Pension Unit Will Not Cut Firms Linked to S. Africa
Officials who oversee the county’s $625-million pension fund for public employees say they will not divest the fund’s portfolio of $72.3 million in mostly blue chip securities of firms that do business with South Africa unless the economy there worsens significantly.
The county Retirement Board, which administers the fund, recently obtained a written legal opinion that advised against divestiture.
Board of Supervisors Chairman Thomas F. Riley, who is also chairman of the nine-member Retirement Board, said that in the opinion, written in June, Deputy County Counsel Donald H. Rubin concluded that divestiture is risky because of state laws that require pension fund trustees to act in a “prudent manner” in carrying out their fiduciary duty to protect the interests of fund participants.
Citing lawyer-client confidentiality, officials refused to make public Rubin’s written opinion. However, Riley said the document warned of a risk of lawsuits against the board.
The board, whose members are elected by agency employees or appointed, administers the pensions for 14,000 active public workers and 3,800 retired persons for the County of Orange, the UCI Medical Center, the City of San Juan Capistrano, the Orange County Transit District, the Orange County Law Library and several special service and sanitation districts.
“I don’t expect the issue (the legal opinion) to be discussed again in the near future,” said Tom Bogdan, Retirement Board administrator. “But if the situation in South Africa gets a lot worse, that could provide us with an economic rather than a social policy reason for deciding to divest.”
Investments Shifted
Meanwhile, the board has quietly shifted investments away from securities involving firms that have not signed the so-called Sullivan principles on South Africa. The principles bar discrimination in hiring, promotions, training and company-owned recreational facilities.
A comparison by The Times of retirement board investments in 19 firms that do business in South Africa with a list of Sullivan signatories shows that 17 are included. However, officials cautioned that some signatories have not honored their commitments. They declined to name those companies.
Bogdan and other board members declined to discuss the reasons for the shift in investments or when the change actually occurred. But the emphasis on firms that have signed the Sullivan principles “is not just a coincidence,” according to Charles Street of Kidder Peabody & Co., an investment brokerage firm that has occasionally handled county pension fund transactions. “Early on, the Orange County board saw that it would not be financially prudent to invest in firms that don’t have a vision of the future for South Africa that is based on a sound approach to human rights,” Street said.
The City of Los Angeles and Alameda County recently approved divestiture, with the Los Angeles City Council scheduled to vote on a specific plan for carrying out the policy Tuesday. In June, the University of California Board of Regents, the target of protests favoring divestiture, voted to conduct a case-by-case review of its stockholdings. Also in June, legislative negotiators in Sacramento approved measures that would prohibit new pension fund investments after Jan.1 in firms that do business with South Africa.
Proponents of divestiture argue that it is a valid strategy for pressuring the South African government to end its policy of apartheid. Critics of divestiture insist that it would hurt South African blacks economically and that pension funds could be adversely affected by investment decisions based on politics instead of fiduciary responsibility.
Little Debate in County
However, little of the debate over divestiture has spilled into Orange County. Labor unions and college students have protested Irvine-based Fluor Corp.’s business activities in South Africa and there have been anti-apartheid demonstrations at UC Irvine and Cal State Fullerton but no group has specifically asked the county Retirement Board to approve divestiture, according to Bogdan.
County Democratic Chairman Bruce Sumner said Friday that the county Democratic Central Committee has not taken up the matter, and county Republican officials actively support President Reagan’s policy of “constructive engagement” toward South Africa, which involves diplomatic moves aimed at easing apartheid instead of economic sanctions.
Sumner said the county’s conservative bent may help explain why divestiture has not been a big controversy but added that a sophisticated realization that there are significant legal and financial risks involved also may be a factor.
“You might adopt a policy of not buying South African-related investments when the price is depressed even though they could be bargain-priced,” Sumner said. “But selling at a time when you could lose your shirt or not be able to find appropriate substitute investments is a different matter.”
Sumner, a Newport Beach lawyer, bankruptcy trustee and former Superior Court judge, said there’s no unanimity even among the county’s most liberal Democrats, who would be expected to favor divestiture. “It’s just not a simple issue,” he said.
The legal opinion issued by the county counsel’s office and cited by the Retirement Board recently was prompted partly by Riley after he received a May 31 letter from Webster Guillory, one of County Assessor Brad Jacobs’ top aides.
Guillory, who is president of the National Organization of Black Officials, said that for nine months he has been trying to persuade people ranging from Riley to U.S. Secretary of State George E. Shultz that it’s time to impose strict economic sanctions.
Guillory said his letter to Riley was aimed at having the Board of Supervisors review all financial transactions, such as the board’s recent decision to award a $34-million contract for data processing services and computers to Martin Marietta, a company that does business in South Africa.
Asked if he had received any response to his May 31 letter, Guillory said:
“Are you kidding? Of course not. They just ignored me.”
Riley said he thought that Guillory had been contacted about the county counsel’s opinion. “That opinion is all we’re going to do. That takes care of the issue,” Riley said.
NAACP Action
James Colquitt a Santa Ana businessman and regional director of the National Assn. for the Advancement of Colored People, said his organization’s national staff has issued a broad appeal on behalf of divestiture. But he said local NAACP chapters are taking a low profile, researching which firms have holdings in South Africa.
Colquitt said: “Stronger action may come later. First we have to survey the territory. Besides, Orange County is a difficult place to do this in. You know? Some people here may not want to address the issue. If this was L.A., why, we’d have no problem.”
Meanwhile, several lists of firms that do business in South Africa are being circulated by a variety of groups throughout the United States. One such organization, the Washington-based Investors Responsibility Research Center, publishes a list that includes 19 firms in which pension funds administered by the county Retirement Board are invested. The cost of the total investment in the 19 companies totaled about $66.8 million and the market value was about $72.3 million as of June 30.
The firms are:
Mobil Corp., General Motors Acceptance Corp., Bank of America, American Cyanamid Co., Borden Inc., Bristol Myers Co., Colgate Palmolive Co., Eastman Kodak Co., Eaton Corp., Engelhard Corp., Exxon Corp., General Electric Co., International Business Machines Corp., Merck & Co. Inc., Monsanto Co. Parker Hannifin Corp., SmithKline Beckman Corp., Warner Lambert Co., and Westinghouse Electric Corp.
SmithKline and Parker Hannifin are Orange County-based companies.
