Governor Shifts Stand, Calls for Full Divestiture

In a major shift, Gov. George Deukmejian on Wednesday proposed that state government and the University of California take steps to fully divest themselves of investments in companies doing business in South Africa.

Deukmejian cited escalating bloodshed over South Africa’s system of apartheid and the failure of the minority white-run government of Pretoria to “dismantle” racial segregation.

“California cannot ignore the deteriorating situation in that country,” he told fellow UC regents in a letter. “We must not turn our backs on black South Africans at this moment of great crisis.”

Toughening Position

Deukmejian, apparently seeking to make tougher his position on South Africa in his gubernatorial election contest with Democratic Mayor Tom Bradley of Los Angeles, made the letter public two days before the regents are scheduled to review UC’s year-old policy on dealing with companies that do business with South Africa.

The Republican governor last year vetoed divestiture legislation sponsored by the Democrats, and Bradley on Wednesday immediately accused Deukmejian of following his and the Los Angeles City Council’s lead on the matter. The Los Angeles program, adopted last August, ordered withdrawal of city deposits from banks doing business with South Africa and recommended that $4 billion in pension funds be purged over five years of stocks in companies with connections to South Africa.

“It is clear that George Deukmejian is no leader on this issue and not a very good follower,” Bradley said. “If he was truly interested in following the lead of Los Angeles, he also would have called for an immediate end to the state’s contracting with firms that do business in South Africa.”

Bradley had laid the groundwork for a possible confrontation with Deukmejian, when he disclosed earlier that he planned to appear before the regents on Friday to urge them to immediately abandon UC holdings in businesses with South African connections. He said Wednesday that despite Deukmejian’s switch, he still intends to testify.

The divestiture procedure offered by the governor involves two basic steps. First, Deukmejian said, he will propose to the regents and to the Legislature that the state and the University of California divest themselves of all stock and bond holdings “in any business enterprise or bank that increases its operations or facilities or makes any new investments in South Africa.”

Second, he proposed that every business or bank with operations in South Africa be told that one year from enactment of his policy, the university and the state government would each proceed to “divest fully” of investments in enterprises “which have chosen to remain in South Africa.” The process, he said, should take “no more than three years once the 12-month grace period has expired.”

Case-by-Case Review

Current UC policy, which has drawn heavy criticism from Democrats, activist students and educators, basically calls for a case-by-case review of companies in the University of California’s investment portfolio and a determination of how forcefully they promote racial equality in South Africa. Until recently, Deukmejian was a major defender of the UC policy and had issued a similar executive order covering investments of public employee pension funds by state agencies.

Under the policy, the university has divested itself of $12.3 million worth of bonds issued by only one company, Eaton Corp. of Cleveland. The governor said additional purchases of stock in five companies by the Public Employees Retirement Board have been suspended, because the companies did not meet his executive order guidelines for good “corporate citizenship” in South Africa.

The UC portfolio of investments in companies doing business in South Africa totals $2.4 billion. The state Public Employees Retirement System held investments worth $3.9 billion in companies doing business with South Africa at the end of 1985, and the State Teachers Retirement System’s holdings in companies with South African ties were estimated by a spokesman at $2.6 billion.

Deukmejian told the regents that the case-by-case policy adopted last year was intended as a warning to the South African government to break up its system of racial discrimination against blacks and Asians and to give Pretoria “the chance to make serious progress, before exercising the option of total divestment.”

‘Ignored Our Warning’

But, he said, “regrettably, the leaders of that country have ignored our warning, as well as the cries of virtually the entire Free World to end apartheid and guarantee basic human rights to the South African majority.

“Given the extent of the violence and unrest in South Africa at the present time, I believe that we have sufficient economic justification to question the soundness of California’s investment in any enterprise which would embark on new investments in that country,” he said.

“I also believe,” he told the regents, “that we have cause to question the business judgment of any company that has not begun plans for an expeditious departure.”

He said his proposed policy of “phased full divestment” would enable “our investment managers the time and flexibility to find alternative investments of comparable financial worthiness.”

UC President David Gardner, an architect of the university’s company-by-company review policy, described Deukmejian’s proposal as “sudden and unexpected.” He said he had expected the university’s South African investment policy to be merely “on the agenda for discussion” at the regents meeting that begins today in Santa Cruz.

Although a handful of regents are strongly in favor of full divestiture and an equal number are adamantly opposed, the majority of board members are caught in the middle. While they seem to want to be responsive to social and humanitarian concerns related to South Africa, they are also eager to make sound investments for the university, irrespective of political considerations.

Emergency Order Cited

Last month, Deukmejian said that when the board of regents first adopted its policy last year, he was “satisfied” with it. However, citing Pretoria’s implementation of a severe state of emergency order, he indicated that his patience was wearing thin.

In his letter, Deukmejian said he will sponsor legislation to give the regents and administrators of other pension funds indemnification from liability “that may arise as a result of the adoption” of his proposed policy.

The governor’s shift drew praise from Assembly Speaker Willie Brown (D-San Francisco), a vigorous advocate of full divestiture, who urged enactment of a bill by Assemblywoman Maxine Waters (D-Los Angeles) that would prohibit any new state investments in banks or other companies that do business in South Africa. It is pending on the Senate floor.

An assistant to Waters, whose divestiture bill was vetoed by Deukmejian last year, said, “This is what we have been wanting all along.”

Times staff writers Anne C. Roark and Janet Clayton in Los Angeles and Leo C. Wolinsky and Paul Jacobs in Sacramento contributed to this article.