UC and South Africa

President David P. Gardner has guided the University of California Regents to a constructive and useful decision in response to appeals for action against the racism of South Africa. The new policy embraces selective investment and divestiture, based on the way companies behave in South Africa--a formula that makes the most of whatever possibility there may be that outside interests can end the tyranny of apartheid.

The course of action laid out by Gardner drew strong criticism from those who wanted immediate action to reflect the almost universal condemnation of the blatant abuse of the black majority in South Africa. In the long run those critics may prevail. Events may show that there is no alternative to their prescription to cut and run, to break economic ties. But we think that Gardner was right in arguing that a purge of all stocks held by the university at this time in companies doing business in South Africa “would surely not end apartheid nor, in my opinion, improve the well-being of non-white South Africans.” The policy that he proposed, on the contrary, enhances the opportunity of the regents to influence events, not just deplore them.

This will be done with the help of a new University Advisory Committee for Investor Responsibility, a committee that will monitor the quality of corporate citizenship in South Africa against the standards already in place through the so-called Sullivan Principles. Beyond that, the committee will mobilize the university to exercise the stockholder authority of its vast financial holdings to promote good corporate citizenship in all companies in which the university has investments--a welcome and impressive change from the passivity of the university, and most institutional investors, in the past.

There will be no new university investments in companies that do not qualify for the two highest categories of the Sullivan Principles, and there will be divestiture of stocks in companies that fail to meet the standards should the regents judge such action as consistent with their fiduciary responsibility. Furthermore, a supplementary retirement fund, made up entirely of investments in companies without connection to South Africa, will be established for faculty and staff members wanting that option.

Some regents regret that language could not be found to mollify the most militant activists on the board. They foresee more controversy in the months ahead. But this is not a closed issue. The review of the new committee will be continuous. The resolution would have no meaning, no usefulness, unless it contributed to this process of monitoring to assure that the companies in which the university has investments are meeting appropriate standards of corporate citizenship--standards long respected in university investment policy, standards on which all stockholders should insist.