Retirement Board to Again Ignore Vote : Council Urges Divestiture of S. Africa Funds

In a symbolic vote that has little practical effect, the San Diego City Council on Monday once again urged the municipal retirement board to divest itself of millions of dollars of investments in companies doing business in South Africa.

The council voted, 6-2, for divestiture, although retirement board members repeated Monday that, for financial reasons, they will ignore the request and keep their investments in companies with operations in South Africa.

The City Charter grants the board independence in making investment decisions, a provision that City Atty. John Witt said Monday does “not allow the political process to intervene.”

Sometimes Bitter Debate

Despite that charter provision, several council members and a cluster of anti-apartheid activists have been locked in a sometimes bitter philosophical debate for two years over what to do with the millions of dollars it has invested in companies active in South Africa.

As the debate dragged on, the state Legislature voted to divest $9 billion of public employees’ and teachers’ retirement funds and the UC Board of Regents voted to divest $3.1 billion in investment funds. In addition, several major corporations, including IBM and General Motors, have announced their intentions to leave the African nation, where the black majority is subjected to many restrictions based solely on race.

$43 Million Invested

Retirement board members said Monday that they have investments worth $43 million in South Africa-related companies. As of January, those companies included Avery International, Acco World, IMS International Ltd., 3M, Exxon, Mobil and Molex, according to a list from the board. In all, the board administers and invests money from a $660-million fund on behalf of 9,000 current and former city employees. Investments earn returns that average 19.7% a year, said board member Jack Savidge.

There are 13 retirement board members, 4 of whom are appointed by the council. The members serve staggered 6-year terms.

“The City of San Diego can no longer be in the forefront on the issue of divestiture,” Councilman Mike Gotch lamented Monday. “You see, that leadership opportunity has been seized from us by large corporations and by other governments.

“So the only thing we can do now is be counted in the right column. We’re not going to be out in front anymore waving the flag. . . . Virtually everybody of any consequence has beaten us to that.”

The City Council first voted in June, 1985, to encourage the retirement board to divest itself of investments in South Africa. It revived the issue last July, when board members, citing their fiduciary responsibility to city employees, refused to budge.

Since then, a second council vote to reiterate its desire for divestiture has been postponed 10 times as both sides testified in public and met in private to discuss the issue.

Cite Charter

Board members, who have denounced apartheid, have also said that the City Charter and the state Constitution leave them no alternative but to invest the funds in a way to make the most return. Changing the investment strategy to a South Africa-free portfolio may be risky, board members have said, and they could face legal action personally if they don’t maximize returns.

But backers for divestiture like Mayor Maureen O’Connor have countered that South Africa-free investments could be both socially responsible and financially sound. In an attempt to strike some kind of compromise, the Mayor’s Black Advisory Task Force met with the retirement board last month to again hash over the issues.

The results were the same. DeDe McClure, a member of the task force, told council members Monday that the retirement board was “steadfast in their position” and was acting in an “arbitrary and capricious manner.”

City employee Debra Logan said she wanted retirement funds divested from South Africa on moral grounds.

“I know there is money to be made,” she said. “There is also money to be made in drug dealing and pornography. I personally don’t want my money being used in illegal activities. In the United States, apartheid is illegal.”

Retirement board member Robert West, however, said he didn’t believe that divestiture would “bring about the end of apartheid” and maintained that the decision of investments should be made on financial data, “not on social grounds.”

Savidge, who heads the board’s retirement committee, said the council’s desires have not gone unnoticed by board members.

Large Stockholders

Although there is no move to divest, he said the board is taking a more active role as a major stockholder to tell South Africa-connected companies “that we as large shareholders don’t like what’s going on and we would like some change.”

“It sensitized us to the power we had before,” Savidge told reporters after the meeting.

Asked why it took a council vote to make the board realize it could use its voice as a major shareholder in such companies, Savidge said, “We knew it, but we didn’t exercise it.”

Rosado Wiseman, Councilman Bill Cleator’s secretary, also told council members that their “purpose is noble, but divestment is not.”

“And your self-righteous posture is a shame when you drive BMWs, Mercedes, Peugeots and other products” made by companies with ties to South Africa, she said.

Cleator, who has voted against divestiture in the past, offered a compromise that would allow city employees to choose between the current portfolio or one that is South Africa-free.

“We’ve made the statement, but we really haven’t thrown the egg in the pan,” said Cleator.

But the council ignored that plan and went on record with a second call for divestiture, with Cleator and Councilwoman Judy McCarty voting no. Councilwoman Abbe Wolfsheimer was absent.