Pension Fund Will Warn Some Firms on S. Africa

The state Public Employees Retirement System, which administers $26 billion in pension funds, will soon warn certain U.S. businesses that they must improve their corporate citizenship in South Africa or risk losing the system’s investment capital, a state official said Thursday.

Greta Marshall, investment manager for the state’s largest pension system, said she plans to report back to her board of directors next month with a plan to withdraw the system’s investments from some major corporations. This would be done on a case-by-case basis, she said, if the companies failed to promote affirmative action for blacks they employ in South Africa.

Marshall said the decision to remove such investments--starting Jan. 1, 1987--would be consistent with the board’s legal responsibilities to protect pension funds and invest them where they would earn the best return.

The board, she noted, has been studying for three months the possible withdrawal of investments from companies that do not comply with the so-called Sullivan Principles for corporate behavior in South Africa. She reported that the board adopted a divestiture policy on Wednesday, shortly after Gov. George Deukmejian announced an executive order calling on the state’s pension agencies to review investments in companies doing business in South Africa, with an eye toward selling investments in those companies that do not follow the principles.

Marshall said she believed the timing of the two events was coincidental, but Deukmejian’s press secretary, Larry Thomas, said the governor’s office knew in advance that the independent board would be “contemplating” the issue.

The order was actually signed by Deukmejian on Tuesday but made public on Wednesday.

“We sought to give them (the board) the governor’s opinion about the course of action they should take and they ended up passing a resolution that is close to. . . . the same process we suggested,” he said.

Corporations that voluntarily sign the Sullivan Principles basically pledge to strive to end segregation at the workplace, to treat black and other nonwhite workers equally with whites in employment and to increase the number of blacks in management posts.

Critics maintain, however, that the Sullivan Principles are largely window dressing and affect only a minuscule percentage of South Africans who work for U.S. companies.

James Mosman, state director of personnel administration and a member of the pension board, said the board, by setting a deadline of Jan. 1, 1987, gave certain U.S. companies more than a yearlong grace period to either sign the Sullivan Principles or, if they already have signed, to improve their standing if compliance has slipped.

Marshall said corporations that have not signed the code and in which the system has invested include General Foods Corp., Revlon Inc., Boeing Co., Dun & Bradstreet Corp., Beatrice Cos. Inc., Black & Decker Manufacturing Co., Kimberly-Clark Corp. and Air Products and Chemicals Inc.

First Companies

“The non-signatories would be the first companies that we would look at,” she said.

The employees pension system has invested about $5 billion of its $26-billion total in companies that do business in South Africa. Marshall estimated that 25% of these companies are out of compliance with the Sullivan Principles.

She said those who had signed the code but were reported out of compliance would receive a letter asking if they intended to comply and warning that the system was contemplating withdrawing its investments for non-compliance.

Marshall said the system had previously expressed concern to non-complying corporations by letter, but “this is the first time that we have said if they don’t comply what the potential consequences of that might be.”