GMProxy Fight May Point Way To Wider Investment Questions

While Harvard may have made its final decision on the General Motors stockholders' challenge, the University's billion dollar endowment may face more serious, though perhaps less overt challenges this Spring.

There have been sporadic attempts through the last decade to challenge the Corporation's investment policy. Each has centered on a narrow perspective in the Harvard portfolio-Harvard's investment in war-related industries, its holdings in South Africa, and other minor individual investments.

The General Motors decision is basically consistent with the University's actions in other issues. George F. Bennett '33, treasurer for the College, said Monday at a special meeting with students that the GM position "represents no change from what has been done before."

NEWS ANALYSIS

Although Bennett argued that the means of challenging GM-a proxy fight-were perhaps more objectionable than the goals of the challenging stockholders, the discussion at Monday's meeting showed that there are fundamental ideological disagreements between Harvard and its challengers.

The General Motors controversy has come down to the question of how well GM is researching anti-pollution devices and complying with safety standards.

Although the Washington-based campaign has included recommendations for hiring more black employees and franchise dealers, dissenting Harvard students are attacking GM primarily on environmental grounds and Bennett has responded with a direct defense of GM's efforts.

Based on private contact with the GM management and the management's publicly announced statement, Bennett points out that GM spent $125 million on research and development in the last three years.

One of the results of their research is a anti-pollution device, marketed last week, which will reduce carbon monoxide emission by more than 50 per cent whenattached to any pre-1966 GM model car. Hydrocarbon emissions on 1970 models are also about 80 per cent lower than 1961 cars and carbon-monoxide emissions are reduced 70 per cent.

Campaign GM says, however, that there are several fallacies in GM's defense of its pollution research. First GM is committed to developing the internal combustion engine and therefore can only develop "gadgets" that will reduce air pollution. The company has done little research into alternate types of engines which might eliminate virtually all automotive air pollution. Campaign GM claims.

GM Trails Others

Secondly, GM has frailed other automotive leaders in recognizing the pollution danger and delayed unnecessarily in correcting the dangers when forced to comply with government regulations.

In regard to the GM figure of $125 million for research and development, Joel R. Kramer '69, a Campaign GM researcher, said "clearly these figures are drastically inflated." He said a GM spokesman admitted that only $60 million of this money went to a research staff of 500 working on new discoveries in that three-year period.

Nader Estimate

General Motors actual research funds therefore come to about $20 million per year according to GM statistics. Ralph Nader, automotive safety crusader, recently estimated that a more correct figure would be about $8 million.

Using GM's statistics, Kramer concluded "and $20 million per year does not compare well with the over $240 million GM spent on advertising in 1967 alone."

Bennett for GM

Bennett, at Monday's meeting with representatives of five student groups, turned down a request to vote with Campaign GM's stockholder challenge.

Campaign GM submitted nine resolutions on "social responsibility" for inclusion on GM's annual proxy statement this April. If the Securities Exchange Commission upholds GM's refusal to put the resolutions on the ballot, Campaign GM has promised to begin a proxy fight with the management next week.

Other Proxy Fights

Aside from its GM decision, Harvard faces pressure to take stands in two other proxy battles. Both involve power companies accused of polluting: the Boston Edison Company, and Commonwealth Edison of Chicago.

Of the two, the Commonwealth Edison fight has easily been the more intense. For the last few months, environmental groups in Washington and the Midwest have singled Comm Ed out as the target for a hard-hitting anti-pollution campaign.

The groups claim that CommEd-by burning high-sulfur coal in its generating plants-pours 420,000 tons of sulfur dioxide into the Chicago skies every day. When the sulfur dioxide mixes with soot and moisture in the sky, it turns into sulfuric acid, having corrosive effects on buildings and human tissue.

Low sulfur fuel would be more costly, the groups admit. But at a time when CommEd's profits are rising, its critics claim that the company can afford to make the change.

Lake Pollution

The CommEd proxy battle includes charges of water pollution as well. The company is now preparing to build a large unclear generating plant-its third-at a spot named Zion on the shore of Lake Michigan.

To draw off the intense heat of the Zion generators. CommEd will use the lake water in a cooling system. Cool water will flow in from the lake and the hot water will be dumped directly back at temperatures 18-20 degrees above normal.

Ecologist Barry Commoner claims that the temperature rise may be enough to cause a vast growth of algae and a sudden disappearance of fish.

Bennett said Monday, however, normal dispersion in the Lakes will offset this effect. He noted that all unclear generators around Lake Michigan will only raise the temperature one tenth of one per cent.

In the last 100 years, the average Great Lakes temperature has dropped two degrees. Thus, the natural drop in temperature may offset any artificial increase, Bennett said.

Universities Included

What the proxy challengers are asking is that CommEd take action on both these fronts, using low-sulfur fuel and finding a different way to cool Zion.

They will take these requests to the company's April 27 annual meeting, and they have asked stockholders-including universities-to join them. So far, three Midwestern universities have agreed to turn their proxies over to student ecology groups.

Harvard-which owns $2.759.907 worth of CommEd stock and another $4.525.000 worth of bonds-has received a similar request. At Tuesday's meeting, however. Bennett indicated that Harvard would almost certainly stay away from the proxy fight.

Boston Edison

The second pollution campaign-which is conceded to have as little chance of success as the first-involves Boston Edison. The issues are basically the same: local ecology groups claim that the company's high-sulfur fuel and uncapped smokestacks are heavy contributors to local pollution.

Harvard's holdings here are relatively small-$1.332.099 worth of common stock and $870.000 in bonds-but again, ecology groups have asked the University to turn over its proxies. In light of Harvard's GM stand, the prospect for such an action seems slim.

'Mississippi P and L'

While the environmental crusades are relatively new developments other aspects of the University's investments have been a constant sore spot over the last few years.

Harvard's ties with the Middle South Utilities, through personal and financial connections, are close. The University owns $125 million worth of Middle South stock, and another $589.812 of bounds in one of Middle South's subsidiaries, Mississippi Pewer and Light.

At the same time, Treasurer Bennett sits as a director of Middle South, and-as manager of the State Street Investment fund-oversees another block of Middle South stock almost as large as Harvard's. Even the Harvard-Yenching Institute owns 18,668 shares, worth about $400.000.

Klan

The recurring complaints against Middle South have centered on the hiring practices of Mississippi Power and Light. Several times in the last six years, student groups have claimed that the company discriminates against black workers, and that its managers include Ku Klax Klan members, Harvard has firmly denied the charges. Three years ago, President Pusey said that any discriminations should be covered by federal law. More recently, Bennett reported that his personal investigation revealed no problems.

'Serious Discrimination'

Several other groups, however-including the Mississippi Council on Human Relations, the NAACP, and the Southern Regional Council-have been conducting their own studies of the company. The U.S. Commission on Civil Rights-an independent Federal agency-also recently concluded an investigation. Commission spokesmen said yesterday that final results would not be available until next week, but that the study revealed "serious problems of discrimination."

An agent of the Southern Regional Council, who asked not to be identified, said yesterday in Atlanta that Harvard's interest in the company was fairly common knowledge among civil rights workers in the South, "I think most people realize that Miss. P and L is outside-owned, Harvard-owned," he said.

South Africa Affiliates

Although Harvard has invested nearly 40 million dollars in companies with South African affiliates or subsidiaries, the University has escaped much of the furor which swept through other Ivy colleges over such investments.

Students raised the issue once before in 1967-at the same time that students at Princeton and Yale were questioning their investments-but Harvard has not decreased its holdings since then.

When Lewis M. Finfer '72 mentionel South African investments at Monday's meeting, Bennett replied "Is that bad?"

Higher Wages

"American companies in South Africa pay higher wages, have better working conditions and tend to make native companies raise their standards," Bennett said, "and therefore they have a good effect on the country."

Bennett called the General Motors investment in South Africa "wholesome." If American companies withdraw, he said, South Africa will go bankrupt and "both black and white will go down the drain,"

David Plotke '71, a member of the November Action Coalition, countered that American firms can have little influence in affecting South African apartheid.

Lower Wages

He noted that wages formulated in conjunction with the South African government are invariably lower for blacks than whites and there is not an open market for black labor in the country.

"Perhaps the short term effect is good," Plotke said, "but in the long run, the companies support the government and reinforce its position."

Another African issue concerns Harvard's investment in oil companies operating in the Portuguese colony of Angola.

Since 1966, Gulf Oil-of which Harvard owns $25.630.751 in stocks-has been developing a rich oil field in the Cabinda area of Angoia. As part of its contract for use of the field, Gulf has agreed to pay the Portuguese government 30 per cent of all its Cabinda profits, plus a set royalty on each barrel of oil produced there.

In return for its payments, Gulf is guaranteed "protection" by the Portuguese army. The exact nature of the protection and of Gulf's payments form the heart of the controversy.

Gulf Builds Barracks

The Committee of Returned Volunteers (CRV)-a group of former Peace Corps workers-claims that Portugal is using the Gulf royalties to finance a war against Angolan rebels. CRV says that Gulf has built barracks for Portuguese soldiers, and that Gulf's $20 million annual royalties make up more than half of Portugal's budget for military operations in Angola.

An official in the State Department's West African division confirmed yesterday that Gulf's agreement requires the company to finance barracks "if necessary to guard the oil fields." He said that whatever troops and barracks might be in Cabinda "are there to protect the area, not just Gulf."

He added-as did several Harvard authorities on Africa-that there has been little military activity in the Cabinda region. Neither the State Department nor Gulf's public information officer, however, had any comment on the reported $20 million figure for the royalty payments.

During the Dow demonstrations in 1967, Harvard breathed a sigh of relief when it discovered that it owned no stock in the company holding the government napalm contract.

Public Service

Last year, Dow lost the contract bidding to other competing companies. A Dow executive explainel that the company had produced napalm with a minimal profit as a public service but last year decided the contract was not worth the trouble and bid according to regular profit scales.

United Aircraft Corp now holds a $4.3 million Department of Defense contract for producing a small portion of the DOD's napalm supply. The company produces airplanes for most major commercial airlines, but in addition does 55, per cent of its business with the Defense Department.

Unaware of the napalm contract, Harvard owns 10,229 shares of common stock worth $624.000 and another $1.5 million in United Aircraft bonds. This amount is a minute percentage of the company's total stock, having more symbolic than real value.