Pax CEO responds to ‘misleading’ NHBR article

Bob Sanders’ article (“How Pax came to alter its investment rules”) in the Aug. 15-28 issue of NHBR purports to address investments by Pax World in military contractors against the backdrop of a recent SEC settlement involving compliance issues in the 2001-2005 time period.

If your readers are interested in the facts of the settlement, detailed information can be obtained on the Pax World Web site (, including links to the SEC order itself. I would encourage anyone who has read Mr. Sanders confusing, inaccurate and misleading piece to do so. The settlement was reported in a number of publications, but this is the first time I have felt the need to broadly correct the record through a letter to the editor.

Mr. Sanders conflates the issues involved in the SEC settlement with Pax World investments today, thereby suggesting that Pax World is somehow violating its current criteria against investing in companies that are significantly involved in the manufacture of weapons. We are not, and Mr. Sanders knows that we are not, because I am familiar with the information we provided to him. Notwithstanding this, his article labors mightily to leave the opposite impression.

To correct the record: The SEC order involved claims that during the 2001-2005 time period, Pax World, as a result of inadequate compliance controls, mistakenly purchased a small number of securities that violated criteria then in place, which have since been modified, including screens against investing in weapons manufacturers and military contractors.

Pax World no longer employs a screen against “military contractors” per se. If a company supplies food or medicine or pharmaceuticals or other non-lethal products and services to our troops, we may invest in such a company so long as it otherwise satisfies our financial, environmental, social and governance criteria. What we do seek to avoid investing in is weapons, and specifically, in companies that are significantly involved in the manufacture of weapons, and we use various criteria for determining “significance,” including but not limited to the percentage of company revenues derived from such activities.

Mr. Sanders talks about “investing tens of millions in contractors that do billions of dollars in contracts with the U.S. Defense Department,” without providing any back-up and without clarifying whether he is referring to the 2001-2005 time period or insinuating that Pax World is somehow investing in inappropriate companies today.

He asks whether technology services provided by Dell Computer and IBM to the Defense Department really “have nothing to do with weapons and combat?” Mr. Sanders doesn’t know, and makes no effort to find out, but the answer he wants his readers to infer is obvious. (In fact, as I understand it, Dell’s fiscal 2007 sales to DOD accounted for 1.2 percent of its revenue while IBM’s 2006 DOD contracts totaled approximately $291 million, and KLD Research & Analytics, upon whom we rely for some of our research in this area, reports that it does not consider such products and services to be weapons-related in either case.)

In another instance, we provided detailed factual information to Mr. Sanders about AECOM, another investment he cites, which he simply ignores (and then quotes me out of context) in order to, once again, leave the impression with his readers that Pax World is somehow violating its own standards today.

I have found that investors, brokers, financial advisers and others who have actually taken the time to read the SEC order (which cites Pax World’s cooperation and remediation efforts), as well as Pax World’s response to the order, and to understand the facts and context of the settlement, have been more than fair. I’m afraid I can’t say the same about Mr. Sanders’ article.

Joseph F. Keefe is president of Pax World Management Corp.

Categories: Opinion