Sullivan’s Reversal Stirs Soul-Searching at Colleges, Firms

Early last year, conservative students at picturesque Dartmouth College disturbed the peaceful atmosphere of the New Hampshire campus by swinging sledgehammers to destroy a shantytown erected by campus protesters opposed to the school’s investments in companies doing business in South Africa.

Later in the year, protesters took over a campus bell tower for nine hours, accusing the college’s administration of bowing to conservative pressure in reducing the suspensions given to the students involved in the sledgehammer attack.

The conflict was only one of scores at universities across the country as the campus anti-apartheid movement reached its peak. Dartmouth, unlike many other schools, was able to weather its demonstrations and adhered to its belief that disinvestment would do more harm than good to South African blacks.

Now, however, Dartmouth and other universities that had struggled to establish policies for investments in companies doing business in South Africa are being forced to re-evaluate their positions. They have lost a crucial supporter, whose guidelines governing the conduct of these companies had been the foundation of stands taken by schools refusing to divest.

For years, Dartmouth officials argued that the college held stock only in companies that comply with the so-called Sullivan principles--a code of “corporate social responsibility” for U.S. firms in South Africa. The principles call for U.S. firms to adopt fair employment practices for black workers to counter South Africa’s apartheid system of racial segregation.

But the architect of the principles, the Rev. Leon H. Sullivan of Philadelphia, announced in June that he was abandoning his decade-old code because the white-ruled Pretoria regime has continued to fight efforts to improve conditions for blacks. He called instead for a mass corporate exodus by March, 1988.

Sullivan’s reversal on the principles, which have been adopted as a major doctrine by more than 100 companies, has reopened the difficult issue of how universities and other U.S. investors can or should conduct business with a nation whose racist policies have drawn overwhelming criticism and economic sanctions from around the world.

Meg Voorhes, speaking for the Investor Responsibility Research Center Inc., a Washington-based group that tracks companies doing business in South Africa, said: “When the fall (term) comes, student anti-apartheid groups are going to point to the principles and say: ‘See? Not even Sullivan supports companies’ presence in South Africa. Why should we?’ ”

Indeed, the ramifications in the academic world have been swift. “We’re revisiting the whole issue this summer,” said Robert E. Field, vice president and treasurer at Dartmouth College.

Without the backing of its influential author, a Baptist minister and civil rights activist who is a member of General Motors’ board, university officials and institutional investors worry that the Sullivan principles will lose their credibility.

“Sullivan represented a coalition of civil rights leaders, universities and corporations with a unified commitment to South Africa,” said Father Richard Zang, who manages Notre Dame University’s $450-million endowment, about 10% of which is invested in companies doing business in South Africa. “Now there’s no longer that unity.”

In addition to calling for fair employment practices, the principles recommend that U.S. firms use their financial and legal resources to help black employees gain access to areas near their plants that are off limits to them under the apartheid system, including parks, schools and beaches.

At a press conference here in June, Sullivan praised American companies for creating educational programs for black workers and for promoting many to management positions. But he stuck to his 1985 promise that he would call for complete U.S. divestment unless the South African government had abolished statutory apartheid by May 31, 1987.

Most companies that have signed the principles say they will continue to comply with them despite Sullivan’s reversal.

But the consulting firm hired to rate corporations’ adherence to the code is not certain whether it will continue participating in the program that administers the principles after this year’s report. Many universities use the reports as major guidelines in their investment decisions.

“Whether it’s a university, a church, an insurance company or a pension fund, they all face the same challenge,” said Timothy Smith, executive director of the Interfaith Center on Corporate Responsibility, a New York-based coordinating center for church investors. “They have to decide what they will base their investment policies on in the future.”

Some university officials advocate full divestment from companies doing business in South Africa, a course taken in the past decade by about 60 colleges and universities, including the University of California. But many officials continue to believe that a U.S. presence there is an important catalyst for social change.

“We don’t think that getting out is necessarily going to solve the problem of apartheid,” said E. Norman Staub, chairman of Northwestern University’s investment committee.

At Dartmouth, which invests only in companies that have signed the principles and whose performances in South Africa are rated highly, the board of trustees was scheduled to meet this month to re-evaluate the basis of the school’s investment policy.

“I don’t know that we’re going to change our policy to say that we’re divesting,” Field said. “But we’re concerned that there won’t be a thorough monitoring of the companies in the future. Without that, the principles fade away. And then what do we do?”

For the past 10 years, Arthur D. Little, a consulting firm in Cambridge, Mass., has studied U.S. companies’ performance in South Africa concerning the Sullivan principles and rated them annually in categories ranging from “making good progress” to “needs to be more active.” Little--supported by funds donated by firms that adhere to the principles--has said it will complete its ratings this year but is not certain whether it will continue them after that.

However, Mobil executive Sal G. Marzullo, speaking on behalf of Industry Support Unit, an industry coalition, promised: “If Arthur D. Little doesn’t do it, some other firm will be reporting on the companies and rating their performance.”

Universities are eager to address the issue before anti-apartheid activists return to campus in the fall.

“The timing was such that most of our students had left at the time of Sullivan’s announcement (in June). But I think his call will bring considerable attention to the whole investment issue on campus this fall,” William P. Sexton, a Notre Dame vice president, said.

At Stanford University, the board of trustees voted only a few days after Sullivan’s call to require divestment from company signatories rated by Arthur D. Little in Category 3--”needs to be more active”--unless they can demonstrate stronger commitments to working against apartheid.

The board had been considering the change long before Sullivan’s announcement, said Frederick Hillier, chairman of Stanford’s commission on investment responsibility, an advisory group to the trustees. “We knew that Sullivan might actually back away from the principles,” said Hillier, a professor of operations research. “Our immediate response was to reaffirm the principles anyway. But it may well be that his announcement would lead us to take an even stronger position on disinvestment in the coming year.”

Sullivan’s reversal also could put pressure on those universities that have been criticized for citing the Sullivan principles to justify their investments in companies with operations in South Africa.

“Some universities have, in fact, hidden behind Mr. Sullivan’s broad shoulders and his principles,” said one senior university official, who asked to remain anonymous. “If nothing else, his announcement certainly put a stop to that.”