The Santa Monica City Council unanimously approved a divestiture policy that will prevent the city from investing in banks and companies doing business with South Africa but will have little immediate impact on the city’s total investments of $90.1 million.
The staff said the plan is designed to discourage financial institutions and companies from doing business in South Africa and encourage those that are withdrawing financial support of South Africa because of that country’s policy of apartheid.
The city will withdraw $128,000 in investments from companies with operations in South Africa that have not signed the Sullivan Principles, a code requiring companies to practice fair employment and work to end racial discrimination.
The city has also reinvested a $1-million banker’s acceptance, a draft financing the export or import of goods. City officials said they could not determine whether the note was connected with the government of South Africa.
Agreement With Banks
The city will continue to invest in three banks that have made loans to the government of South Africa or the country’s private sector. But the banks have adopted policies opposing apartheid and assured the city that they are in the process of terminating the loans.
Santa Monica joins a growing list of cities, states and universities using divestiture to condemn apartheid. In California, San Francisco, Santa Cruz, Oakland, Berkeley, Davis, Cotati and Inglewood have adopted similar policies.
In May the council asked the city staff to develop a policy for divestiture and to determine whether the city’s finances would be damaged. The staff reviewed the investments during the past four months and concluded that the city could adopt a policy that would not harm it financially.
Councilman James P. Conn, who initiated the city’s divestiture policy, expressed concerns about relying on the Sullivan Principles to guide investments in American corporations. The principles were drafted in 1977 by the Rev. Leon Sullivan, first black director of General Motors Corp.
“The (principles) simply do not challenge the legal structure upon which South Africa is based,” Conn said.
Warning of Problem
Finance Director Michael Dennis said that nearly all Fortune 500 companies have operations in South Africa and that if the city refused to invest in all of those companies the city’s financial security could be jeopardized.
The council decided to adopt the recommended policy and strengthen it later. Conn said that “what we are doing is adding another straw to a pile that has been piling up throughout the country.”
And Councilman Dennis Zane said that the divestiture movement shows that it is possible for cities to “put together a policy” that will have a cumulative impact, like “straws on a pile or voices in a choir.”
Councilman David G. Epstein expressed concern about the policy, saying there are other governments that are “more tyrannical with respect to their own people.” But he said South Africa is “the only country that deprives citizens of rights as a matter of law,” and he voted for the proposed policy.
The Santa Monica policy prevents the city from investing in:
- Companies with operations or direct investments in South Africa, unless the company has signed the Sullivan Principles.
- Banks and financial institutions making loans to the government of South Africa. But the city will continue to do business with banks in the process of terminating loans with South Africa if the banks have adopted a policy opposing apartheid.
- Banks and financial institutions that make loans to the private sector in South Africa unless the financial institution has adopted a policy opposing apartheid and invests in companies working to benefit South Africans of all races.
- Banker’s acceptances that are connected with the government of South Africa.
As a result of the policies, the city allowed the $1-million banker’s acceptance to mature in August and reinvested the money. The $128,000, which is in the city’s $1.9-million Cemetery Perpetual Care Trust Fund, was invested in three companies doing business with operations in South Africa that have not signed the Sullivan Principles. The city will withdraw investments in those three firms, Boeing Corp., Dun & Bradstreet Corp. and Times Mirror Co., which publishes the Los Angeles Times.
Stronger Ban Loses
The staff had considered divesting funds in all companies doing business in South Africa, which would have resulted in divestiture of $367,000. But the staff concluded that this would penalize companies that have taken “affirmative steps” to promote equality and could harm the city’s investment security.
The staff also rejected a policy of divesting all funds in financial institutions with loans to the government or private sector of South Africa.
The city has $8.2 million invested with Bank of America. The bank made a loan to the government of South Africa in 1981 but is in the process of terminating the loan.
The city also has investments with three banks that have made loans to South African companies: Security Pacific National Bank, First Interstate Bank and Bank of America. According to the city staff, these banks are in the process of terminating the loans.
However, if the banks do not, the city will have to reinvest the funds under the new policy, the staff said.