The View From the Outside...

For the first time in its 10 and one-half year history, the Advisory Committee on shareholder Responsibility (ACSR) this spring voted on a recommendation advising the Corporation to divest itself from stock in all companies doing business in South Africa. The resolution did not pass--it failed by a six to six tie vote--but the mere fact that the ACSR came close to passing so sweeping a recommendation demonstrates how far the committee has evolved in its 11 year history.

The ACSR was an outgrowth of the turmoil of the late 1960s, and early 1970s. In the early 1970s, the University was confronted with the question of how to vote on the increasing number of shareholder resolutions that were introduced in companies in which Harvard had large stock holdings. To deal with this spate of resolutions, President Bok established the ACSR in 1972. Its stated purpose was to examine each proxy resolution presented to shareholders of companies in which Harvard has holdings, and advise the Corporation how Harvard should cast its vote.

At the same time, Bok also established a separate Corporate Committee on Shareholder Responsibility (CCSR). The CCSR was to receive the recommendations of the ACSR, and then use them to decide how Harvard would vote.

While the ACSR has recently been linked in many minds with the issue of South Africa, last year's University financial report notes that the ACSR began by investigating shareholder resolutions about" consumer and environmental protection."

The ACSR was also designed to serve as a conduit between concerned members of the community and the Corporation. As Bok said at the time, "I look to the Advisory Committee as a link with different interested segments who can develop useful information and advice on forthcoming shareholder resolutions and other important issues of shareholder "responsibility." The ACSR began this task in earnest, investigating a wide range of ethical issues. ACSR members have traditionally spent much of their time writing to companies to inquire about their business practices, and sounding out interested individuals and organizations about their opinions of various companies.

But somewhere along the way, the ACSR began to stray from this original task of making recommendations on proxy votes on a case-by-case basis. Discussing specific examples has logically drawn the ACSR into attempts to form broader policy statements that would help set out consistent ground rules the University would use to guide its votes. In large part, these guidelines represent the ACSR's attempt to keep its recommendations consistent from year to year.

This consistency has proven to be particularly difficult to achieve because of the rapid turnover in membership on the ACSR. The Committee consists of 12 members; four alumni, four Faculty, and four students. Each serves for a two-year term, and many members insist that it takes a full year just to learn how the Harvard portfolio operates. This year, for example, seven of the 14 members will be leaving. Noel McGinn, a lecturer at the Graduate School of Education who is one of the outgoing members, says that this constant turnover prevents the ACSR from passing on a coherent policy on investment from year to year.

Yet of all the issues that come up before the ACSR, the question of how to handle Harvard's stock in companies having business in South Africa has particularly led the ACSR to make sweeping policy recommendations. The Committee made its first statement on the subject in 1978. This was a relatively specific recommendation that Harvard check that the companies it invests in abide by the Sullivan Principles, which set forth suggested minimum wage and labor standards for U.S. companies operating in South Africa. President Bok issued a policy statement that year agreeing with the ACSR recommendation, and stating that the University would divest from companies that fail to meet the minimum requirement of the Sullivan Principles. Nevertheless, to this day the University has not yet divested from any company on these grounds.

The debate over the Sullivan Principles raged again this year when members of the ACSR learned that the Corporation had invested in companies without checking if they had signed the Sullivan Principles. Concern over the University's commitment to its previously expressed policy was compounded soon thereafter by a public statement by Hugh Calkins '45, chairman of the Corporation Committee on Shareholder Responsibility. Calkins said that it simply was not financially feasible for the Corporation to investigate a company's practices until after Harvard had already invested in the company.

Confronted with this statement, members of the ACSR attempted to formulate new resolutions that would somehow ensure that the University did not end up purchasing stock in companies that do not meet minimum standards of conduct in their South African operations. Committee members unanimously supported a recommendation advising the Corporation to prescreen all companies. The ACSR also recommended that the University use the Sullivan Principles as the bare minimum requirement for investing in a company, and that it sell its stock in any company that fails to meet these minimum standards. This term's actions culminated with the unprecedented six to six vote on a recommendation asking the Corporation to divest from all companies doing business in South Africa, whether or not they subscribe to the Sullivan Principles.

In response to this recent spate of ACSR votes, Calkins announced late last month that the Corporation would begin investigating the possibilities of prescreening companies. Earlier in the spring, however, Bok reaffirmed his 1978 South African statement that Harvard does not consider divestiture an effective way of expressing disapproval of the apartheid regime.

ACSR members had varying reaction to Calkins's statement. Alumni member George M. Dallas '56 says he is pleased with the Corporation's willingness to consider changing its current policy, adding that the ACSR should now wait to hear what the Corporation decides before resuming a discussion of the South Africa question. But Jonathan Cedarbaum '83, this year's undergraduate member, says that Calkins's statement merely shows how wide the gap is "between the Corporation's rhetoric and both its actual concern and practice" for the plight of Black South Africans. His term on the ACSR revealed to him, he says, that issues of shareholder responsibility are "merely inconveniences that have to be taken care of" for the Corporation, "rather than pressing matters that one should feel obliged to act on." Cedarbaum is not optimistic that the Corporation will actually agree to begin pre-screening companies.

More than any other point in its history, members of the ACSR now seem to sharply differ with the Corporation on how it can be most effective. All the committee members say that the ACSR has been most useful when it has made broad policy statements. Yet Calkins says that while these broad statements are valuable contributions to the general discussion, recommendations on individual shareholder resolutions should continue to be the ACSR's major charge.

Ironically, the greatest debate the ACSR seems likely to enter into in the next year will not center on any particular issue, such as South Africa, but rather this broader question of just what the ACSR's role should be. The Harvard Board of Overseers formed a special ad hoc committee last December to begin examining the development of Harvard's investment-monitoring apparatus. Roderick Park '53, chairman of the seven-member committee, says that his group has been meeting with members of the ACSR, the Corporation, and others, and will issue a report this December on the status of Harvard's investment policy.

Park says that if the University decided that the ACSR really does function best by making recommendations on a case-by-case basis, it should consider developing a second body specifically charged with discussing the broader issues of investment policy. This is a suggestion that has not been publicly made before, and members of the ACSR say that it would needlessly remove from them a task they are now performing well Walter J. Salmon, the ACSR's outgoing chairman, says that the ACSR no longer needs to continually treat the same recurring issues one case at a time, but would better accomplish its goals with broad policy statements.

The Corporation's record of accepting the ACSR's recommendations on specific investment issues has only been spotty at best. It now seems possible that it may overrule the ACSR's most personal recommendation of all: that it be permitted to continue to make broad policy recommendations.