Regents to Review S. Africa Holdings : Plan for Full Divestiture Defeated; Panel Set Up to Study Stock Portfolio

Rejecting passionate pleas to sell the University of California’s holdings in firms linked to South Africa, a divided UC Board of Regents voted instead Friday to set up a committee to conduct a case-by-case review of its stock portfolio.

Under the compromise measure, drafted by UC President David P. Gardner, the advisory panel will judge “the quality of corporate citizenship” of U.S. firms that do business in South Africa, using as a standard policies that encourage “vigorous promotion of racial equality.”

The panel’s findings would be forwarded to Gardner for possible use in decisions on future university investments. Gardner conceded to reporters, however, that only three U.S. firms whose stock is held by the university appear to be in jeopardy of failing the “corporate citizenship” test.

The vote climaxed months of debate and student demonstrations over the university’s $2.4-billion investment in U.S. firms with operations in South Africa. It was taken as a clear defeat by advocates of divestiture, who favor sale of stock as a way to protest apartheid, South Africa’s rigid policy of racial segregation that the ruling white minority has imposed on the black majority.

Criticized by Speaker

Assembly Speaker Willie Brown, an ex-officio regent whose proposal for full divestiture over a five-year period was rejected by a 14-9 vote on Friday, called the endorsement of the Gardner plan “worse than doing nothing at all” and said the South African government “will be overjoyed.”

The plan adopted by the regents does not require the university to divest itself of any stocks and lifts the monthlong moratorium on further investment in firms that do business in the white-ruled nation.

“I am simply not persuaded that the selling of UC-held stocks . . . would accomplish much more than a change in ownership of the shares to be sold,” Gardner said in an opening statement to the regents. “It would surely not end apartheid, nor, in my opinion, improve the well-being of nonwhite South Africans.”

The advisory panel, to be made up of university officials, professors, students and alumni, will annually examine the actions of corporations in which the university has investments. However, the plan is vague about what constitutes “good corporate citizenship,” except to mention the Sullivan Principles, a voluntary code that pledges firms to work for equality in South Africa.

Only three of the 33 affected firms in the UC portfolio are not in good standing under the Sullivan guidelines, and Gardner said the new policy “might possibly” lead to divestiture of those stocks.

The Gardner plan also says the UC system will work with other universities, businesses and institutions to seek “. . . to improve the educational opportunities and the health and economic conditions of nonwhites in South Africa.” The university will also create a new retirement fund for those employees who want to invest their funds in a “South Africa-free” stock account.

In adopting the plan, the regents called South Africa’s racial policies “repugnant” and said they joined with “members of the university community in condemning the policies and practices of apartheid.”

However, Brown, Lt. Gov. Leo T. McCarthy and other supporters of divestiture said Gardner’s plan would not put the kind of pressure on South Africa needed to bring about an end to apartheid.

“We have tried everything under the sun--all this good corporate citizenship stuff--and nothing has changed in South Africa,” Brown said. “We should be able to say we no longer do business with anyone doing business with South Africa in any fashion.”

Regent John Henning, executive secretary-treasurer of the California AFL-CIO, drew attention to the fact that 24 of the 28 regents are white males.

“Can such a white body truly appreciate the agony of black South Africans?” he asked. “You are white, but before you vote, I urge you to put yourself in the position of a black South African.”

Bitter Debate

But after bitter debate, the regents rejected Brown’s full divestiture proposal, which would have begun with sale of stock in companies that do business directly with the South African government and its police apparatus.

Three regents, Robert N. Noyce, William Milliken and former U.S. Atty. Gen. William French Smith, disqualified themselves from voting on Brown’s proposal because of their ownership of stock in some of the same companies held by UC.

The regents also refused to continue the current moratorium on stock purchases for 12 months or to adopt a policy that would have required divestiture of stock in firms that lend money or sell supplies to the South African government.

Financial Concerns

Gardner’s proposal, which was formally unveiled at the meeting, drew support from regents who said they were morally opposed to apartheid but unwilling to place university pension funds--which make up the bulk of the portfolio--at financial risk by making investments on a political basis.

Vilma Martinez, a Los Angeles attorney and chairwoman of the board, said her vote for Gardner’s plan was “based on my fiduciary responsibility” to protect the employees’ pension funds, which make up the bulk of the stock holdings.

Gov. George Deukmejian, who voted against Brown’s proposal, labeled the Gardner plan a compromise and said, “I think it will send a very clear, definite signal to the government of South Africa that we abhor the fact that millions of people are denied basic human civil liberties. We can’t turn our backs on them.”

Both Deukmejian and Gardner called for a unanimous vote that would send a “strong statement” to South Africa. But the measure passed by a vote of 16 to 10 with several conservative regents joining advocates of divestiture in opposition.

‘Just Too Weak’

Regent Sheldon W. Andelson, a Los Angeles attorney who favors divestiture, said the compromise plan was “just too weak for me to support.”

“I think it says this board has not been able to come to any conclusion,” he said.

Regent Dean Watkins, chairman of the Watkins, Johnson Co., a Palo Alto electronics firm, who opposes divestiture, condemned the plan as “an unfair and unwarranted attack on American business.”

Despite the months of debate surrounding the divestiture issue, Friday’s meeting was the first time in eight years that the Board of Regents has considered the issue. In 1977, the regents rejected a proposal to divest the university’s stock in firms linked to South Africa.

In January of this year, student Regent Fred Gaines asked that the board review the university’s investment policy and student demonstrations on most of the nine UC campuses followed. In the last month, the regents have held three public hearings on the issue.

However, in contrast to the regents’ May meeting at Berkeley, where thousands of demonstrators protested, the board Friday was surrounded by more police officers than protesters.

Nevertheless, after Brown’s measure was defeated, the meeting was briefly disrupted by about 50 students who chanted slogans but were quickly cleared out by police. Three were arrested for refusing to leave the meeting room.

After the meeting, about 60 demonstrators were arrested for failing to disperse as they marched from the meeting at the UC Extension Center toward Union Square. Most were cited and released.

“We’ll be back next year and we will be even stronger,” said Mia Lawrence, 21, a UC Berkeley student, who was an organizer of a rally. “We’ve won the support of thousands and we’ve increased the awareness about apartheid in South Africa.”

Times staff writer Saul Rubin contributed to this story.