Proposal for Divestiture Defeated by Supervisors

The Los Angeles County Board of Supervisors on Tuesday voted down a proposal calling for full divestiture of $660 million in stocks and bonds held by county pension funds in firms doing business in South Africa.

The 3-to-2 vote, reflecting a conservative-liberal split, came on a resolution by Supervisor Kenneth Hahn that would have recommended speedy divestiture to the county’s independent pension fund board.

Meanwhile, the second of three independent boards that oversee City of Los Angeles pension funds approved a limited divestiture plan.

The Los Angeles City Employees’ Retirement Systems board voted 3-1 to phase out most of its $250 million in South African investments over five years. The move followed similar action less than two weeks ago by the board of the city’s police and fire retirement system, which controls another $350 million in stocks and bonds of firms linked to South Africa.

At the county, it was unclear what effect--if any--the supervisors’ action would have on the nine-member Board of Investments, which has been studying divestiture since April but has taken no action.

In recent weeks, some investment panel members have predicted approval of some sort of limited divestiture, exempting companies that have signed the so-called Sullivan Principles of equal treatment for South African blacks.

However, the panel members--who were quick to point out that they, not the supervisors, bear responsibility for the economic health of the $5-billion fund--are reportedly deeply split on the wisdom of divestiture, and are awaiting a county counsel’s opinion on whether it would violate the panel’s fiduciary responsibility.

“This is no play thing,” said Board of Investments Chairman Norman Johnson. “We have expressed our opinion that we are totally opposed to apartheid, but likewise, we’re not there as politicians; we’re only there as trustees.”

Move Called a Protest

Hahn framed his call for divestiture as a protest against South Africa’s apartheid racial policy, and won the vote of Supervisor Ed Edelman.

However, conservative supervisors Pete Schabarum and Michael Antonovich spoke out strongly against the move, contending that divestiture would harm blacks in South Africa.

Antonovich also argued that the security of the United States could be harmed if sanctions are imposed against South Africa, an ally.

Both Schabarum and Antonovich visited South Africa within the past year as guests of that country’s government.

Supervisor Deane Dana, who joined them in voting down the motion, said that he opposes apartheid but that divestiture of current pension fund holdings is too economically risky.

Concern for ‘Unrest’

Dana offered a compromise, calling for the Board of Investments to avoid future investments in companies operating in countries “where there appears to be a degree of unrest” such as in South Africa, Lebanon and Nicaragua.

However, Hahn and Edelman joined Antonovich in opposing that approach after county Treasurer-Tax Collector Richard Dixon told the supervisors that the Board of Investments already uses political unrest as a criteria in assessing its holdings.

In another compromise attempt, Antonovich suggested that the county ask the black leaders of South Africa to negotiate with the South African government on reforms.

Hahn characterized the compromises as “pussyfooting” around divestiture and implored Dana and Antonovich to “be either for or against it.

“You won’t make any friends or enemies with a lukewarm position,” he said.

Bradley Leadership

In approving divestiture, the city employees’ retirement board followed the urging of Mayor Tom Bradley and the Los Angeles City Council.

Voting for a phased, five-year divestiture were two members--Olga Marcus and William T. Woods--appointed by the mayor, and a city employee representative, Henry W. Hurd.

Opposing it was board member Chester J. Bachry, who also represents city workers. “The city employees’ retirement system was not designed to handle the social problems of the world,” Bachry said. “It was designed to handle the social problems of city employees.”

George Zakaryan, legislative chairman of the 8,000-member Retired Los Angeles City Employees Inc., expressed similar sentiment in testimony, arguing that the board’s responsibilities do not include “making a social statement with the power of our money.”

“All we want is our money protected, according to the laws we have now, not to the whims of politicians,” Zakaryan said.

Financial Concern

However, supporters said the plan allows the flexibility necessary to postpone or otherwise alter divestiture if it poses a danger to the retirement system’s financial base.

Under the plan, pension funds will be withdrawn within 18 months from companies doing business with the South African military or other government enforcers of apartheid. Within three years, the board must divest its interest in firms that have not signed the Sullivan Principles--a voluntary code by which employers work to improve conditions of nonwhite laborers in South Africa.

In five years, the pension system will sell its interest in all countries doing business in South Africa, except for those firms engaging in activities that “substantially assist efforts to end apartheid,” the plan stated.

The city employees and police and fire boards control two of the three city pension systems and a total of $3.1 billion of the $4 billion invested by city workers.

Only the Department of Water and Power’s retirement board has yet to take up the matter. DWP spokeswoman Elizabeth Wimmer said Tuesday that the board, which has invested $139 million in South African-related firms out of its nearly $1-billion fund, has not scheduled a vote.

The DWP board is seen as the most likely of all the boards to buck Bradley’s pro-divestiture campaign, since the mayor cannot hire or fire its members.