UC to Sell Investments With Links to S. Africa : $3.1 Billion in Portfolio Is Affected

The University of California Board of Regents voted Friday to sell all of the university’s $3.1 billion worth of investments in businesses that have ties to South Africa.

The plan, drafted by Gov. George Deukmejian and approved by a 13-9 vote of the board, is by far the single largest divestiture move by any public or private university in the United States, exceeding even the combined amount divested by all other U.S. colleges and universities to date.

The regents’ decision to support full divestiture, in phases over four years, came despite opposition of UC President David P. Gardner and warnings from UC Treasurer Herbert Gordon that divestiture would cost more than $100 million in commissions and other expenses.

Findings Disputed

In addition, the treasurer cited an analysis by the Boston Co., a subsidiary of American Express, concluding that had UC invested last year only in top companies that do not have ties in South Africa, its portfolio would have earned $250 million less than it did.

Several regents, including the governor, a member of the board by virtue of his office, disputed those findings, saying other reputable analyses show that “South Africa-free investments” can be as profitable as unrestricted investments.

David Hoffman, a student regent from UCLA, added that the university ought to be raising questions about the business acumen of companies that are working in a nation that he said was close to economic collapse.

Many regents, however, admitted privately that they did not know whether divestiture is a sound fiscal policy, but believed it was necessary on moral grounds.

Last year, with the help of Deukmejian, the regents defeated a policy put forth by Assembly Speaker Willie Brown (D-San Francisco), a member of the board, that also would have called for complete divestiture.

Reason for Change of Heart

This year, however, the regents approved the policy despite Brown’s absence from the meeting and the absence of another of the most outspoken advocates of divestiture, Los Angeles businessman Stanley Sheinbaum.

Deukmejian explained the reason for his change of heart this way:

“The imposition of a state of emergency . . . 3,000 arrests without any due process . . . the escalation of violence and death” in South Africa--all lead to the conclusion that a policy appropriate a year ago is no longer sufficient today.

Los Angeles Mayor Tom Bradley, Deukmejian’s Democratic opponent in the Nov. 4 gubernatorial election, appeared at Friday’s meeting to urge adoption of an even more drastic divestiture policy, one that would “begin immediately and be completed as soon as possible.”

Bradley also called on the university to stop contracting for goods and services with companies that have South African ties.

Although Bradley’s plan was at first put on the table for a vote by Los Angeles attorney Sheldon Andelson, it was later withdrawn when the university’s general counsel, Jim Holst, ruled that it was out of order and would have to be brought up at a later meeting.

The discussion that preceded the vote was generally restrained and polite. The vote, itself, however, marked a breakdown in a conservative compromise forged last year by Gardner. Gardner’s plan, which has been in effect since last June, was to review on a case-by-case basis the policies of companies in the UC portfolio that have operations in south Africa.

Some Purchases Stopped

An investment committee, chaired by UCLA Chancellor Charles E. Young, has made recommendations causing the regents to stop buying stock in three companies and to sell bonds it held in a fourth.

Recently, the committee has also worked aggressively with banks to ensure that those in which the university places its funds no longer make loans in South Africa.

Gardner said he voted against Deukmejian’s plan because he was not convinced that U.S. divestiture policies would have any persuasive effect on the South African government.

He emphasized that relations between him and the governor will not be strained by their differences over this issue--a sentiment echoed by Deukmejian.

“I have had discussions with President Gardner,” Deukmejian said at a press conference after the regents’ meeting.

“The differences in our votes will not in any way affect our relationship, which is a very good, very strong relationship. . . . Men and women of good will can differ on this issue.”

Details to Be Worked Out

Details of how the governor’s plan will be implemented are yet to be worked out. In general, it calls for a one-year grace period for corporations in which the university has invested to respond to the university’s new policy. After that, stock in companies that continue to do business in South Africa will be sold over a three-year period in a manner and at a time that are most financially advantageous to the university.

UC Treasurer Gordon said he will do his “best” to see that the university does not lose money from its $9.6-billion portfolio because of the change in policy.

He warned, however, that many of the largest and most profitable U.S. corporations have dealings in South Africa.

“This restricts us,” Gordon said of the divestiture vote. The new policy, he said, would bar investments by the university in 24 of the 50 largest U.S. corporations.

In voting against the plan, Edward Carter, founder of Carter Hawley Hale Stores and the longest-serving member of the board, voiced grave concern that the regents will be individually liable for abandoning their “fiduciary responsibilities”--their legal obligation as regents to seek the maximum possible financial benefit from the university’s investments.

Part of the governor’s plan, however, is based on the assumption that the Legislature will relieve the regents of any liability should any investment losses be directly attributable to the new divestiture policy. About 100 students representing several UC campuses applauded and booed as they listened to the meeting on speakers outside the board room.

The outcome of the vote drew a standing ovation from about a score of students who had been allowed into the meeting room. About 100 more students listening to the meeting on speakers outside the board room hugged one another and chanted, “Freedom for South Africa” and “We did it.”

Thabo Moeti, 34, a South African who is a graduate student in biology at UC Santa Cruz, said he hopes that the vote will prompt other U.S. organizations to divest.

‘Another Nail in the Coffin’

“It (the board’s action) is another nail in the coffin, but not the main nail, or the last one,” Moeti said.

Carolyn Ferstman, 25, a UCLA law school graduate and a member of UCLA Alumni for Divestment, said she thinks Deukmejian’s and the regents’ policy is a direct result of continual student protest.

“I don’t think Deukmejian would have come up with his own divestment plan without student protest,” Ferstman said.

Times staff writers Janet Clayton and Mariann Hansen contributed to this article.