Lutherans to Decide on Divestment Compromise

Lutherans to Decide on Divestment Compromise

The Evangelical Lutheran Church in America (ELCA), formed through a merger of three Lutheran church bodies January 1,1988, has been clear about divestment from its birth. At its constituting convention in May 1987, delegates expressed "unqualified opposition to the apartheid system in South Africa" and pledged that the ELCA would "work tirelessly to see that none of our pension funds will be invested in companies doing business in South Africa." As far back as 1977, world Lutherans declared that opposition to apartheid was a matter of status confessionis; that is, apartheid is heresy.

But moving from convention resolutions to practical actions is another matter. Though others have tried, no major denomination's pension plan has been able to divest its holdings in companies that directly or indirectly invest in South Africa. Lutherans are not unique: When church pension boards get down to business, the phrase "fiduciary responsibility" always pops up. And the issue boils down to how to put into practice the church's opposition to apartheid and still invest pension funds in such a way that will provide maximum gain.

From the beginning the Board of Pensions, which is separately incorporated though the trustees are elected by the ELCA Assembly (the denomination's national representative body), made it clear they were more worried about being sued (they are liable as individuals) than about pressure from the denomination's Church Council.

Board member Elizabeth A. Storaasli, who headed the former American Lutheran Church pension board, urged the ELCA board to adhere to the letter of the law regarding its trusteeship. "Why do we think we are wiser than the law that was set up for the protection of members?" she asked trustees at their meeting last fall. "I would prefer a schism in the church [rather] than placing my trusteeship at risk."

Beyond fund performance and the fiduciary responsibility issues, those who op-pose divestment cite IRS regulations that require tax exempt pension funds to be invested solely for the benefit of the members. It is unclear whether the IRS would continue to give tax exempt status to church pension funds that did social invest-ing without the explicit permission of their members.

The ELCA pension board has always offered members the option of Social Purpose Funds, which exclude not only companies doing business with South Africa but also those dealing in weapons of mass destruction. These social purpose funds also deliberately invest in community development.

In the more than two years since the ELCA came into existence, divestment has been the most hotly debated church policy. During 1988 and 1989, the ELCA Church Council repeatedly urged the Board of Pensions to get on with divestment. When pension trustees cited legal obstacles, they were accused of foot dragging.

Pressure groups emerged in the church on both sides of the issue, with some opponents of divestment threatening to sue the pension board if they carried out the divestment mandate. The frequently acrimonious "pension tension" culminated in a resolution at the first churchwide assembly last summer, which asked the pension board to divest fully all of its funds by 1991.

Following the assembly meeting, the board again said it was divesting but could never promise full divestment, so a working group was formed to find a compromise solution. The working group's compromise, which will be sent to the Church Council in late April, would create three new funds--bond, equity, and combined--that carry only a South Africa-free screen. These new funds would be considered "normative" funds for the ELCA, meaning that if pension fund members did not choose the previously offered Social Purpose funds or one of the funds with no screens, they would be put into the new South Africa-free funds.

Proponents of divestment like the fact that the compromise would make the church's public policy one of support for South Africa-free investing. Those who oppose divestment are comforted by the fact that they could still choose a fund with no screens. And church officials seem pleased that the threat of lawsuits would be mitigated.

Roger Kahle was managing editor of The Lutheran when this article appeared.