Quis cusotdiet ipsos custodies.
Like the vast majority of large institutional investors, the PC(USA)'s pension plans manage the pooled savings of small individual investors. From a governance perspective, there is little to distinguish such institutions from corporations. Plan investors have no more control over the election of company trustees than do shareholders over the election of corporate directors. Nor do the holders of such shares have greater access to information about their holdings, or ability to monitor those who manage their holdings, than do corporate shareholders. Worse yet, although an individual investor can always abide by the Wall Street Rule with respect to corporate stock (it's easier to switch than fight), he cannot do so anywhere nearly as easily with respect to investments such as these denominational pension plans.
Managers of pension plans are fiduciaries of the beneficiaries of those plans. When they pursue a social agenda nearly certain to result in poorer performance, they are disserving their beneficiaries. The activists at the PC(USA) may have gotten a warm and fuzzy feeling from taking a slap at Israel, but in doing so they injured Jewish-Christian relations, besmirched the one functioning democracy in the Middle East, and stabbed their own people in the back. All for the sake of a gesture that experience teaches will be fruitless.
I'm glad to see the Methodists decided not to go down that road.