UC Halts Stock Purchases Over Firm’s S. Africa Policy

In its first formal action against companies that do business in South Africa, the University of California has halted its purchase of stock in Nalco Chemical Co. and has warned two other corporations that it will take similar action against them if they do not alter their business relationships with that country’s apartheid government.

The decision to target Nalco, based in Oak Brook, Ill., was announced at the UC Board of Regents meeting Friday at UCLA. The university said it has suspended purchase of Nalco stock and told the company it will sell its existing holdings unless the chemical firm makes changes to meet the university’s “criteria for good corporate citizenship in South Africa.”

A report to the regents indicated that as of April 30, 1985, the university owned 4% of Nalco’s stock, valued at $37 million. UC’s total investment portfolio is valued at $6.3 billion.

There was no public announcement of the identity of the two other companies warned, because the firms had not acknowledged receipt of the university’s letter. Sources on the board said, however, that the university has also sent letters of warning to Dun & Bradstreet and Baker International Corp.

UC owns more than a million shares of Dun & Bradstreet, a New York-based financial information corporation. Those shares are valued at $81 million, according to the UC treasurer’s office. Baker International is a corporation in Orange that supplies equipment and services to the petroleum and mining industries. The university owns nearly 1.8 million shares of Baker International, valued at about $28 million, the treasurer’s office said.

Many critics of South African policies were angered last June when UC regents refused to follow the lead of several other major American universities and sell stock in companies that have ties to South Africa. Instead, at the urging of UC President David P. Gardner, a committee was set up to conduct a case-by-case review of UC’s stock portfolio. The committee was to recommend to the regents possible divestiture of stock in firms that were not “good corporate citizens,” as Gardner put it.

That committee, which includes faculty members, students, administrators and alumni, has met twice and has investigated nine corporations with questionable policies, according to UCLA Chancellor Charles E. Young, committee chairman.

According to sources on the Board of Regents, the three companies singled out by the committee have been advised that they must assure the university that they adhere to the Sullivan Principles or to an equivalent corporate citizenship standard.

‘Slowly buy Firmly’

The Sullivan Principles, named after the Rev. Leon Sullivan of Philadelphia, who authored them, have been UC’s main standards in reviewing its stock holdings. They call for companies to provide equal treatment of blacks in the workplace and to support efforts to improve the overall quality of life for blacks in South Africa.

Young said the university is moving “slowly but firmly” in giving companies that fail to adhere to the Sullivan Principles a “clear warning: Either change your policies, or we will not do business with you.”

According to the university’s announcement Friday, Nalco was one of the original signatories of the Sullivan Principles in 1977. In that year, the company received a satisfactory rating for complying with the principles from Arthur D. Little Inc., a firm in Cambridge, Mass., that has conducted annual reviews of companies for the last six years. Each year since then, however, Nalco has received ratings of “needs to become more active,” the university said.

In the most recent review, the UC announcement continued, “Nalco narrowly missed a satisfactory rating, and company officials have expressed confidence in being able to attain the higher rating in the new review period in the fall of 1986.

“However, as presently rated, Nalco does not meet the university’s presumptive criteria for good corporate citizenship in South Africa.

More Evaluation

“It is the intention of the University’s investor advisory committee to monitor and evaluate Nalco’s performance in South Africa over the next reporting cycle and submit a further recommendation to the president and the committee on investments based on that evaluation.”

Meanwhile, the university will discontinue further investment in Nalco, although it will not sell its existing shares.

A Nalco official declined further comment but referred a reporter to the university’s statement that the company expects soon to return to compliance with the Sullivan Principles.

The university has yet to announce the specific complaints against the two other companies warned. According to the Investor Responsibility Research Center Inc. in Washington, neither Dun & Bradstreet nor Baker International has signed the Sullivan Principles, although officials of both firms said in interviews Friday that they have met UC’s criteria of “adhering to an equivalent standard of good corporate citizenship in that country.”

One high-ranking official at Baker International, who asked not to be identified, said the firm will probably agree “very shortly” to the Sullivan Principles because of “so much political pressure.” Officials of the company believe, however, that the firm has long been in compliance with the spirit of the Sullivan Principles, he said.

‘We Charge You’

Demonstrators protesting the university stand on divestiture disrupted Friday’s regents session and were escorted from the building in which the regents were meeting. As they were forced outside, the protesters chanted “UC Regents, you can hide. We charge you with genocide.”

Thursday night, protesters demonstrated outside a UCLA guest house where several of the regents were staying for the two-day meeting.