Less than a month after rejecting a divestiture plan, the managers of a pension fund for Los Angeles Department of Water and Power workers adopted a compromise policy on Wednesday aimed at limiting their South African-related investments.
The modified plan, which won approval of the retirement board, permits DWP managers to rid their $1.2-billion portfolio of $135.5 million in South African-connected investments but only if "equal investments" can be found that will not jeopardize the pension fund. The vote was 5 to 0, with two of the board's seven members absent.
The board, in an effort to comply with a citywide divestiture policy promoted by Mayor Tom Bradley and the City Council, also agreed to instruct its investment advisers to consider other alternatives to investing in companies that do business in South Africa.
"I am entirely comfortable with (the policy)," said Vincent J. Foley, president of the retirement board, who had joined employee representatives three weeks ago in spurning a divestiture policy.
With Wednesday's vote, the DWP managers joined the city's two other pension boards in adopting a program to address concerns about investing in firms with links to racially segregated South Africa. But they stopped far short of the policy adopted by the Los Angeles City Employees Retirement System and the Police and Fire Pension Commission that called for full divestiture in five years.
Foley and the other employee representatives on the DWP board, which represents the 10,500 workers covered by the pension plan, had rejected such a divestiture proposal and timetable after saying that it placed political opposition to South Africa above fiscal responsibility.
But Foley said the new plan is different.
"Basically, this is based on economics rather than social conditions," he said, adding that retaining investments in South Africa or making new ones will be made on the basis of "economic risk," not political considerations.
Under the plan, if equal alternatives to the South African investments can be found, the retirement board will opt for investing in the enterprise with no South African ties, Foley said.
"My sense is that within the next month, if the investment adviser can find alternative investments that are equal and qualify for our plan, they will recommend those and we can act," he said.
In voting for the plan, Walter Zelman, a board member who had pushed for divestiture, said he was pleased with the compromise plan. He called it "cleaner and stronger without a timetable."
"This starts right now. In some respects, we're going to see faster in this department how divestiture is working than in other departments," he said.
John Pulskamp, first vice president of the Water and Power Retired Employees Assn., whose 8,000 members are beneficiaries of the plan and whose membership has been vocal against divestiture, said he was also pleased with the compromise.
No one could say how much of the $135 million in DWP stocks and bonds in companies with South African connections might be sold under the new policy.
For example, among its investments in companies that do business in South Africa are 105,000 shares of IBM stock, currently worth $14.5 million. But Rich Goss, retirement plan manager, said it would be difficult to find a comparable stock to replace IBM.
In addition, Goss said that the board, following the advice of its investment advisers, last week purchased 100,000 shares of Chevron stock and 150,000 shares of Mobil stock at a total cost of $9.9 million. Both of those companies maintain South African ties, Goss said.
Under the new policy, the retirement board can ask its investment advisers to seek similar investments with no South African ties. But if they cannot be found--as in the case with Chevron and Mobil--those purchases in South African-related stocks and bonds could still be made, Goss said.
Deputy Mayor Tom Houston said the Bradley administration was disappointed that the policy did not go farther but said he was generally pleased.
"Our intent is to see how it works in practice . . . and if it is not making progress toward total divestiture, we'll have to do something stronger," he said.