Divestiture Debate

The first annual report of the UC Advisory Committee for Investor Responsibility reflects some substantial accomplishments in the struggle to respond constructively to the problems of South Africa. Gov. George Deukmejian and Mayor Tom Bradley of Los Angeles plan to suggest moving farther and faster when the report comes before the university regents today.

These accomplishments and proposals come at an awkward time, of course, because the deterioration of the situation in South Africa has greatly reduced the prospects for peaceful change. The brutal repression, the suspension of civil rights may have rendered futile any moves to pressure for reform through economic sanctions. Events suggest that time is running out for a political solution as the risk of prolonged civil war and anarchy rises.

Nevertheless, the regents will be well advised to pursue the efforts set in motion last year by President David P. Gardner. The initiatives at least encourage the application of what little leverage there may be to push the government in Pretoria to definitive action.

Under guidance from the advisory committee, the regents already have divested $12.3 million in Eaton Corp. securities, and have barred further investments in Balco Chemical, Baker International and Dun & Bradstreet until there can be a test of their commitments to support the Sullivan Principles for workplace equality and reform. Purchases of stock in 150 other companies, operating in South Africa without signing the Sullivan Principles, have been barred.

Questions inevitably will be raised about the committee’s policy regarding banks, which seems to impose a different standard--one of total sanctions rather than the use of selective sanctions. Banks in effect are being asked to ban all loans to all interests in South Africa. The wisdom of this must be judged by the regents against the alternative of permitting loans that support those actively seeking change. Nevertheless, the committee has been successful in negotiating the acceptance of its policy by 18 of the 21 banks with which the university does business.

The committee has also won a long-overdue reform from the regents themselves. Efforts of the committee to use the proxy power of the university had been stymied because half the regents had left standing orders to support corporate managements in all proxy disputes. Now all but 4 of the 29 regents have withdrawn those restrictive instructions, freeing the regents to address critical issues arising through proxy controversies on a case-by-case basis.

Many of the student leaders in the UC system remain skeptical of the regents’ selective divestiture program, suspecting that it masks inaction. Student demonstrations have supported a program of outright divestiture of all university funds in any company doing business in South Africa, along the lines now supported by Deukmejian and Bradley. That may yet prove to be the only appropriate course. But the first year of work by the advisory committee seems to demonstrate the usefulness of further testing of the policy of selective sanctions. The real tests lie ahead, however. Will the regents support the committee effort to push major corporations, such as IBM, into stronger anti-apartheid actions? Will the regents heed the committee’s recommendations on specific challenges at stockholder meetings? Will the university go beyond a freeze on deposits to withdraw funds from the banks found not in conformity with committee standards?

UC is not alone. Most American colleges and universities are acting to register their abhorrence of apartheid. But the Investor Responsibility Research Center’s latest report notes that the $410 million in divestitures ordered thus far by campus policy-makers represents only 1.2% of their total holdings in companies doing business in South Africa. A lot of leverage remains to be used.