Fund’s Investment Portfolio Reflects Its Charitable Mission

By Harvy Lipman

For the trustees of the Needmor Fund, entry into the world of socially responsible investing began with an unexpected

discovery during the course of a board meeting in the early 1970s.

Kerr McGee, an energy company in Oklahoma City, was embroiled in controversy over allegations of safety problems at one of its plutonium-processing plants, which later closed in 1975.

“We had a grantee that was trying to get Kerr McGee to be more open with residents of the area about what was going on at the plant,” said Molly Stranahan, a psychologist who sits on the Needmor board. Ms. Stranahan is former finance committee chair at the fund, a private foundation in Toledo, Ohio. Needmor, with assets of $28-million, was founded in 1956 by Ms. Stranahan’s grandparents, the heirs to the Champion Spark Plug Company.

After discussions about the grantee finished, the board turned to financial matters, including a review of the stock holdings in its endowment.

Ms. Stranahan’s aunt, another board member, “noticed Kerr McGee was one of the companies we held in the portfolio, and said, ‘Isn’t this interesting? How do we feel about the fact that we own a company that we think is doing something that is harming residents of the community and we’re trying to empower those people to get some answers from Kerr McGee?’”

The answer, the board decided, was to sell the stock.

Fighting Apartheid

That solution was not viable a few months later when another board member began raising questions about the fund’s ownership of stock in Champion Spark Plugs — the source of the money used to create the fund.

Champion was among the American companies operating in South Africa, and the international campaign to end apartheid was in full swing.

Activists sought to persuade such companies to abide by the Sullivan principles, a set of guidelines designed to guarantee fair treatment for black African workers, and urged foundations, colleges, pension funds, and other big shareholders to sell the stocks of companies that would not.

After Needmor board members raised the issue at an annual stockholders’ meeting, company executives decided to adopt the principles. “The convergence of those two things set us off into saying, Maybe we really ought to look at our portfolio, what the companies that we own are doing,” Ms. Stranahan said. “We don’t really feel comfortable owning companies, and especially one where we felt we had ownership responsibilities, that we think are engaging in practices that are harmful.”

New Strategy

Over the next decade that evolved into a strategy that combines screening the fund’s investments to make sure none of the endowment money goes into companies engaged in activities the board finds to be in conflict with its principles, and actively supporting shareholder resolutions designed to get corporations to follow policies that are socially and environmentally responsible.

Dave Beckwith, the foundation’s director, says the fund’s philosophy is that “every dollar in our endowment has the power to help us accomplish our mission.”

In 1995, the fund for the first time co-sponsored a shareholder resolution. Needmor had provided a grant to the Southwest Organizing Project, in Albuquerque, which was battling Intel over the company’s heavy use of the area’s limited water resources and the amount of pollution it was emitting.

Another foundation supporting the Southwest Organizing Project — the Jessie Smith Noyes Foundation — owned Intel stock and had filed a shareholder resolution that urged the company to focus on environmental issues.

The Needmor Fund also owned Intel stock. “Noyes put out the call: ‘Would you guys be willing to co-file a resolution?’ We said yes,” Ms. Stranahan said.

The resolution asked the company to reduce the amount of water it used at its New Mexico plant, an area where water is a scarce and precious commodity, and to be more open in sharing information about its operation with people who live in the vicinity.

After some initial resistance, the company entered into negotiations with the Southwest Organizing Project and has since cut its water usage by a third. It also has established an office that works with community groups at all Intel sites.

Since then, Needmor has co-sponsored other successful shareholder resolutions. One of the most recent persuaded Alltel to change its employment policy to ban discrimination based on sexual orientation.

While many foundation officials worry that getting involved in shareholder activism will force them to narrow their portfolio and settle for lower returns, Needmor’s experience shows that not to be the case, Ms. Stranahan added.

She says the foundation’s returns are usually as good or better than at least half of other foundations.