Regents Suspend S. Africa Investing : Monthlong UC Moratorium Affects Firms That Do Business With Nation

Amid growing protests over the University of California’s financial ties to companies that do business in South Africa, the Board of Regents declared a monthlong moratorium Friday on new investments in such firms.

The board refused, however, to make a final decision on whether to sell its $2.2 billion in holdings in such companies until its next regular meeting on June 20 in San Francisco.

Announcement of the investment moratorium came at the beginning of Friday’s regents’ meeting, which was held at the Lawrence Hall of Science, an isolated fortress-like building overlooking the campus here.

Throughout the meeting, and at an earlier session Thursday, the building was surrounded by chanting anti-apartheid demonstrators demanding immediate divestment. The protesters could not be heard inside.

Regent Edward W. Carter, chairman of the board’s committee on investments, surprised the 40 to 50 protesters inside the meeting room with the moratorium disclosure, which he said was recommended by University Treasurer Herbert M. Gordon.

Financial Effect

The precise financial effect of the decision remained unclear Friday. The regents did not say how much the university might normally invest in such companies in a given month. University President David P. Gardner told reporters after the meeting that such investments vary unpredictably from month to month.

Most of the 32 board members indicated on Friday their reluctance to make a final decision on divestment until after hearing additional testimony from financial consultants and other experts.

“It is a very serious decision, one that is not to be made lightly,” said Regent Sheldon W. Andelson, a Los Angeles lawyer.

The seriousness of the decision was evidenced at Friday’s meeting by the tense nature of the discussion, which resulted in sharp questions, insults and at least one accusation of racism against a board member.

Review of Report

Before the divestment decision can be made, according to UC President Gardner, the board must look more fully at the question. That includes, he said, a review of a report from the treasurer, which is scheduled to be released June 3.

Gardner said a special meeting on the subject of South African divestment has been scheduled for June 10 at UCLA. Procedures for allowing members of the general public and representatives of interested groups to speak at that meeting are being developed, Gardner said.

A panel of experts appeared before the regents Friday, the concluding session of the two-day meeting. If the diversity of views expressed by those experts is any indication, however, the board is a long way from reaching a final decision on the divestment question.

For many board members, the decision is not easy, because it involves a substantial amount of money. The university maintains an investment portfolio worth about $5.5 billion, by far the largest of any U.S. university. Of this, according to Gardner, an estimated 40%--or about $2.2 billion--is invested in companies that have some ties with South African companies. Among them are IBM, Coca-Cola and General Motors.

One of the experts who spoke out in favor of divestment was Robert Price, associate professor of political science at UC Berkeley, who presented the regents with the history of apartheid--a rigid system of racial segregation--in South Africa. He told them that because of the size of the university’s portfolio, the board’s decision will be of “great importance” to the internal politics of South Africa.

“This obviously is not a role of your own making. But you will be playing it nonetheless,” Price said.

Carter was greeted with hisses from many in the audience when he told Price that he was “impressed” with the presentation of the history of South Africa but “quite less impressed” with Price’s conclusion that the regents’ investment policy would make any difference in that country.

Carter then asked Price for “substantiation of the rather dogmatic conclusions that you arrived at.” Regent Glenn Campbell, another conservative board member and director of the Hoover Institution at Stanford University, asked Price to name an African state that could be “followed as a model of political freedom.” Price responded angrily that Campbell’s question was “racist.”

Strong Feelings

Although some board members expressed strong feelings either for or against divestment, most admitted to being undecided or preferring a more moderate course.

It was evident this week, for example, that support was mounting for a proposal of partial divestment being pushed by Regent Stanley K. Sheinbaum of Los Angeles.

One proposal being talked about by the regents is modeled after the divestment policy of New York City and provides that investments can remain in companies that sign the so-called Sullivan Principles, which require commitment to such policies as equal employment opportunities and equal pay for all races in South Africa.

In subsequent phases of the Sullivan Plan, the companies are required to work against apartheid and to see to it that discrimination ceases to exist, at least in their organizations. If a company fails to follow any of the phases, divestment is called for.

Despite the appeal of such a middle-of-the-road approach, many regents said they were uncertain what the effect of divestment would be on South Africa.

Potential Effect

Many regents were troubled by the potential effect of divestment on the university’s own financial health.

Financial experts who testified at Friday’s hearings were able to give little concrete guidance.

There are some indications that companies without any South African ties, which tend to be smaller organizations, may provide investment returns equal to, if not better than, the large multinational companies that have South African interests. However, the financial experts seemed to agree that there remain risks involved in investing in small companies.

“They tend to go up more and go down more,” said Allen Emkin, a representative of Wilshire Associates, a firm that has analyzed South African divestiture and manages a South Africa-free portfolio for Washington, D.C.

Position Unclear

Whether the regents are legally at liberty to take such risks with the university’s investment portfolio is also unclear.

“The law is very unclear with respect to fiduciary duties . . . of the Board of Regents,” said Edward C. Halbach Jr., professor of law at Berkeley.

Gov. George Deukmejian, who attended the regents meeting, told reporters later in San Francisco that the session was “very instructive” on conditions in South Africa.

“I did not feel, however, that there was as much valuable information as I would have hoped to have received with respect to what is in the best interest of the university,” he added.

“I wouldn’t be prepared to make a decision based on the information we received thus far.”

Times staff writer Leo C. Wolinsky in San Francisco contributed to this story.