Socially Responsible Investing and the Arts

Cynthia A. Gehrig

Foundation grantmakers are investors. The endowment that sustains a grantmaking program demands the same concentrated, strategic thinking that developing a focus for a giving program entails. The challenge addressed in this essay is to bring together these two basic functions — investing and grantmaking. The context for doing so is socially responsible investing. My purpose is to take an expanded definition of socially responsible investing and see if it has a meaningful role to play in arts philanthropy.

Socially responsible investing calls for the integration of social values into the investment decision-making process. Amy Domini, of Domini Social Investments, states that socially responsible investing manifests itself in three primary forms: guidelines for portfolio investment, shareholder activism, and community development investing.1 Each form will be examined in this essay in sections with headings that expand Domini's designations somewhat to more closely reflect grantmakers' experience: social screens (guidelines for portfolio investment), informed shareholder voting (shareholder activism), and program related investments (community development investing). First, however, I begin with the source: values and principles.

Values and Principles
Values and principles underscore a foundation's grantmaking policies and program focus, as well as its basic mission and objectives. Although values and principles may not be discussed overtly at board meetings, they nonetheless inform every decision that is made. As grantmakers, however, we've tended to create a sharp division between the values expressed through our grantmaking and the values in our investment policies. A 1994 article in The Chronicle of Philanthropy reported that the Leonard and Beryl H. Buck Foundation was asked by one of its grantees, the Marin Institute for the Prevention of Alcohol and Other Problems, to remove from its endowment holdings in companies producing alcohol and tobacco. The Foundation's investment manager, the Wells Fargo Bank, reportedly stated that its job was to protect the financial interests of the trust, not to be concerned about the organizational missions of the Foundation's grantees.2 Fiduciary interests were seen as being quite separate from charitable giving interests. Some argue that decisions governing the investment of an endowment should be made by specialized money managers who have strong performance records of investing for total return. In many instances, a relatively small number of foundation board members and the president develop investment policies, often with the counsel of an advisor. Foundations can be compromised if board members have too great a say in directing investment management choices, particularly if they have a conflict of interest with their own business holdings. For these reasons and others, the split is one with which we've come to live.

Acceptance of the split between fiduciary interests and charitable giving interests is changing, however, as the number of institutional and individual investors interested in socially responsible investing continues to grow. A question I ask is whether foundations may have a goal of integration — a flexible, continuously scrutinized integration of a foundation's philanthropic values and principles through all aspects of its work, both its giving program and its investment policies.

Socially responsible investing is often associated with the political left, with a liberal approach to social values and ethics. Yet, many examples can be found on the political right and in the vast area in between. My purpose is not to draw firm boundaries or confirm single-issue definitions, but to pose questions, offer observations, and provide information that I hope will enable grantmakers to consider the relationship between arts philanthropy and socially responsible investing. An attachment to the idea of social change may cast much socially responsible investing in an activist, liberal light; but social change can work in various directions. As investigations into this kind of investing continue, we face the danger of sloppy language and of misinterpretation, especially if the work gets politicized. While I try to be relatively balanced in this essay, I must acknowledge my own liberal bias in the examples I put forward. For those who don't share my frame of reference, I ask that you take what you can from the essay and interpret it in light of your principles and values.

Over the years, I've attended meetings with investment managers and participated in investment policy formulation, monitoring, and evaluation. I've come to realize that foundation grantmakers may be shirking, perhaps even ignoring, a responsibility they should be assuming. Foundations may have too quickly and without real thought assigned to investment managers the voting rights and responsibilities they have as shareholders in corporations on the assumption that investment managers will vote objectively to ensure solid corporate performance. Some foundations have assigned voting rights and responsibilities to the management of the companies in which they hold stock, by simply voting shareholder proxies consistently in favor of the management's positions. If either of these two practices is a deliberate choice of a foundation board, then the decision is to be respected. On the other hand, if the practice of assigning voting rights and responsibilities to others is automatic, I would urge that it be carefully reconsidered.

A few years ago, in an effort to better educate board and staff, the Jerome Foundation asked its investment managers to provide regular written reports indicating how they voted the foundation's shares and why they voted as they did. We wanted to know whether the votes echoed the values of the grantmaking program. We asked our largest investment manager, which has a proxy voting division within the corporation, to provide a more extensive rationale and process description so that we could understand how the manager arrived at its votes on shareholder resolutions. The education provided by the managers' reports was important, and making sense of the information will take some time.

Some managers abstain from shareholder resolutions that are characterized as non-financial — social, political, and environmental — because, they argue, their research and knowledge don't prepare them for these decisions. The managers may look to their clients (the foundations) for direction. If a resolution clearly has economic ramifications for the company, the manager has a basis for a yes or no vote. We found that the managers' votes on many shareholder resolutions seemed perfectly sound. This was especially true when it came to protecting and increasing the strength of the shareholders' position. One example was a company management proposal to limit shareholders' rights to call for special meetings on pressing subjects such as the potential sale of the company. Our investment manager voted against company management. Another was the proposed issuance of stock with unequal voting rights, which our manager opposed because it was a divisive move to separate shareholders and possibly pit them against each other. A third example was a management proposal that would make it more difficult for shareholders to place “nuisance” resolutions on the annual meeting agenda, to gain access to proxy materials, and to comment on the resolutions. The Jerome Foundation's investment manager voted against overly restrictive limitations and upheld the shareholders' right to have a reasonable amount of time and space both to propose and comment on shareholder resolutions.
On the other hand, the Jerome Foundation found several instances in which shareholder votes were based on opinions and historical patterns that clearly reflected the values of the investment manager, but were not necessarily the values the foundation embraced in its grantmaking program. For example, the manager had an inconsistent practice of responding to shareholder resolutions calling for the election of independent candidates to the board of directors and for their appointment to the nominating committee. A blanket statement asserting that nominees must be “qualified” to serve was often used as the argument against a call for candidates not employed by the corporation. An independent candidate might be just as experienced and just as qualified to serve as an “insider,” such as a current company executive, might be. The movement toward an independent presence on corporate boards is becoming more widely promoted within the business community. Many shareholders have come to believe that a board of “insiders” may be too insular — its members may be fully knowledgeable but may lack the broader perspective to be critical and proactive.

Social Screens — Guidelines for Portfolio Investment
When defining socially responsible investing, one might expect a simple list of social screens — mechanisms for eliminating certain corporations from the field of possibilities as investment managers determine which stock to purchase. Yet, socially responsible investing is much more than the application of social screens. In fact, it holds an ever-expanding number of definitions, limited only by our imaginations.

Although some form of socially responsible investing has existed since the beginning of the century, its current history began in 1971, when the Episcopal Church filed a resolution calling on General Motors to withdraw from South Africa. Reportedly, this was the first religious investor-sponsored shareholder resolution. The history of similar shareholder action in the areas of militarism, international health, the environment, global corporate accountability, and community economic development is detailed in a twenty-five year history compiled by the Interfaith Center on Corporate Responsibility as a part of its 1995-96 Annual Report.3

One of the driving motivations in early socially responsible investing was the association of certain kinds of products or actions with sin. Such investing, for example, used screens that removed from investment portfolios the stocks of companies that produced or sold alcohol, tobacco products, or birth control pills. Later, other screens appeared that eliminated corporations using child labor in product manufacture, companies doing business in South Africa, and military contractors. Perhaps the one cause that attracted the most foundation endowment activity was the South Africa Free Portfolio movement. A number of foundations decided to invest only in corporations that had signed the Sullivan Principles, a list of practices designed to counteract the restrictive policies of apartheid. The Jerome Foundation, for example, moved from a policy that allowed its investment managers to invest only in companies ranked on the first two levels of the Sullivan Principles, to a policy that required a South Africa free portfolio. The Foundation lifted this restriction when Nelson Mandela called for re-investment in South Africa a few months prior to his election.

A particular criticism of socially responsible investing comes to mind at this point. In 1993, a writer for The New York Observer noted that eager activists may think they have “purged the hypocrisy from their portfolios,” but may only have raised it to a higher level.4 Did U.S. corporations really end their business activity in South Africa or did they just legally spin off South Africa subsidiaries with the appearance of separate ownership? Does a single shareholder vote really make a difference? Are exclusionary social screens really useful in a complex economic environment in which a corporation may perform exceptionally well in one arena while under-performing in another? What about a retailer that employs a large number of women but hires most of these women in part-time positions with few insurance benefits and no pension contribution? In the period during which the Jerome Foundation took its position on South Africa, one of the Foundation's trustees, a university president, spoke about the inadequacy of an exclusionary screen if it remains only an instruction from a foundation to its money managers. At his urging, the Foundation wrote letters to the CEOs of the corporations in question asking them to explain what they were doing in South Africa to resist the policies of apartheid and advance the rights of Black South Africans. The exchange of correspondence that ensued was enlightening, provocative, and substantive. We learned that corporate management does respond to shareholders. Dialogue is the goal. We then began to see the limitations of exclusionary screens in comparison to the opportunities afforded to an active shareholder.

Although values and principles certainly can be the foundation for exclusionary screens, screens can also be affirmative. In other words, screens can recognize strengths within a corporation and encourage investment. We, as arts grantmakers, can put our values into practice by using an affirmative screen such as the size of a corporate contributions budget or the presence of a strong commitment to arts philanthropy. In many respects, an affirmatively screened list already exists in the membership of the Business Committee on the Arts, at least, in terms of large capitalization corporations. Do investment managers have a list of the largest corporate arts funders in the country, and do foundations encourage investment in these companies? Do foundations encourage corporations not yet identified as large arts givers to meet this affirmative screen? Other examples of affirmative screens include: innovative as well as generous giving, diversity of gender and race on the board and in upper management, progressive employment practices, family benefits, praiseworthy non-U.S. operations, positive environmental impact, and strong corporate ownership practices. The investment firm of Kinder, Lydenberg, Domini and Company has compiled a more complete list of the corporate strengths socially responsible investors ordinarily track. Another source is the Investor Responsibility Research Center, founded in 1992, a nonprofit research organization serving institutional investors. The Center offers several subscription services including proxy issue research and guidelines. The Interfaith Center on Corporate Responsibility publishes a proxy resolution book and offers an informative newsletter.

The most common criticism of using exclusionary social screens — that is, removing certain types of companies or products from an investment manager's portfolio — is the charge that these investments perform at a lower level than ones that do not screen. This criticism raises important questions about whether foundation directors are meeting their fiduciary responsibilities — a serious claim that demands accountability. This blanket indictment, however, should be questioned. While some endowments with social screens do suffer in terms of performance level, many do not. The Domini 400 Social Index is an index of common stocks that pass commonly-applied exclusionary and inclusionary social screens. At its inception, the Index's fund held 243 of the Standard & Poor 500 corporations. The Domini Index then added smaller capitalization companies with strong social records in under-represented industries. One of the purposes of this index is to enable managers to measure the performance of screened portfolios against non-screened ones and to develop historical data for evaluating the effects of social screening on portfolio performance. In each of the past three calendar years, the Domini 400 Social Index has exceeded the performance of the S&P 500. The Domini Index Fund reported sustained numbers below the S&P 500 during the Gulf War, which is not surprising, but regained its position shortly afterward. As calculated by Wilshire Associates, the Domini 400 Social Index posted the following total returns as of January 31, 1998: year-to-date, 2.11% as compared to the S&P 500 at 1.13%; one-year, 31.36% as compared to the S&P at 26.87%; three-year, 32.66% as compared to the S&P at 30.51%; and five-year, 20.95% with the S&P at 20.31%, The three and five year figures are annualized returns.5 Let's not accept the easy economic criticism of socially responsible investing. We should make direct comparisons so that decisions can be based on actual data.

It may not be possible to have a complete synthesis of values and principles in grantmaking and investing. However, the work of a foundation is more than its funding program, the work is also its endowment. Are foundations asking questions about the values, principles, opinions, and historical practices that are expressed in the way their rights and responsibilities as shareholders are exercised? This kind of questioning and investigation is neither easy nor simple. Although reaching consensus is difficult, there is great merit in working within an organization in which the collective values and principles are consistent throughout all aspects of the work.

Informed Shareholder Voting — Shareholder Activism
Shareholder activism, as a form of socially responsible investing, raises the question, for me, of whether foundations can enter into effective working partnerships with their investment managers — that is, can we engage in partnerships that lead to more informed shareholder voting? Again, the goal is the integration of values. This should give foundations a dynamic base for assuming more public roles as informed shareholders who vote shares according to values and principles that have been carefully established.

Informed shareholder voting is both an alternative to social screens and their complement. Much activity in this arena is based on the belief that advocacy from within provides greater opportunity for voices to be heard and dialogues to be sustained.

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Grantmakers should allow sufficient time to evaluate the rationales underlying their shareholder votes. The first year of any investigation is primarily about education and can be facilitated in various ways. Several reputable and effective independent agencies (noted earlier in this essay) offer information on informed shareholder voting and provide regular reports on U.S. corporations and their performance in various areas of what has been generally accepted as socially responsible investing. According to the firm Kinder, Lydenberg, Domini & Company, standard research topics include: charitable giving programs, leadership roles in community affairs, employee relations, the environment, product manufacture, employment of women and minorities, activities in Third World countries, the military, nuclear power, and South Africa. The price tag for receiving regular reports on U.S. corporations may be too high for a smaller foundation. However, these independent analyses may be purchased by investment managers as well as foundations, and many major investment management firms already purchase them because more clients are asking for the information. The Jerome Foundation discovered that its managers had been purchasing this information for some time, one of whom was able to provide it to us free of charge.

Independent analyses of corporations' performance around certain standard social concerns should become part of the regular reading material for any investment manager who is considering the addition of a new corporation, the shaving of a position in a current holding, or the sale of stock. Sometimes it's as simple as asking that your investment managers agree to read these independent assessments on a regular basis. Some foundations might choose to instruct their managers to purchase or sell based upon certain benchmarks within specific areas of concern. Others will simply ask that the manager consider the independent research as one of several factors in decision-making. For example, if a company is receiving widespread criticism for its use of child labor, a pending boycott or weakened public regard may adversely affect profits and signal a drop in stock value. While many managers already use socially responsible investing information, it never hurts to have a reminder from the client.

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Shareholders have the opportunity to vote on a variety of policies and actions including the election of the board of directors, the composition of nominating committees, resolutions to search for women and minority candidates for the board, the release of public reports on domestic and foreign military sales, reports on operations in other countries, reports on EEO programs, studies on practices that might coerce employees to make certain political contributions, executive compensation, anti-takeover policies that limit shareholder rights, stock option and purchase plans for employees, proposals to eliminate support for abortion, proposals requiring published reports of the environmental impact of products, term limits for directors serving on the board, the establishment of a shareholder rights plan, a minimum stock ownership expectation of directors, approval of financial statements, and spin-off subsidiaries and their governance structures. To respond intelligently to such an array of subjects requires more human resources than most foundations have at their disposal.

At the same time, arts grantmakers may choose to advance a more manageable number of policies or actions. Of particular note are resolutions about corporate charitable giving. In most companies, management continues to recommend that charitable contributions be continued, but, in others, resolutions are being submitted by shareholders that require corporations to end their giving programs. As shareholders, grantmakers should be voting in favor of charitable contributions programs. Do we know whether our investment managers are voting in favor of or in opposition to resolutions calling for an end to corporate charitable giving? As a proactive stance, I suggest we might do more than direct the voting of our foundations' shares. Perhaps, we as grantmakers should make it a practice to send annual letters to the CEOs and board chairs of the companies in which the foundations we work for hold stock, thanking them for their charitable contributions program, stressing our continued support of it, and urging their particular attention to arts philanthropy.

If colleagues in corporate arts philanthropy tell us that their programs are threatened, then as shareholders, grantmakers can write to the CEOs and board chairs in support of retaining a commitment to the arts. In short, we can become active colleagues, speaking not as another self-interested grantmaker but as a shareholder. That's a huge difference. We might survey the foundations sending representatives to the next Grantmakers in the Arts annual conference and determine how many shares are collectively held in certain key corporations with arts giving programs. This is an arena ripe for proactive movement.

Some of my corporate philanthropy colleagues have described to me their participation in annual meetings of shareholders. They attend in case there are questions posed by shareholders about the contributions program. I asked them how helpful it would be to their giving program if a shareholder asked to be recognized and then gave a forceful endorsement of the charitable giving program of that corporation, making particular note of arts philanthropy. In every case, the response to my question was extremely positive. This leads me to suggest that grantmaker shareholders adopt a goal to attend at least two shareholder meetings per year and to speak in favor of corporate giving to the arts.

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At first glance, it may seem that some social concerns have no direct relationship with arts grantmaking. Yet, in fact, they often do. I'll offer two examples here, but many more connections can be made.

The press reports numerous instances of corporations spending millions of dollars on legal fees and related discrimination settlements for not meeting the recommendations of the Equal Employment Opportunity Commission. In 1994, more than 155,000 discrimination complaints were filed. As noted in a shareholder resolution filed with a major retailer, the high cost of legal expenses, the potential loss of government contracts, and the social and financial consequences of damaged corporate image from discrimination allegations place the subject high on a priority list for shareholders.6 Shareholders have urged that companies more accurately reflect the marketplace, the customers, trading partners, and a diverse work force. Some arts grantmakers share the same concerns and have cultural pluralism as a core value in their giving program. Many of us raise questions in our application reviews about the composition of boards, staffs, constituents, and audiences. Often, we urge nonprofit arts organizations to strengthen their board of directors by diversifying the talents and backgrounds of the individuals serving, and we fund audience development programs specifically to broaden participation. In this respect, should our foundations reflect a consistency of values through their roles both as grantmakers and as shareholders?

In 1995, the Glass Ceiling Commission, with Secretary of Labor Robert Reich, released a report titled “Good for Business: Making Full Use of the Nation's Human Capital.” The study reported that women and people of color represent more than half the workplace but less than 5% of executive management positions. The Minneapolis Star Tribune published an article on the presence of women in the boardrooms of corporate America, citing a Catalyst survey which reported that women held 10.2% of the directorships that governed Fortune 500 companies.7 In Minnesota, the number was 12.7%. Both figures were reported as increases over previous study results, but they are still well below what they should be. How often do we, as grantmakers, take a look at the boards and management of the nonprofit arts organizations we fund, and ask questions about gender diversity and about representation from the business sector? Can we, who urge a wider range of qualified participants in nonprofit arts governance, transfer these values to our investments? And, conversely, if pluralism is not a grantmaker's priority, then that, too, might be reflected in shareholder governance voting.

Many of us have worked diligently on behalf of cultural pluralism because we are motivated by the realization that lives are enriched by the confluence of unique cultural traditions. A movement toward pluralism has the potential and the obligation to strengthen rather than weaken a governing body. The purpose is not to elect or hire unqualified people. Experienced individuals exist; they need only to be brought into the circle of consideration.

A second example involves the public disclosure of information. Shareholders often introduce resolutions requiring that corporations conduct studies of current business policies and practices, such as the characteristics and working conditions of the overseas labor force employed by that business, the conditions under which employees are encouraged to make political contributions, and the environmental impact of certain products. Typically, a corporation is not asked to stop any practices but rather to study, evaluate, and issue a public report. In most instances, management resists. The reports, in fact, may already exist but are not released to the shareholders or to the public. Investment managers tend to vote with management, citing confidentiality, repetition of existing studies, and excessive government regulation. In this example, a connection to some arts grantmakers may be made through shared concerns for the principle of freedom of speech and the First Amendment. Why do people fear public disclosure and debate? In some cases, such information may actually defuse a volatile situation. A corporation that holds itself accountable as a good citizen should have no need to hide. An open, uncensored exchange of information is what shareholders should expect.

Stephen Viederman, president of the Jessie Smith Noyes Foundation, wrote, “Well-managed companies are serious about investor relations and do respond to letters and calls, particularly from institutional shareholders. Meeting and corresponding with management, while time-consuming, can alert companies to the concerns of grantee groups as well as of grantmakers, and in this way raise issues that are part of a foundation's mission.”8 Mr. Viederman's articles about the Noyes Foundation's activism as a shareholder with Intel Corporation based upon the Foundation's grant support for the South West Organizing Project make for excellent reading. In a letter to the editor responding to one of Mr. Viederman's articles in Foundation News, Gordon Casey, director of investor relations at Intel Corporation, complimented Viederman for his diligence. His efforts, Casey wrote, led to “a constructive exchange of views in which both parties gained a fuller understanding of the other's position.”9 Casey makes particular note of the fact that Viederman advocated first for the establishment of a dialogue to fully explore the issues before filing a shareholder resolution. Shareholder resolutions normally draw a very small percentage of the vote, although, with a minimum threshold of 3.5%, a resolution may be revived in the succeeding year. While the resolution itself is important, it is the dialogue before and after the resolution that is paramount.

Asset Class Diversification
Another way to enter into the arena of socially responsible investing is to buy shares in a mutual or index fund, or in an actively managed socially responsible fund. In this way, a foundation can establish an asset class of socially responsible investments as a means of diversifying a portfolio rather than make a sweeping revision of its entire investment strategy. For example, a foundation with a $100 million endowment might invest 65% with large capitalization equity managers, another 20% with a fixed income manager, and the remainder in a socially responsible mutual fund. A growing number of investment managers offer such a line of investment products, and their performance records can easily be compared against the managers that foundations are currently using. Some socially responsible managers and mutual funds beat the performance levels of managers without restrictions, and some do not. I want to stress once again that socially responsible investment vehicles do not necessarily under-perform compared with other managed accounts.

Program Related Investments — Community Development Investing
One of the largest areas of practice within the realm of socially responsible investing is the category of program related investments (PRIs). The legal definition of a PRI was established in the Tax Reform Act of 1969. The Ford Foundation, with vast PRI experience, makes available to its colleagues a videotape and various publications that provide an excellent introduction to and overview of program related investing — Investing for Social Gains: Reflections on Two Decades of Program Related Investments.11 Since 1969 when Congress approved the use of this philanthropic tool, Ford has been exploring the potential of PRIs in highly effective ways. The Foundation reports that, although at first the purposes of its PRIs were not integrated with its grantmaking goals, they are now.

While most PRIs are investments by foundations to support charitable projects or activities (usually structured as loans), PRIs can also take other forms: equity partnerships in earned income initiatives, real estate development, loan pools, investments in economic development and municipal revitalization, venture capital investments, and loan guarantees. Some PRIs are taken from a foundation's endowment fund. If the recipient repays the loan at a below market interest rate or no interest, the foundation loses that capital for a period of time, eliminating the possibility of a positive differential between the loan's interest rate and the total return on the foundation's endowment. Many foundations consider a program related investment to be a quasi-grant — using money that would have been granted anyway to meet payout requirements, a use the Internal Revenue Service allows. In these cases, the differential between the interest rate charged and the total return performance of the foundation's endowment becomes a moot point because the money would have left the foundation's holdings in any event, as a grant.

Loans, equity investments, and loan guarantees are increasingly used by grantmakers as important tools to further their mission. Several years ago, the Dayton Hudson Foundation provided a pool of funds to Artspace Projects, a nonprofit developer of space for artists and arts organizations. The Foundation's funds were then loaned by Artspace to individual artists to construct studio and living spaces, and to purchase basic equipment to support their art making. The Jerome Foundation was attracted to the idea as well, and has made two $100,000 loans to Artspace Projects. In turn, the funds are being loaned, over a ten-year period, to individual artists in Artspace buildings, with most individual loans having a duration of two years. Other foundations have guaranteed loans to nonprofit arts organizations from traditional lenders since foundation guarantees often help the organizations secure lower interest rates. In still other examples, foundations have taken equity investments in redevelopment initiatives in inner cities.

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Thus far, most PRI support in this country has been directed to affordable housing and community development. The use of PRIs in the arts, however, is growing each year. We need to imagine new ways that this socially responsible investing tool can be utilized in arts development. Following are a few examples of arts PRIs cited by the Council on Foundations.

From $50,000 in proceeds from an art center gala opening, the Dade Community Foundation created a revolving arts fund in 1989. While half of the $50,000 was kept in market rate investments, the other half was made available as working capital loans to nonprofit, tax-exempt arts and cultural organizations in Dade County. Loans were available in amounts up to $5,000 with the interest rate at 2% and with specified loan terms of three to nine months. In the early years of operation, the Dade Community Foundation made loans to nearly twenty arts and cultural organizations in Dade County.

A second example cited was an agreement between the J. M. Kaplan Fund and the Martha Graham Center for Dance. While in the midst of financial difficulties, the dance company concluded that it needed to sell by auction six sculptures by Isamu Noguchi that had been designed as stage sets for the company. Instead, the Kaplan Fund entered into a PRI lease/buy back agreement in which it purchased the sculptures from the company for $600,000. The purpose of the PRI was to provide operating cash to the dance company while it restructured its finances, and to prevent the loss of its collection. When the company is on more solid financial ground, the Fund hopes to sell the sculptures back at the initial price plus an annual appreciation to cover inflation.

As part of a strategy to revitalize the downtown area of New Haven by developing it into an arts-oriented neighborhood, the city sold a plot of vacant land at $1 per square foot to a partnership of nonprofit organizations in the late 1980s. The arts organizations invited the New Haven Foundation to join them as co-owners and developers of a proposed building. The agreement was completed in 1990. The New Haven Foundation owns three of the five floors of the building and accounts for them as program related investments. One of the floors is owned by the Foundation's corporate entity, the other two by the Foundation's trustees.

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In conclusion, the arena of socially responsible investing is an umbrella of ideas. Arts philanthropy has a place within the mix, and we have an opportunity to define the roles we will play. Speaking about and acting upon our values and principles is hard work. The Jerome Foundation, for example, is still in the process of finding its way, steeped in debate and clarification. Yet, the challenge of that work — the journey — has merit even if the result is not immediate action. The task is complicated and requires imagination, thoughtfulness, and stamina.

Cynthia A. Gehrig is president of the Jerome Foundation, and has been with the Foundation for twenty years. She is a past chair of Grantmakers in the Arts.

1. “What Is Social Investing? Who are Social Investors?” Amy L. Domini, Peter D. Kinder, et al, editors, The Social Investment Almanac, New York: Henry Holt & Co., 1992, pg. 5.

2. “Beneficiary Asks California Foundation to Get Rid of Alcohol and Tobacco Stocks,” John Murawski, Chronicle of Philanthropy, October 4, 1994.

3. Interfaith Center on Corporate Responsibility, 475 Riverside Drive, Suite 550, New York, New York.

4. “Ethical Investors: $10 Billion +,” John Dizard, New York Observer, March 22, 1993, pg. 1.

5. February 17, 1998 Press Release, Kinder, Lydenberg, Domini, 129 Mt. Auburn Street, Cambridge, Massachusetts, 02138-5766.

6. Shareholder Proposal Concerning Equal Employment and Affirmative Action Report, Dayton Hudson Corporation, 1996.

7. “Women Slowly Gaining Corporate Board Seats,” Star Tribune, Minneapolis, December 12, 1996, pgs. 10 & 11.

8. “Adding Value to Your Grants,” Stephen Viederman, President, Jessie Smith Noyes Foundation, Foundation News, January/February 1997, Volume 38, Issue 1, Pgs. 65-68.

9. Letter to the Editor, Gordon Casey, Foundation News, March/April 1997, Issue 2, pg. 7.

10. “Investing for Social Gain: Reflections on Two Decades of Program Related Investments,” Ford Foundation, New York City, 1991. Bibliography on Program Related Investing available.