Colleges hit for lack of openness in investing

Major schools including Boston University, Boston College, and Northeastern University are too secretive about what stocks they hold and how they vote in corporate elections, a new study asserts.

The low marks come at a time when some other institutional investors are putting a new emphasis on corporate-governance practices, both to improve profits and, in some cases, to promote causes such as environmentalism. Also, the government is requiring mutual-fund companies to disclose their votes on corporate issues.

Yet of the 100 schools with the largest endowments, 72 of them, including Tufts University and the Massachusetts Institute of Technology, got the lowest possible marks for how "transparent" they are about their holdings in a report to be released today by the Sustainable Endowments Institute of Cambridge.

In addition, 68 percent of the schools got the lowest score -- F -- on how much effort they made to engage campus communities in deciding how to vote on corporate matters, the report said. Boston College, Boston University, and Northeastern University were in both groups.

Few schools would discuss the report or make investment officers available to be interviewed. Some specialists say schools worry that disclosing their holdings could put them at a disadvantage compared to private investors.

Overall, the quiet record of the universities is a surprise, said Mark Orlowski , executive director of the institute, which funded the study partly with a grant from Rockefeller Brothers Fund in New York. In all the 100 schools control $258 billion, or 75 percent of all higher-education endowment investments. Since many are excused from tax obligations, Orlowski said, they have higher obligations to make their actions public, he said.

"It's reasonable to expect a certain level of openness and transparency, given their tax status," he said.

High-scoring schools in the survey include Dartmouth College and Williams College. At Williams, the holdings and proxy-voting record of its $1.5 billion endowment are disclosed internally to students, faculty, staff, and alumni, partly on a password-protected website.

In deciding to post the information, Williams spokesman Jim Kolesar said, a university committee aimed "to balance two things, a concern among investment professionals that there could be a competitive disadvantage to exposing your holdings, and members of the community's understandable interest in knowing what those holdings are."

At Dartmouth, which makes an annual report available online, chief investment officer David Russ said many students and faculty appreciate being able to see the details. Also, the investments are spread among so many external investment managers that just publishing the holdings "doesn't tell you anything" that could pose a competitive threat.

Publication of proxy votes has become a hot area in recent years as unions and public pension funds get more vocal on issues such as reining in executive pay. Many belong to the Council of Institutional Investors in Washington, where deputy director Amy Borrus called it "disappointing" that few large universities say much about their holdings and that few weigh in on popular issues. "I don't know where they are, they certainly are not prominent in most of the big corporate battles," she said.

For its report, the Sustainable Endowments Institute reviewed university policies in seven areas, such as whether they run recycling programs or follow "green building " guidelines for new campus developments. Overall, the highest grades went to Harvard University, Williams, Dartmouth, and Stanford University .

But the study is likely to draw the most attention for its review of investment policies, an area in which endowments are becoming increasing ly important economic f actors as their total endowments rise through fund-raising and the use of hedge funds. Just yesterday another report showed Tufts University's endowment was among the fastest growing in the country, returning 44 percent last year, followed by MIT's with 25 percent.

In its report today, the Cambridge institute faulted the way Tufts runs its $1.2 billion endowment, giving the school F grades both for "endowment transparency" and "shareholder engagement." The school won't share its proxy voting record, makes its holdings known only to investment committee members, and leaves it to investment managers to handle the details of its proxy votes, the report stated. A Tufts spokeswoman said the school keeps investment decisions private " to maintain the integrity of the university's proprietary investment choices and strategies."

Among other Boston-area schools, the institute similarly described Boston University, Boston College, Northeastern University, and MIT, though it noted MIT has an investment advisory committee that includes faculty, staff, and students.

A Boston University spokesman called the investment information "proprietary" but noted the school has taken steps in the past like divesting from companies that do business in Sudan because of human-rights violations in the Darfur region. Spokespeople for MIT and Northeastern said endowment officials were not available to comment.

At Boston College, spokesman Jack Dunn said the school's $1.5 billion endowment is screened so its investments are made "with the university's Jesuit Catholic values in mind. But our policy has been to not disclose specifics of our investment strategy, so as not to put us at a competitive disadvantage with other universities."

Ross Kerber can be reached at kerber@globe.com.