UC Says ’85 Divestiture Would Have Cost $250 Million

The University of California would have lost nearly $250 million in investment income last year had it sold its stock in companies doing business in South Africa in favor of alternative investments, according to an assessment made by the UC treasurer’s office.

Sources in the UC administration said that figure will be released to the UC Board of Regents meeting here today. The treasurer’s analysis is expected to add to the controversy surrounding a proposal made on Wednesday by Gov. George Deukmejian that the university sell all of its investments in companies that have ties to the government of South Africa.

Citing escalating bloodshed over South Africa’s system of apartheid, the governor, in a sharp policy switch, called on the 26-member board to abandon its case-by-case review of South African-related investments in favor of full divestiture. He urged that state pension funds do the same.

Mixed Reaction to Report

The governor’s proposal has met mixed reaction among members of the university’s governing board. Although the board defeated a tough divestment proposal put forth one year ago by Assembly Speaker Willie Brown (D-San Francisco), the vote on Deukmejian’s plan is expected to be close. Several supporters of full divestiture, including Brown, were expected to miss today’s meeting, but several other board members, including some recent Deukmejian appointees, were expected to go along with the governor’s plan.

Of considerable concern to board members is whether they can carry out their fiduciary responsibility--their legal obligation to seek the maximum benefit to the university from its investments--if they decide to sell the university’s holdings in major corporations that have South African ties.

The treasurer’s analysis suggests that full divestiture might in fact constitute a breach of fiduciary responsibility. However, several regents who support full divestiture, but who had not yet seen the treasurer’s analysis, expressed skepticism Thursday about the validity of the treasurer’s conclusions. They said they would continue to push for a “South Africa-free portfolio” for the University of California.

Skepticism Voiced

UCLA Chancellor Charles Young, who has headed an advisory committee that is conducting a company-by-company review of about $2.4-billion worth of university investments in businesses with South African ties, said he thought that full divestiture would not achieve the ends its supporters hope.

“If we sell stock in a company, someone else will simply buy it up,” Young said. “If we continue to push companies to change their policies in South Africa and eventually to disinvest in the country themselves, we can have some impact.”

In a report to be presented to the board today, Young’s committee points out that the university has accomplished something that no other university in this country has even tried to do: It has persuaded numerous banks to bring their portfolios into conformance with a UC policy of doing business only with banks that “refuse to make or renew loans to any South African bank or corporation,” except in a specified and limited number of unusual circumstances.

Not Far Enough

The committee has made recommendations causing the regents to stop buying stocks in several companies, and to sell stock in at least one company.

Many regents, as well as students and faculty members, do not believe that such steps have gone far enough, however.

Sheldon Andelson, a Los Angeles lawyer, said he is one of many regents who strongly supports full divestiture and will vote in favor of the governor’s plan. He called the question of the regents fiduciary responsibility to maximize profits on its investments a “bugaboo issue.” There is, Andelson said, plenty of room in the governor’s proposal to sell the university stock in companies with South African ties over a long enough period of time and in such a manner that the university would not lose money.