Divestiture: 2 Regents Urged to Sit Out Debate
The Fair Political Practices Commission voted Monday to advise two University of California regents to disqualify themselves from participating in deliberations on divestiture that could affect their personal investments in stocks linked to South Africa.
Dan Stanford, chairman of the political watchdog commission, said the advice may also apply to Gov. George Deukmejian and to three other regents who have reported substantial interests in firms doing business in South Africa.
The 28-member Board of Regents is scheduled to decide Friday whether to sell $2.4 billion in investments in 33 companies that do business in South Africa.
Divestiture of the university’s stocks, purchased with pension funds, has been proposed by some regents as a method of protesting the minority white-ruled nation’s policy of apartheid.
Eight Own Stock
The question of conflict of interest arose because a total of eight regents have reported owning stock in some of the same companies that UC has invested in.
Whether they have a conflict, the FPPC ruled, hinges on whether their vote would have a material effect on the value of their own holdings.
Four of the regents, William J. Milliken, Robert N. Noyce, Joseph A. Moore and UC President David P. Gardner asked the FPPC for advice on whether they should disqualify themselves because of the potential conflict.
By a vote of 3 to 0, the commission found that the holdings of Noyce and Milliken are large enough to present a conflict of interest if they were to vote on a plan to sell off UC stock within a specific time frame.
IBM Stock Owned
Noyce owns more than $100,000 worth of IBM stock and Milliken owns more than $230,000 worth of stock in five firms that do business in South Africa.
But the FPPC also ruled that those regents would have no conflict if the divestiture question could be framed in such a way that it would not affect the value of their stock.
One such alternative would be a proposal to sell off the South Africa-related stock without any time limit. Another alternative would be to vote separately on each of the 33 stocks, so that Noyce and Milliken could vote on all of the stocks except those that they have an interest in.
The advice from the agency is not binding on Noyce and Milliken. However, any regent who casts a vote that affects a personal investment could be subject to a $2,000 administrative fine by the commission or civil or criminal action.
“It is the advice of the commission,” Stanford said, “that individual members of the Board of Regents should disqualify themselves from divestment decisions which materially affect the price of stock they individually hold. But they are not required to disqualify themselves from decisions which will not materially affect their individual stock holdings.”
At the same time, the FPPC found that Gardner would have no conflict because his ownership of 24 shares of IBM stock represents a holding that is too small to be affected. The FPPC also found that Moore would have no conflict because his stock holdings linked to South Africa are in a trust fund beyond his control.
The FPPC ruled only on these four cases because they received no request for advice from the other four regents with substantial South Africa-related investments: Deukmejian, former U.S. Atty. Gen. William French Smith, Edward Carter and Stanley Sheinbaum.
Governor Hasn’t Decided
“I think it is likely that the other regents who have not asked for advice will look to the advice that is issued and follow suit,” Stanford said after the meeting.
Larry Thomas, Deukmejian’s press secretary, said the governor has not decided what action he will take in light of the commission ruling.
“Obviously we’ll review the opinion and take it into consideration before the governor votes or participates in the debate,” Thomas said.
The commission ruling contradicts the advice of the UC regents’ own attorney, who said there would be no conflict.
Representatives of the university argued strenuously before the commission that the regents would face no conflict under the law and that divestment would not affect their personal stock holdings.