University Tackles Divestment's Nuances

This article is the last in a two-part series on the University's investment policies.

Next Monday, Harvard's Corporation Committee on Shareholder Responsibility (CCSR) will meet with its advisory board--made up of alumni, faculty and students--to discuss the future of University investment policy.

And they will be sure to discuss what has been the major issue in CCSR policy meeting--the debate over whether Harvard should divest of its $163.8 million of stock in companies with holdings in South Africa.

Yet even as the CCSR--a standing committee of Harvard's seven-member chief governing board--prepares once again to confront the lingering South Africa investment question, many Harvard officials now say that divestment in itself is no longer the main issue.

Instead, they say, companies are finding ways of technically withdrawing from South Africa while still maintaining economic ties through licensing agreements and subsidiary holdings. And they add that this issue is shaping up as the next major sticking point for large-scale investors such as Harvard, which currently has over $2.1 billion in public stock holdings.

"That's the issue that will be the big issue over the next couple of years," says Professor of Law Lance M. Liebman, who heads the Advisory Committee on Shareholder Responsibility (ACSR).

The ACSR was created in 1972 to advise theCorporation's committee on issues associated withethical investing, but has no formaldecision-making power. Since 1985, Harvard'spolicy of "selective divestment" from companiesthat do business in South Africa has remained thesame, although the University's total holdings inSouth Africa have declined about 30 percent in thelast year as a result of companies deciding ontheir own to divest.

"Everyone expected it would be over afterdivestment, but it's not," says RadcliffeTreasurer Louis R. Morrell.

Recent events nationwide have heightened theurgency of the South Africa question, according tomany associated with the University's investmentoperations. Just last week Mobil OilCorporation--which has already divested but stillretains strong economic ties throughsubsidiaries--announced that it intended to sellits remaining franchises in South Africa.

Many activists had raised concerns over Mobil'sdivestment procedure because the company chose notto negotiate with the chemical workers'union--which represents about 1200 of the oilcompany's 1500 Black employees in South Africa.

In fact, the chemical workers' union and othersaccuse Mobil of misrepresenting its divestmentfrom South Africa. They charge that the companymay have sold its plants though it retainedlicensing agreements and allowed the new owner touse the Mobil logo.

And those charges against Mobil in many waysrepresent the substance of the new debate aboutwhat--if any--economic ties should be maintainedby companies that have formally divested fromSouth Africa.

"Some companies have in effect franchised theirname; some have genuinely pulled out in a way thatprotects workers and some have not," says RobertP. Wolff '54, who is the head of an alumni groupthat has nominated pro-divestment candidates forthe Board of Overseers for the past four years.

Wolff adds, however, that Harvard-RadcliffeAlumni Against Apartheid has yet to take aposition on this new twist to the divestmentissue. "Our focus is Harvard's investment policyso we haven't taken a stand on this," he says.

In fact, the University recently adopted ageneral policy that favors total withdrawal fromSouth Africa by the companies in which it ownsstock. This stance followed the recommendations ofa joint committee of Harvard's governingboards--the Corporation and the alumni-electedBoard of Overseers.

And the new policy expresses concern about theways in which companies withdraw from SouthAfrica--an issue brought into the spotlight by theMobil announcement.

This issue is not a completely novel one forthe University's money managers, though. Forexample, Radcliffe College, which maintains itsown $80 million endowment and owns close to $1million in Mobil stock, wrote a letter to the oilcompany in May, 1988, questioning its policies,according to Morrell.

In the letter, Morrell wrote to Mobil's chiefexecutive, Allen E. Murray, asking him to adviseRadcliffe of the company's "position relative tothe sale of products directly to the [SouthAfrican] police and military." The letter saysthat "such information will enable us to determinewhether it is appropriate to continue to holdMobil in the College's portfolio."

Written to "put pressure on" Mobil, the letteryielded no concrete response from the oil company,according to Morrell. Instead, the Mobil responseexplained that the company does not directly sellcrude oil to South African and cited South Africanand cited South African security laws whichprohibit disclosure of companies that do businesswith the apartheid regime's military.

Nonetheless, Radcliffe chose to retain itsholdings in Mobil, Morrell says, despite a policyof not holding stocks in companies which dobusiness with South Africa's police or military.It is unclear whether Harvard is currentlyinvested in Mobil, although it does not appear onthe list of the University's 50 largest holdingsas of June, 1988.

But Radcliffe's uneasy acceptance of Mobil'sSouth Africa policies underscores what Universityaffiliates concede is a difficult set ofinvestment decisions.

"Here's a company [Mobil] that's doingsome-thing really bad," says Ronald A. Goodman'60, an alumni member of the ACSR. Companies suchas Mobil force the University to ask, "'ShouldHarvard stay with a company to put pressure on itor should Harvard get out?'" according to Goodman.

This new set of questions has generated adifferent type of response from those who urgedivestment from South Africa. For example, insteadof shareholder resolutions urging companies todivest of South Africa-related holdings, thesestatements are more and more often demanding anend to all economic ties with the country.

"The attention is shifting from divestment to'cut all ties' resolutions...because some[divested companies] still have a regularrelationship," says Liebman.

These resolutions, however, have polarized theACSR, a group that many characterize as an alreadydivided body. "Those questions have divided thecommittee down the middle," Liebman says.

Within the ACSR, Liebman says there are twofactions. "One side views all relationships withSouth Africa as bad," he says, while the othersees the apartheid nation as an "evolvingcountry."

Goodman, who says he supports total divestment,says that although "there isn't anybody [on theACSR] who feels that apartheid isn't anabomination," committee members have differentideas about how Harvard--as an educationalinstitution--should influence public policy.

Goodman asserts that "Harvard, having theinfluence that it has, could [make divestment] aneffective gesture on opinion in the world."

That strategy is precisely the one whichpro-divestment activists from students and alumnito South African Archbishop Desmond M. Tutu andthe Rev. Allen Boesak have urged Harvard topursue.

Liebman, though, identifies himself with thegroup urging selective divestment. "All contactwith South Africa is not evil," Liebman says,because Harvard, as a stockholder, can try toinfluence companies from within.

On the ACSR, Liebman says, the two sides are"very close to even." But the two-member CCSR"votes together" to maintain the University'spolicy of selective divestment over the completesale of stock from South Africa-related companies.

"They can do anything they want," Liebman saysof the Corporation committee.

What the Corporation has chosen to do is retainHarvard's selective divestment policy. Theofficial line on South Africa investments is thatHarvard will vote on proxy resolutions toencourage companies to divest, while refrainingselling stock in those companies should theyrefuse.

The University keeps its proxy voting policiesseparate from its investing policies, according toLiebman. "Although we'll vote in favor [of totaldivestment], we won't sell our stock," he says.

These proxy resolutions on South Africa willoccupy more than half of all those considered bythe CCSR this spring, according to the group'smid-year report.

Both Harvard and Radcliffe officials say theyhave tried to influence the apartheid governmentby influencing the South Africa-related companiesin which they own stock to actively work againstracism through progressive employer practices.

"The Harvard philosophy is to continue todivest from companies doing more harm than good[in South Africa]," Liebman says.

And Radcliffe President Matina S. Horner alsosays total divestment is not the best answer tothe apartheid problem. "If you totally divest, youturn your back on the issue," Horner says.

In trying to influence the South Africangovernment, Horner says an institution has to askitself, "'Why are you doing it' and 'Who are youtrying to speak to?'" Rather than merely making ablanket political statement through fulldivestment, Horner says universities "must educateby what we do, and not what we rant and raveabout."

Additionally, University officials say theyencourage some companies to stay in South Africaif they provide humanitarian services. Forinstance, although Harvard asked most of itscompanies with South African holdings to divest,Liebman says the University exempts drug companiesfrom this rule "on the grounds that they areneeded."

Morrell says Radcliffe has a similar policy.Out of 20 South Africa-related resolutionsconnected to withdrawal or cutting economic tiesthat Radcliffe has voted on this year, theschool's investment committee ruled against ineight cases. All instances involved drugcompanies.

But some other universities have chosen todivest completely from companies which haveholdings in South Africa. Columbia University, forinstance, "does not invest in any companies whichhave facilities in South Africa," says Roberta M.Weil, the school's vice president for investments.

Stanford University, however, maintains about$25 million worth of stocks in SouthAfrica-related companies, according to TreasurerRod Adams, while Cornell's stock ties total about$42 million.

But, Liebman says, although some schools haveofficially divested, "many remain more involvedwith the economy of South Africa than Harvard,"because of economic ties retained by companieseven after they have officially left the country.And, in fact, Weil says Columbia's divestmentpolicy "does not affect [a company's] licensing"in South Africa.

Thus, Liebman says, "the big press release isnot followed up by action."

But for all institutions--academic andotherwise--divestment has become an increasinglycomplicated issue. And, as divestment activistDamon A. Silvers '86 says, "the anti-apartheidmovement has got to increase its sophistication tomeet that of the companies [because] complicationshaven't changed the heart of the issue."Matina S. Horner