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Report of the Committee on University Responsibility To the Trustees, with Recommendations, Concerning University Policy Relating to Investments in Companies Doing Business in

January 16, 1986

Introduction Within this context, the Trustees have been particularly concerned with the conduct of that do business in South Africa.* Ac- the events in South Africa have and held corporations During past year, captured in 1978 the Trustees endorsed the Sullivan the attention of the entire University community. One need only scan cordingly, Principles (Ap- pendix A) as an appropriate standard of corporate conduct for compa- the daily newspaper or listen to the nightly news to learn of the escalat- nies in which the University held stock and which had operations in ing violence in that nation. As resistance grows against , a matter the fundamental of the South Africa. which as of law ignores most rights a of , under nonwhite the South African has intensified its re- In 1980, the Trustees adopted policy selective majority, government in that do business in South a state of and and which companies the University's portfolio pression by declaring emergency arresting detaining Africa are to adhere to "sound of thousands of of without due As trustees, required principles corporate prac- opponents apartheid process. in all to the Sullivan we are united in our abhorrence of tices, comparable important regards Principles. apartheid. and other similar international statements of of In of the level of conflict in South Africa and the principles corporate light increasing A which fails to and abide such attention to the of the fed- practices." company adopt by princi- heightened being paid problem apartheid by be considered a candidate for divestment. The Trustees also eral that do business in South Africa, and ples may government, by corporations resolved that financial institutions in which the holds concerned members of the the Trustees University equity by University community, investments should not make new loans, renew old loans, or extend the asked the Committee on "Committee") University Responsibility (the terms of loans to the of South Africa or to state-owned cor- to review the Trustees' South Africa, re- government policy concerning particularly unless such loans which bene- to investments in that do business in that porations, support projects substantially lating University companies fit non-whites and would not be undertaken without nation, and to make recommendations as to whether that should likely foreign sup- policy Should such financial institutions fail to with this be modified. port. comply guideline, the Committee is empowered to make recommendations to In accordance with its charge, the Committee has focused on the the full Board which may include divestment of stock. question of divestment and the role of the University as a stockholder. recommenda- Two years later, the Trustees reaffirmed the 1980 policy, and author- However, while not a part of the Committee's formal in of the role of the ized the Committee to vote the University's proxies support tions, all the members ofthe Committee strongly support that in for shareholder proposals companies not engage new or expanded University as an educational institution in providing opportunities that if a at in investment in South Africa. The Trustees also recommended oppressed South Africans to study the University, cooperating has the Sullivan is ranked in the an- institutions in South Africa and in company adopted Principles, yet with appropriate educational helping Sullivan Arthur D. Little, in essential to the new nual Reports (prepared by Inc.) Category in other ways to provide the knowledge leadership 111-A Low Point 111-B Not Pass Basic in health care and other as is dis- (Received Rating); Category (Did government, professions apartheid or IV Which Did Not mantled. The Committee commends President and other Requirements); Category (Signatories Report), Hackney the Committee should to about a of members of the for their efforts to date and attempt bring change by program University community communication with the would be considered a knows that the Trustees will further efforts in management; company enthusiastically support candidate for divestment if it could not its in a reason- this direction. This is the arena in which Penn and other American uni- improve rating able period of time. versities can have a real impact. * Recognizing that there are many important issues and injustices in the world Evolution of the that confront individuals today, the Trustees have for many years singled out University's Policy the evil of apartheid in South Africa for attention under the Guidelines. The The Trustees have had a longstanding concern with the social respon- Trustees believe that there remains a strong and fundamental presumption sibility of corporations in which the University invests. In 1972 the against the University taking an institutional position on political or social is- Trustees established Guidelines for investment in Held Com- sues. As the Committee noted in its 1980 draft statement concerning Institu- Publicly tional to External Issues: which state that while the "has Response panies, University traditionally sought If... an issue does not closely relate to the mission of the University, the to its endowment to achieve maximum return," it "should not manage University of Pennsylvania will take institutional positions only under the retain in its portfolio the securities of any company whose activities, on most unusual circumstances and only on the issues which are of the great- balance, are unconscionable." est social concern and deal with the most fundamental human rights.

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In accordance with the 1980-1982 guidelines, in 1983 the University, in an open forum, sponsored by the Undergraduate Assembly, on South after extensive but unsuccessful attempts to persuade Dart & Kraft, Inc. Africa-related investments. Committee members also attended a meet- to comply with the reporting requirements of the , ing of the University Council on November 13, 1985, at which the poli- divested of 12,000 shares of that corporation, representing a market cy on divestment was discussed and a resolution favoring divestment value of $813,000. was passed by a vote of 25 to ten with five abstentions. In 1984 the Trustees authorized the Committee to consider new en- The Committee sponsored an open forum on December 3, 1985, at- try, expanded investment or any sales by a company to the South Afri- tended by six trustees, at which members of the University community can police or military as factors in determining whether a company were invited to present their views on divestment. The Committee sub- should be a candidate for divestment. sequently met three times to discuss and evaluate the policy of selective As of June 30, 1985, the University's investments in companies do- divestment of South Africa-related stock. business in South Africa totaled $92.6 million, constituting 11.42% ing Consideration of of all University investments. (Appendix B). All U. S. companies are University Community Opinion Sullivan Principle signatories; the one non-U. S. company is a sub- During the course of its deliberations, the Committee gave careful scriber to the European Economic Community for consideration to the written responses it received to the series of ques- Companies with Interests in South Africa. None ofthe companies in the tions about apartheid and the proper role of educational institutions in University's portfolio does more than 1.2% of its business in South Af- addressing apartheid which the Committee addressed to the University rica. The University owns no investments in South African-owned community. The Committee recognizes that many members ofthe Uni- companies. versity community devoted substantial time and effort to answering these questions, and the Committee deeply appreciates and values the Current Consideration of the University's Policy information and opinions provided on all sides of the issue. The opin- In 1985 the level of violence in South Africa increased dramatically, ions expressed in the responses defy easy characterization; they reflect a notwithstanding (and perhaps in response to) the government's declara- considerable diversity of viewpoint on appropriate conduct by the Uni- tion of a state of emergency. In August, South Africa's President Botha versity, on the role of corporations in South Africa, and on the pros- indicated little willingness on the part of his government to change its pects for (and the best means of) dismantling apartheid. The responses policy of apartheid. Thus, in many respects, the prospects for peaceful were closely split on the advisability of divestment, with 31 responses change in South Africa appear bleak. Yet there are still a number of appearing to favor such a course of action and 26 responses expressing hopeful signs on the horizon, as leaders of major South African and opposition to divestment. A brief summary of the responses is attached American corporations have expressed public opposition to the govern- as Appendix C. ment's policy, calling upon the government to change its course. For reasons articulated in some ofthe responses to the questions from The government also modified its stance with regard to members of the University community, as well as in the Committee's South Africa. Under pressure of stronger legislation being considered January 1982 report to the Trustees, and in light of some of the com- by Congress, President Reagan in September issued an executive order ments made during the University Council's thoughtful and searching imposing limited economic sanctions on South Africa. That legislation, discussion on this topic, the Committee continues to question the appro- the Anti-Apartheid Act of 1985, was the subject of extensive Congres- priateness and efficacy of complete and immediate divestment. We are sional discussion. In May 1985, President Hackney was asked to testify mindful of the fact that the sale of South Africa-related stock by the on the legislation before the Senate Subcommittee on International University would be effectuated through the purchase of the identical Trade and Finance, and did so in his individual capacity. President shares by other investors, who may not be concerned about the situation Hackney supplemented that testimony by joining, in June 1985, with in South Africa. We are not convinced that immediate divestment of nineteen other college presidents urging Senate passage of the anti- stock by the University would influence the actions of multinational apartheid bill. corporations, much less the actions of the South African government. Given events in South Africa and the changing domestic climate of While we may believe that the threat of disengagement of companies opinion, the Trustees determined that it was appropriate to review the from South Africa might be seen as exerting leverage for change in that current University policy of selective divestment and to reexamine that nation, we do not believe that divestment will directly or indirectly re- policy at the January 1986 stated meeting. sult in disengagement. At its meeting on October 23, 1985, the Committee resolved to so- We are concerned that complete and immediate divestment might licit opinion from the University community as to the appropriate role amount to "washing one's hands" of a difficult problem while there of the University as an educational institution and as a shareholder in may still be an opportunity for individuals, groups, and entities such as addressing the issue of apartheid. Opinions were sought by posing a se- corporations and universities to play a constructive role in South Africa. ries of questions the Committee believed pertinent to the issue. During And, given the rapidly shifting political and economic situation in November 1985 these questions were widely disseminated to the Uni- South Africa and the emergent role of the South African business com- versity community and published in the campus media. The Committee munity in the anti-apartheid movement, the Committee is not yet pre- requested written responses and received replies representing the views pared to classify the mere presence of a corporation in South Africa as of 57 individuals and organizations. "unconscionable" under the 1972 Guidelines. Members of the Committee gathered additional information concern- While the Committee does not recommend the complete and immedi- ing South Africa and informed themselves of campus opinion by par- ate divestment ofthe University's stock in all companies doing business ticipating in a dialogue with the Executive Committee ofthe University in South Africa, it is increasingly disturbed by the apparent intransi- Council. On October 30, 1985, the Chairofthe Committee participated gence of the present South African government and is concerned that

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the prospects for peaceful and meaningful change in that nation may lition of Passes and Co-ordination of Documents) Act; Reserva- soon vanish. Given the present South African context, the Committee tion of Separate Amenities Act.] believes the Trustees should expect these companies to play an active " The Government of South Africa has ceased removals of black economic and political role in pressuring the South African government populations from certain geographic areas on account of race or to dismantle apartheid. The Committee continues to believe that such ethnic origin. [Group Areas Act; Black Administration Act.] companies have the capacity to be a positive force in South Africa. In- " The Government of South Africa has eliminated residence re- deed, Dr. Leon H. Sullivan, the author of the Sullivan Principles, has strictions based on race or ethnic Areas Act; the need for U. S. to assume a more active origin. [Group recognized corporations pos- Black (Urban Areas) Consolidation Act; Black Lands Act.] ture in this regard toward the South African government. The Fourth " The Government of South Africa has taken to Amplification of his Principles (articulated in late 1984) requires that meaningful steps "work to eliminate laws and customs which im- ensure the effective sharing of political power in South Africa signatory companies with all nonwhites. pede social and political justice." Future reports on the Sullivan Princi- ples will monitor the performance of signatory companies under this The Committee further recommends that the University communi- new and higher standard of activity. The Committee intends to review cate now with the portfolio companies having South African operations such performance with an extremely critical eye. to encourage their active efforts to end apartheid and to inform them of the Trustees' expected timetable. Recommendations of the Committee The University should monitor, during the next eighteen months, the The Committee believes that the for performance of companies in its portfolio in seeking to foster substan- emphatically opportunities sig- tive this we believe that the current of nificant progress toward reform in South Africa are not of unlimited du- progress. During period policy ration. The time for is now, not at some selective divestment should be strengthened to ensure that all compa- meaningful change unspecified nies in which the invests maintain the standards of future date. If the efforts of corporations, governments, and other inter- University highest ested to dismantle are not soon rewarded with substan- corporate conduct in South Africa. Therefore, we recommend that the parties apartheid current be amended to tive reforms on the part of the South African government, the policy require: " heightened potential for continued social unrest and the improbability That the University hold no stock in any Sullivan signatory with of peaceful dialogue among South Africans will cast grave doubts on a rating of Ill-B (Did Not Pass Basic Requirements), with any the economic wisdom and moral propriety of continued investment. divestment to be carried out in a prudent and orderly fashion Despite our belief that U.S. corporations can play a constructive role in upon ascertaining the Sullivan rating; bringing about peaceful change, continued intransigence on the part of " That the University, in cases in which it holds stock in a com- the South African government could reduce even the best intentioned pany with a Sullivan rating of Ill-A (Received Low Point Rat- and most diligent corporations to a state of involuntary alliance with an ing), allow such company to improve its rating by the next re- unconscionable system of oppression. porting period. If no improvement is noted in the subsequent If the Committee determines that by June 30, 1987,* substantive report, that stock should be divested in a prudent and orderly progress has not been made in dismantling the legal structure of apart- fashion; and heid, the Committee will ask in which the owns companies University " That the University place an immediate freeze on all purchases stock to withdraw from South Africa and, if they fail to do so within a ofshares in companies that are rated in Sullivan Category Ill-B, reasonable of time, will recommend that the divest its period University or that have not signed the Sullivan principles, or have not re- holdings in those companies. ported their progress under the Sullivan principles or their sub- The Committee would define "dismantling the legal structure of stantial equivalent. apartheid" to include, but not be limited to, the elimination of the laws The Committee that divestment is a serious with eco- and conditions attendant to that human civil lib- recognizes step, apartheid deny rights, nomic consequences difficult to predict. It has examined various studies erties, rights, and individual economic to the political opportunities and opinions concerning the financial consequences of future divest- nonwhite majority of South Africans. In evaluating whether "substan- ment, including, but not limited to, the probability that a higher level of tive has occurred, the Committee will require that all or sub- progress" risk may be associated with a South Africa-free portfolio and that given stantially all of the following steps will have been taken: the current philosophy of management of the University's portfolio, the " The Government of South Africa has eliminated the system total return would be somewhat lower than with an unrestricted uni- which makes it for black and their fam- impossible employees verse of possible investments. It has concluded that the opportunity cost ilies to be housed in accommodations near the of family place inherent in a South Africa-free portfolio cannot be predicted with any Areas) Consolidation employment. [Black (Urban Act.] certainty, though there are undeniable portfolio turnover costs associ- " The Government of South Africa has eliminated policies that re- ated with divestment. Consistent with the Trustees' fiduciary duties, strict the rights of black people to seek employment in South Af- therefore, the Committee recommends that whenever the University is rica and to live wherever they find employment in South Africa. considering the sale of its holdings in South Africa-related companies, [Black (Urban Areas) Consolidation Act; Group Areas Act.] every effort should be made to minimize costs. " The Government of South Africa has eliminated policies that Cognizant that conditions can change rapidly and in unexpected make distinctions between the South African nationality of ways, the Committee understands that the Trustees must reserve the blacks and whites. [(Population Registration Act; Natives (Abo- right to revise any policies adopted today if warranted by future condi- tions or developments. In carrying out its charge, the Committee will * This date allows time for two regular sessions of the South African continue to monitor matters relating to the situation in South Africa that parliament. should be brought to the attention of the Trustees.

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Resolution on the Report of Committee on University Responsibility

Intention: apartheid and to inform them of the University's expected timetable. The Report of the Committee on University Responsibility, with (2) The Committee shall recommend the sale ofstock in any com- Recommendations, Concerning University Policy Relating to In- pany in the University's portfolio which is a signatory to the Sulli- vestments in Companies doing Business in South Africa dated Janu- van Principles and which has a Sullivan rating of Ill-B (Did Not ary 16, 1986 has been circulated to the Trustees in advance of to- Pass Basic Requirements), such divestment to be carried out in a day's stated meeting. This report includes a number of prudent and orderly fashion upon ascertainment of the Sullivan recommendations pertaining to the University's ownership of stock rating. in companies doing business in the Republic of South Africa. The (3) Any company in which the University holds an equity invest- trustees are united in their abhorrence of apartheid and intend to ment which operates in South Africa and which receives a Sullivan adopt the recommendations of the Committee. rating of Ill-A (Received Low Point Rating), should improve its rat- ing by the next Sullivan reporting period, and if no improvement is Resolved, that the Trustees accept the Report of the Committee on noted in the subsequent report, the Committee should recommend University Responsibility to the Trustees, with Recommendations. the sale of the University's stock in that company, such divestment Concerning University Policy Relating to Investments in Companies to be carried out in a prudent and orderly fashion. doing Business in South Africa, dated January 16, 1986. and adopt (4) The University should not purchase any shares of stock in the Committee's recommendations as follows: companies which do business in South Africa and which: (I) If the Committee on University Responsibility determines that (a) are not signatories to the Sullivan Principles or a substantially by June 30, 1987, substantive progress has not been made by the equivalent statement of principles of corporate practices; or South African in the structure of government dismantling legal (b) are to the Sullivan and have received a as defined in its dated 16, 1986. the Com- signatories Principles apartheid, report January Sullivan rating of Ill-B (Did Not Pass Basic Requirements) in mittee will ask companies in which the University owns stock to the most recent On the to the withdraw from South Africa. If a fails to withdraw from Report Signatory Companies company Sullivan Principles; or South Africa within a reasonable period of time thereafter, the Com- mittee will recommend that the University divest its holding in that (c) are signatories to the Sullivan Principles or a substantially company. In carrying out this resolution, the Committee shall com- equivalent statement of principles of corporate practices but municate now with companies in the University's portfolio having which have not reported their progress under the Sullivan South African operations to encourage their active efforts to end Principles or their substantial equivalent.

- Passed, voice vote; 5 recorded 'nays' and 2 recorded abstentions.

Appendices A and B are available from the Office of the Secretary. Appendix C is printedbelow.

Summary of Responses to Committee on University Responsibility Questions

As of December 17, 1985, the Committee had received fifty-seven The Trustees' Committee on University Responsibility wishes to thank (57) written responses to the questions. Fifty-four (54) of these re- those individuals and organizations who responded to the series ofques- sponses were signed by members of the University community acting in tions pertaining to South Africa and the University's investment policy an individual or on behalf of the three which the Committee posed to the University community in November capacity organizations; remaining 1985. In view of the level of interest in this matter, the Committee (3) responses were from anonymous sources. Comments were received high plans to make the responses available for review by the University com- from students, faculty, employees and alumni, as well as from groups them on reserve in Van Pelt To afford indi- such as the of Alumni Clubs of Central Massa- munity by placing Library. University Pennsylvania viduals and groups an opportunity to preserve the confidentiality of their chusetts and Metropolitan New Jersey, the Graduate and Professional opinions, respondents who do not wish their responses to be made public Student Association, the Undergraduate Assembly and the Penn Anti- should so advise Dr. Mary Ann Meyers, Secretary of the University, at Apartheid Coalition. The responses were closely split on the advisabil- 121 College Hall, on or before February 3, 1986, so that the responses in ity of divestment, with thirty-one (31) responses appearing to favor question may be deleted from the volume. such a course of action and twenty-six (26) responses expressing oppo- Richard P. Brown, Jr. sition to divestment. Chairman, Trustees' Committee The opinions and ideas expressed in the responses defy easy charac- on University Responsibility terization or classification. Many respondents elected to use the Com- mittee's questions as a starting point for the presentation of their opin- Question 1: Is the apartheid problem in South Africa directly related to ions, while others returned the question sheet with their marginal Penn's educational mission? Why or why not? notations or ignored the questions entirely. This summary broadly de- Thirteen (13) respondents stated that no direct relationship existed, scribes and samples responses to each question. However, the full one of whom made the following points: range of opinions can only be gleaned from a thorough review of the (a) South Africa is geographically distant. It is distinct in government, responses. moral and ethical values from the United States and the University .

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(b) the University's mission is not to pressure or impose moral or political cording to the Graduate and Professional Student Assembly values on people outside its community. . . (c) the South African apart- ("GAPSA"): heid problem is essentially a political problem, the moral issues It is clear that by investing in South Africa the University has already notwithstanding. taken an "institutional position" on the political system of apartheid Many other respondents, however, took a contrary position. One stu- which exists there. The returns from our investments in South Africa de- dent contended that to educate means" 'to develop mentally or mor- pend on the existence of apartheid. . . - Many ofour investments actu- ally,' "and that the University has "an obligation to detach itself from ally allow the white regime to enforce and strengthen the oppression of all those activities as investment in business in black South Africans, through loans to the white government and sale of [such companies doing to and South Africa] that are to this end." Some goods the South African military police. contrary respondents argued One asserted that since an institutional that was a vital of historical, economic, socio- respondent position on apartheid apartheid topic political, divestment would constitute or and ethical and thus was related to the edu- already existed, merely correcting logical inquiry, University's that in of new facts and considerations." cational mission. One individual declared that "changing position light "everything affecting There was also broad over whether the of an human rights and dignity is related to Penn's educational mission," disagreement adoption while the Penn Women's Alliance stated that institutional position would inhibit the freedom of expression of those "Training young people members of the who hold views. in moral responsibility always has been, and should remain, a tradi- University community contrary Eight (8) voiced concern that such individuals be tional function of a Penn education." Some of the responses focused respondents might unwilling Penn's role in the wider world the "sets an ex- or unable to freely express their opinions, but eleven (11) respondents upon (e.g., University that such a result was As one ex- ample of enlightened thought and conduct, behaviorthat can rise above argued highly unlikely. professor the motive in favor of ideals;" the teaches stu- plained, "I see no danger of inhibiting the freedom of expression of profit high University individuals with views to the trustees' action, since such indi- dents "to think critically, act and view themselves as part of the moral opposed fiber oftheir worlds; and so too, the institution is no to that viduals will always be free to express their agreement or disagreement exception with trustee Another commented that "as a educational mission"); other responses explored the ties between the any position." professor University member who has often at variance with abstract pursuit of knowledge and morality: expressed positions When the discerns that it is a in supporting a mor- those in the administration . . . . I have always felt welcome, indeed University participant a ally wrong system, then that knowledge becomes directly related to its encouraged, as junior faculty member, to do so. And so in the tradi- educational mission. To possess that knowledge and to do nothing would tion of Penn would I presume the continuance of this atmosphere." One prevert the very character and spiritual integrity ofthe institution itself, as answer sought to allay fears of restricted speech by observing that the well as its mission. current "institutional position" of the University has by no means The Black Alumni Society warned that the "apartheid system threatens served to silence the advocates of divestment. the freedoms on which the to continue to flour- very University depends Question 3: Should apartheid be singled out as an issue calling for an ish . . . . To the academic and freedoms which are safeguard personal institutional position, as compared to other social andpolitical issues? essential to the maintenance of an the tacit outstanding" university, Ifso, why? condoning of apartheid cannot be permitted. Sixteen (16) respondents felt that the issue of apartheid should not be 2: Under what circumstances should the dis- Question University-as designated for special institutional treatment. According to one tinguished from members of the University community as individual: individuals-take an institutional position on issues not directly related There is no reason that UP should get deeply involved in the racial prob- to its educational mission? Ifthe University takes an institutional posi- lems of [South Africa] while it ignores similar or worse problems in doz- tion, how can it avoid inhibiting the freedom of expression of those on ens ofother countries: citizens of USSR need permission to travel inside campus who may hold different views? their country; citizens of Romania are forcefully relocated by the thou- sands from their homes to other settlements, and people of Chile are ex- Eight (8) of the respondents argued against the taking of any ploited by their "upper class" and by governmental organizations far noneducational institutional positions. "Academic institutions," said more corrupt than [the South African] government. one individual, "have enjoyed great autonomy in the United States, but Yet many other groups and individuals strongly believed that the sit- that status will be ifwe seek to our will our uation in South Africa merits measures. South Africa, wrote one endangered impose "beyond unique jurisdiction." He quoted a statement by Derek Bok that 'resources respondent: were entrusted to [the University] for academic purposes and not as a is the only developed country in the Western Alliance whose government means ofdemonstrating our opposition to apartheid or to other manifest maintains power by an explicit policy of brutality, suppression, torture, around the world.' " Another writer concern that and a particularly abhorrent form of racism. It keeps the vast majority of injustices expressed its in Third World are not deemed wor- taking an institutional position on a noneducational issue would "re- population grinding poverty: they thy to share their own country's abundant wealth, simply because of the quire [the University) to consider, spend time on and take positions on color of their skin. any number ofother ethical or political issues. This would politicize the This author stated that the situation in South Africa remained fluid and and be to, if not, undermine it's [sic] mission." University contrary that South African society was "now exquisitely sensitive to external Other respondents claimed that institutional positions should be adopted economic the of a under extreme conditions, where there exists no other feasible pressure," thereby necessitating adoption special "only University with regard to that Other conduit of or in the "extreme case" where "there is a clear position country. respondent change," groups distinguished South Africa as the "only country in the world cut violation of fundamental values which the University seeks to up- which practices institutionalized racism," or explained that: hold and upon which it is based. In other words, if there is no reason- due to the extreme nature of the violations of human rights which occur able doubt that a system is evil." daily there (for example, the murder ofunarmed demonstrators, the mass A view expressed by twelve (12) respondents was that the Universi- arrest of protestors, including schoolchildren, and the torture and murder ty's continued ownership ofstock in companies doing business in South of political prisoners) and its uniquely institutionalized system of racial Africa already constituted the taking of an institutional position.' Ac- discrimination, the situation in South Africa deserves special attention in the form of a firm and effective institutional position. 'One noted that a in the Committee's 1980 Statement on respondent footnote Draft One answered the that 'Institutional Response to External Issues" explicitly states that the Trustees' adop- response question affirmatively, noting apartheid was "like a sore and, like was, is to lead to tion ofa policy statementon South Africa on January 18, 1980 constitutedthe taking festering slavery likely ofan institutional position by the University. widespread bloodshed." The signatories to this response also urged that

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other issues should be similarly addressed by the University as an insti- scionable? Whether they do 1.5% or .0015% of their business in South tution. Still other respondents called for University sanctions against Africa, these companies still lend material support to apartheid. South Africa, claiming that apartheid 'violates the basic morals upon One respondent also noted that: which the University of Pennsylvania is based," or that "we are substantial business in South Africa does not necessarily mean per cent of with a There is on a company's operations there. Rather, it also is measurable by the scope dealing morally wrong system. general agreement of business within South Africa as with other enter- this, which is not true of other social and political issues." The Penn activity compared prises in the South African economy. One and a half percent of a large African Students Association objected to the raising of this question, multinational isn't insubstantial in South Africa. is that "it is our belief that as it seems to be the Finally, substantiality stating any attempt not adequately measured by economic statistics alone. American compa- case-to compare the Apartheid issue with any other issue is tanta- nies are disproportionately visible in South Africa, and their behavior mount to playing down the seriousness and viciousness of the crime of (and their investors' behavior) is very important to the South African Apartheid and is therefore racist in nature." government. A number of individuals took the position that the Committee, Making a similar point, the Black Alumni Society pointed out that through the adoption.of its 1982 Report, had previously elected to treat "U.S. corporations control some of the most vital sectors of the South South Africa apart from other global problems. That report contains the African economy-70% of the computer market, 44% of the petroleum statement that "we have subjected investments related to South Africa products market, and 33% of the automotive market, including military to a much higher level of scrutiny than we have those related to other vehicles." Another respondent questioned whether the University countries where oppressive regimes have tried to grind certain of their would "invest in a company only 1.5% of whose business is run by the citizens into submission" and declares that "we do recognize the mafia and involved in drugs and prostitution plus just a little murder?" unique character of the situtation in South Africa in which a white mi- Analogies were also drawn to involvement with and hence alleged sup- nority government has imposed a system of racial repression on a non- port of slavery, Nazi Germany, and discrimination in modern American white majority." And while one student who felt that apartheid could society. not be from other issues worried that "if we to correct distinguished try Question 5: What is the purpose ofdivestment? Is the sale ofstockfrom all the ills ofthe world we would end up achieving absolutely nothing," the University's portfolio a useful wayfor the University to take a another student his belief that "while is posi- expressed apartheid certainly tion opposing apartheid? Are there alternative or additional means of not the violation of human in the world," neverthe- only flagrant rights opposing apartheid that the University should pursue? Would it be less "some is more desirable than no progress progress." more constructive for the University to find educational ways to help Question 4: The University's 1972 Guidelines for Investment in Pub- prepare South Africa for a stable democratic multiracial society? Held state that "the should not retain in its licly Companies University Some opponents of divestment expressed skepticism about the moti- the securities whose activities, on balance, portfolio of any company vation behind divestment ("political diversion") and/or its practical ef- are unconscionable." that the in the Recognizing companies portfolio fects ("Imposing financial hardship on groups of people that you intend that do business in South do less than 1.5% their business Africa of to 'help' will only bring resentment, and further incite some to violence there, are their activities, "on balance, unconscionable"? Is the pres- and obstruct communication"). Proponents of divestment, on the other ence se a in South an "unconscionable per of company Africa activity" hand, offered various reasons for selling the stocks of companies doing regardless of its principles ofoperation? Ifso, does the fact that, as in business in South Africa, them: all among cases of University-held companies, less than 1.5% of the com- " Making symbolic "statement of our unwillingness any longer to be pany's revenues is derived from South African operations make its ac- invovled in or to profit from an unjust and racist regime;- tivities, "on balance, unconscionable"? " "To sensitize the moral conscience of corporate management and to Ten (10) individuals rejected the notion that the mere presence of bring pressure on them to take disinvestment measures." Many re- that divestment, if followed disinvestment United States corporations in the Republic ofSouth Africa was "uncon- spondents argued by (see scionable with of the same also Question 7) would be a highly effective means of bringing pressure to activity," eight (8) respondents explic- bear on the "the South African to that the activities of a that conducts regime: government acutely itly refusing agree corporation fears massive Western disinvestment (more than it admits in public 1.5% of its business in South Africa should be classified as "on bal- pronouncements), and [divestment] by a prestigious American univer- ance, unconscionable." One alumnus wrote that "Certainly the mere sity carries disproportionate influence, owing to its visability [sic] and 'presence' ofa company in South Africa is not proofof unconscionable moral statute in America and abroad;- activity. In fact, many companies have expressed opposition to apart- " By increasing public awareness of the situation in South Africa and heid, employ many blacks at decent wages and are doing all they can to fueling negative publicity against companies doing business in that divestment "cause the United States to change the practice by peaceful means." Another respondent declared country, may government put that honest business cannot be termed unconscionable. more pressure on the South African government to make reforms"; "Doing proper, and If! open a store, I sell to those who come in to purchase whether or not " "Divestment would cause other institutions to consider I or of divesting, like them personally approve their life styles." the of [other] efforts." Other called for the 1972 Guidelines. thereby augmenting impact responses amending Suggested There appeared to be substantial agreement on the utility of anti- modifications included striking the words "on balance" from the 1972 educational measures to be the Guidelines and the "or who do business with countries apartheid implemented by University. adding phrase Approximately (20) favored the creation of that or to the end of the statement. twenty respondents special practice support apartheid" policy classes or scholarship about one-halfof these individuals and These and others the view that U.S. cor- programs; respondents expressed any groups supported educational initiatives as an to-and not as a in South Africa was unconscionable and that the con- adjunct porate presence substitute for-divestment.2 One student suggested; cept of "balancing or measuring" a corporation's activities was inher- Why not sponsor an ongoing series of debates extending invitations to ently unworkable. According to the Penn Anti-Apartheid Coalition: representatives of South Africa's government to participate?. . . What All companies doing business in South Africa support the apartheid sys- about offering a free course in the Spring term taught by a rotating group tem by providing the government with goods, services, revenues from taxes-and in the moral . general by lending system legitimacy 2Two (2) respondent groups, however. (the Penn Anti-Apartheid Coalition and the [Furthermore the] notion of a "balance" or "scale" is morally suspect. Penn Women'sAlliance) wouldonly support such programs ifthey were approved by If a person is a murderer 1.5% of the time and a law-abiding citizen the "recognized black leadership, the African National Congress and the United Demo- rest ofthe time, would this mean that his actions were "on balance" con- cratic Front."

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of faculty on the question of apartheid . . .? Perhaps Penn could arrange conduct." Another respondent observed that "The stocks would be with universities in South Africa an exchange program whereby students bought by other investors and the stock price would not change appre- of all races are exchanged between our two countries. ciably. Someone will always be willing to purchase the stocks of com- much more constructive to Another individual stated that "it would be panies of the calibre of those in the investment portfolio." Yet another business in South Af- retain our stocks in those U.S. corporations doing individual commented that "it is doubtful that even a group of Univer- to for Black rica and allocate the dividends therefrom scholarships sities' holdings would be of a significant enough percentage of total at Penn than to divest those stocks and wash South African students just outstanding shares to effect a change." our hands of positive involvement in that nation's future." Yet one re- Twelve (12) respondents contended that corporations would be influ- sponse rejected the notion of such University-sponsored educational enced by Penn's election to divest. "If a sizeable group of universities programs, noting that while 'Individual members of the University protested in this way," wrote one faculty member, "it would be an im- community may wish to engage in such . . . activities" nevertheless portant step toward making support of Pretoria seem a minority posi- "the University's institutional responsibility is not education or govern- tion, one held only by a few extremist right-wingers and racists. No ment in South Africa but the correctness, morality, and educational sig- respectable company, or company desiring to seem respectable. will nificance of its own investment policy." want to be seen associating with such a minority." The Black Alumni Question 6: ifthe University should choose to divest completely, should Society's response noted that "divestment would have an influence on it sever other ties-including, for example, research relationships, re- the conduct of companies . . . . The movement in the United States ceipt ofgifts, pruchases ofproducts-with companies doing business in and throughout the world against apartheid is growing, and as more in- or making sales to South Africa? stitutions, governments and individuals apply pressure through eco- sanctions, the will be forced to if for Eleven (II) respondents answered this question in the affirmative. nomic companies comply simply Some on the basis of and moral consistency ("Certainly, economic survival." Another respondent claimed that: agreed logical Concerted actions, based on rational a number of insti- unless it is a candidate for Hypocrite of the Year"; 'For the sake of analysis, by large tutional investors will send a clear signal. They will not . . . only dem- consistency . . . all of the company in question must be cut support onstrate that these institutions agree that the corporation's actions are off'). One faculty member wrote: but will have the added clout of stock If unsatisfactory, they depressing The Princeton position is the only consistent moral position to take. and the a worse investment for the others disassociate from a because it will prices making corporations you are going to yourself corporation who, unconcerned with the situation in South Africa, will invariably rush not remove a which the then presence supports apartheid system, you in to buy. should not accept any of their gifts, buy any of their products . . . or doubt about the existence have other business relation with that A smaller group of respondents expressed any company. divestment and answered the in the The of any cause-and-effect relationship between Fifteen (15) respondents question negative. would still have an effect for these answers varied from the disinvestment, but maintained that divestment justifications widely, ranging opinion in South Africa: "It is true that divestment from an opponent of divestment that "it would underscore the absurdity upon corporations operating does not lead directly to disinvestment. But . . . disinvestment is bad ofthe divestment policy" to a belief that such a course of action would for American and affects their decision-making "impeach [the University's) standing, internationalily) as a foremost publicity companies nevertheless." One student articulated this position in the following bastion of academics and intellectual pursuits." One person worried that all such economic ties was "too a to for an manner: cutting high price pay The sale of stocks of business in South Africa the attack on at least two indviduals advised that companies doing by illusory apartheid," (2) University of Pennsylvania will not directly affect the conduct of those this measure could be held in reserve as a more drastic second step if companies. However, if Penn divests it will encourage other institutions divestment failed to accomplish its purposes, and three (3) other re- to consider divesting. If some of the institutions then divest, even more spondents claimed that such behavior would "have no political effec- institutions will consider divesting. In this way, the divestment move- tiveness." Six (6) of the negative responses stated no reasons." ment could gain enough momentum to have substantial impact on corpo- A self-avowed "undecided" individual stated that "Because my ar- rate policy. A movement such as this would bring such bad publicity to guments. . . have more to do with political pressures to minimize vio- the firms in question that they would have no choice but to reconsider lence, than with the 'blood claim, I don't see as a there [sic] presence in South America. etc., money' strong ma- need to cut all ties." the same individual also wondered whether "In- Question 8: Would the political and economic position ofthe black vestors, as owners, are accountable for the behavior and location of jority in South Africa be better or worse-both in the short run and the American withdraw South companies in a way that consumers and gift/grant beneficiaries are long run-if companies from Africa? not.,, Question 8 gave rise to an extremely broad range of responses. Fif- The Penn Anti-Apartheid Coalition responded that: teen (15) respondents argued that South African blacks would be worse these questions. . . should be considered as separate issues after the di- off if the corporations withdrew.3 One individual noted that: vestment question has been resolved. In our view, divestment is not an [B]lacks would lose substantial employment opportunities. And, espe- attempt to achieve moral purity and absolute consistency; rather, it is a cially if European companies followed suit, the South African economy strategy designed to have maximum political impact at minimal cost to could become depressed, resulting not only in more unemployment for the University community. We need not be distracted by these questions blacks . . . . The antagonism of the ruling white minority toward blacks at this time. would increase as they would be seen as the cause of the depression. If 7: Would the sale by this or a universi- the economy should deteriorate far enough there is the possibility of Question University, group of riots and bloodshed. ties, stocks American business in South greater of of companies doing Africa Other commented that workers would be have any influence on the companies' conduct and, in particular, on respondents "Foreign particu- hurt the divestment and this effect would over to many their decision whether to stay in South Africa or withdraw? larly by carry neighboring countries which are in political and economic turmoil." The Committee received twelve (12) written responses arguing that One individual stated that: divestment was not to have on a deci- likely any impact corporation's [D]ivestment hurts the very people we seek to help. Chief Buthelezi sums sion whether or not to disinvest. According to one alumnus, "I think The GAPSA response to Question 8 though, notes that "U.S. companies concentrate the sale by this University of American companies doing business in their activities in technology and capital intensive sectors of the South African econo- South Africa would not have any influence whatever on the companies' my, and employ a very low percentage of the non-white labour force."

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up this argument with these words, "Not only will the poverty and mis- the University stock portfolio, "there seems to be general agreement ery of Black South Africa be increased by a successful disinvestment that divestment of large multinational corporations and reinvestment in campaign; political progress towards positive change will be impaired. smaller, more dynamic corporations will actually increase return, al- .11 Just recall that it was the industrialization of our South that did so though there will be greater volatility or risk. Endowment funds are in much to break down racism, raise Black standards, and encourage living the position where they should trade greater return for greater volatility Black political activity. risk." Mr. Vitale also stated with reference to the bond The answers ofthree individuals the that while University's (3) expressed opinion that: the economic of the black and the while minority will portfolio position majority While bond divestment will ordinarily involve greater concentration in be harmed in the short run by U.S. withdrawal.... In the long run the U.S. bonds, this will lower risk, economic affects will not be as South Africa will still be able to lower-yielding government offsetting large, some or all of the higher risk assumed in the equity portfolio and, at the export its natural resources. There may also be an influx ofcapital from same time, over securities as other sources ...... providing many advantages corporate (such lack ofcredit risk, increased noncallability, and enormous vari- Seven reflected the that the short- liquidity, (7) responses position "Although ety of coupon and maturity). term economic effects of disinvestment would hurt the black majority The Penn Anti-Apartheid Coalition stated that in light of the "active much as strike or the short and term temporarily, any , long po- nature of the University's portfolio, "the transaction costs associated litical effects would them .... Ifeconomic sanctions help dramatically with divesting in a careful, phased manner would therefore be within are maintained until the black their removal, then majority requests the University's normal costs of portfolio management." and further Botha will eventually be forced to negotiate with the black leadership." noted that: According to the Penn Anti-Apartheid Coalition: The withdrawal of American companies from South Africa, combined The of increased risk because of a lack of with economic sanctions the international supposed problem resulting imposed by community, espe- diversity in the portfolio... is an excuse for not divesting.... A glance cially the United States, could seriously dislocate the South African econ- at a financial will show hundreds ofother, non-South Af- the event such dislocation, the economic of black listing literally omy. In of position rican related with levels of risk and rates of return comparable South Africans would worsen in the short run .... But it should holdings, probably to those holdings which would have to be sold, or could not be bought. be remembered that the present economic position ofblacks is bad, espe- when to the of whites .... If are Three (3) responses suggested that, in view ofthe deteriorating situa- cially compared position political rights tion in South Africa, investors will soon be from granted before the economy is destroyed by the intransigence ofthe gov- prudent withdrawing ernment, there is no reason for the economic situation of blacks not to that country anyway. improve. Two (2) individual respondents commented that divestment would The rest of the responses to this question adopted widely scattered have a negative impact on the returns earned by the endowment . One viewpoints, ranging from the proposition that "The policies of Ameri- such respondent (who explained that financial impacts "certainly are can companies, and whether or not they withdraw from South Africa, is not the decisive factor in my position") observed that certain studies: divestment] did not for also not for the University to define or decide," to the observation of which reported positive returns [following adjust one student that the Blacks who are the higher portfolio risk nor for the 'small firm effect.' Given that dis- "Undoubtedly benefitting [sic] the anomalies ofthe recent neu- from with American would be hurt. However, claimer, it is easy to reconcile apparent employment companies tral or of divested Once for risk numerous Black movements ... to favor divestment." Another positive experiences portfolios. adjusted appear and firm size, returns will fall-the only question being to what extent. student that there could be reform without harm to the economic argued Nine (9) appeared willing to suffer whatever adverse fi- of the blacks due to the existence of an "intermediate respondents position period, nancial consequences might ensue from divestment. According to the while divestment to around the but before com- begins pick up country Undergraduate Assembly, "our moral responsibility to take action withdraw from South Africa. It is that such a panies very likely during against apartheid outweighs the financial risk of divestment." One stu- the South African can be to its period government persuaded change dent asked, "Can we not afford to shave a percentage point or two from present course." Finally, one respondent stated that "we cannot assign for the sake of Is this such a to a financial value to freedom.... disinvestment the blacks to earnings supporting justice? big price [l]f helps pay when the moral authority of the Western world is at stake in South achieve freedom it should be considered beneficial to them in the long Africa?" A commented as follows: run." professor I accept that we may suffer economically both through potential loss of Question 9: What would the effect of divestment be on the returns income and from loss of the good will of the companies we divest. earned by endowment? If there is a risk that the effect would be signifi- Speaking only for myself, I am quite willing to accept the consequences down the road. cantly negative, would the University community be willing to have the if they are negative; even if they mean a lower salary hand, not believe that the Trustees compromise their fiduciary duties to earn maximum returns, Seven (7) respondents, on the other did to such a Wrote one consistent with risk, in support ofthe University's educational mission, University community would be willing pay price. i.e. is the community willing to bear the financial burdens in terms of student: tuition, less aid, and smaller increases in I am neither willing nor able to bear a financial burden, such as higher higher financial salary for tuition and less financial aid, which would be connected to the and staff? implemen- faculty tation ofa program like divestment. Since the University has an excellent This question was widely criticized as "unworthy," "specious" and rate of return on its endowment, the Trustees would be foolhardy to im- "intimidating"; one respondent group referred to it as "a textbook ex- plement a policy of such dubious effect on both the endowment and the ample of a biased, leading or loaded question, because it implies that current conditions in South Africa. divestment will lead to higher tuition, less financial aid, and lower sal- Finally, one alumnus opined that "Whether the people within the ary increases." community would be willing to bear their share [of the costs of divest- At least eleven (11) responses argued that divestment might not entail ment] is another question, but I am convinced that it would reduce the any financial loss to the University.' According to Robert J. Vitale, quality of life within the Pennsylvania community and, therefore, de- President of the Drexel Bond-Debenture Trading Fund, with regard to tract from its ultimate mission."

"See also the December 2, 1985 report of the OSAS/GAPSA Joint Committee on 5See also the November 1985 report of the University's Office of Investments, enti- Divestment. tled Investment Costs of South Africa-Related Divestment.

VIII ALMANAC SUPPLEMENT January 21, 1986