The ACSR: What Difference Can It Make?

The most active members of the national campaign for corporate "social responsibility" have been the Project for Corporate Responsibility (PCR) and various coalitions of concerned Protestant denominations. And two years ago, in an effort to assist church groups with research on their respective investments, the National Council of Churches established the Corporate Invormation Center (CIC).

The church groups are responsible for this year's resolutions on southern Africa. Firsthand reports from southern African church leaders and from representatives of black African communities provide a major source of information for the churches' proxy statements.

But it appears that Harvard joined this movement for corporate responsibility with less than wholehearted enthusiasm. Under the guidance of George F. Bennett '33, formerly treasurer and, this year, the University's acting treasurer, it took the Corporation until 1972 to vote a proxy against a management position. Last April, the Corporation endorsed disclosure resolutions filed with Ford and General Motors.

The vote was still not intended "to reflect a judgment on actual performance by a company," the Corporation stated. Harvard only said it would support disclosure requests of "reasonable" scope unless already public information "is reasonably complete when compared to the disclosure requested in the resolution."

Institutional investors have been generally slow to take up the activist groups' lead. Only after three years of debating whether institutions should take a stand at all, can advocates now focus on procedures within institutions and on the issues surrounding each resolution, says Susan Gross, director of PCR research and education.

Three years ago the Corporation failed to support the first major proxy fight of the emerging shareholders' movement. The Fellows refused to endorse the recommendation of PCR's Campaign G.M. (--even though a resolution supporting the campaign had been passed overwhelmingly by the Faculty.)

In January 1971, the Austin Committee reported to former President Pusey on "University Relations with Corporate Enterprise."

Since the University's central function is the "pursuit of truth," the committee reasoned, Harvard could "best serve society" by "maintaining a neutral stance as a university on all political and social questions." Only when no room for argument exists among people who accept our basic socio-economic-political system," should the University risk a political stance.

But Harvard's reluctance to enter any anti-management fray may have stemmed from more than the quest for "academic" neutrality. The Austin Committee also reported on potential conflicts of interest which the treasurer could face.

Their observations were "not remotely intended to reflect on the integrity, the professional skill and the dedication of the present Treasurer," the report said. But Bennett's affiliation with Harvard's investment management firm and his position as director on corporations in which Harvard owns stock led the committee to "recommend" a thorough examination of these issues."

Harvard finally modeled its own ACSR on similar committees founded as early as 1971 at several other colleges. Since other institutions found the committees "useful and productive," Harvard created the ACSR to obtain the community's views on shareholder issues, says Stephen B. Farber '63, special assistant to President Bok. Farber is Bok's liason to the ACSR and the Corporation Committee on Shareholder Responsibility.

The creation of the ACSR reflected the Administration's belief that more pressure can be exerted by "responsible" shareholders than by institutions selling all their stock at once in a particular company.

Holding on to stock may also increase shareholders' general influence with the business community. "If you work inside institutions, you can never work fast enough. But if you work outside, you're accused of not being 'accountable,'" says Ruth Jarmul, a CIC associate.

But Harvard still faces the problem of not having any commonly accepted definition of "corporate social responsibility" to work with. The Austin Report argued against "joining forces with other large, tax-exempt organizations in policing the conduct of business corporations." Yet, it noted that "it is a truism in the financial world that [except for rare cases] abstention in a proxy contest is a vote for management.

It also appeared impossible to translate the quest for neutrality into practical terms. Moral neutrality is an impossible stance, the report suggested: "If the University would not consider buying stock in gambling houses, even where legal and however attractive financially--as presumably it would not--it cannot close its eyes to...moral factors."

The ACSR is left, then, without any definitive statement of its own responsibilities. Acting responsibly, for now, has simply come to mean giving careful consideration to proxies which other shareholders have submitted.

The proxy resolution has been the chief weapon of advocacy groups so far. The tactic has offered a number of advantages, especially in raising issues of which corporations have seemed to be unaware.

A number of companies appeared to be ignorant of the social implications of Namibian investment, says Interfaith's Timothy Smith. The churches carry on continuing discussions with corporations in order to "sensitize them to socially important issues," Smith says.

In some cases, the proxy statements facilitate productive negotiations. The Church Project on U.S. Investments in southern Africa this year withdrew 7 of 11 disclosure resolutions after the corporations involved voluntarily provided the requested information.

The most obvious advantage of proxy fights is the publicity they attract. A resolution attracting three per cent of a company's stockholders' votes may be resubmitted the following year. By making shareholders aware of social problems in which their companies are involved, proxy statements aim to create pressure for change within institutions.

The three per cent of a company's shares may represent more sizeable portion of a company's shareholders. Management often controls over half the stock regardless of the merits of any shareholder challenge; in addition, banks may control a sizeable percentage--securities held in trust for smaller-scale investors--which they are unlikely to vote in opposition to management.

Farber is deeply involved in helping foundations and other universities to decide their positions on proxy resolutions. He created the Investor Responsibility Research Center (IRRC) this year to provide what Farber says will be "objective, timely, in-depth exposition of the facts and issues involved in public interest shareholder proposals."

Harvard is one of almost 70 institutions which subscribes to IRRC's reports. Though subscribers are entitled to papers on any company in which they're interested, IRRC can provide a regular schedule of reports for general use since colleges and foundations tend to hold similar portfolios. Each IRRC report presents the positions of both the resolution's advocates and of management; an independent analysis of the accuracy of each side's case is included.

Advocates have questioned the "objective" quality of IRRC's paper and the potential effectiveness IRRC can have given its present function it the movement for corporate responsibility.

Since no one can possibly be fully objective in political analysis, representatives of CIC and PCR insist IRRC plays a frustrating role as "middleman" between the advocates and institutional boards of trustees.

Furthermore, advocates object to the money IRRC consumes in a year--a budget of about $200,000--which direly strapped advocate groups could use.

The advocates' objections to IRRC's role are "absurd," Farber said in an interview. "We are not in competition. The excellent feedback we've been getting proves we're performing a service that institutions want and that existing groups simply can't perform," Farber said.

In addition, Farber says he believes that rather than closing trustees' doors to proxy advocates, IRRC has aroused interest in shareholder issues which some voters would otherwise lack the time or interest to study.

And the ACSR makes extensive use of the advocates' documents and other non-IRRC sources, both Farber and several members of the ACSR say.

But the advocates raise a more basic objection to IRRC. By devoting study only to the merits of shareholder resolutions, they argue, IRRC focuses time and attention on a strategy which may miss the point of the advocates' campaigns.

The goal of proxies is raising issues; resolutions are not ends in themselves. In fact, "there is now much discussion among corporate responsibility advocates about deemphasizing the use of the proxy as a mechanism of advocacy and moving on to new structures," the CIC reports.

IRRC may contribute to a problem among institutions like Harvard which have yet to establish strategies to promote corporate responsibility Such shareholders may infer from the IRRC approach that the mere act of voting on resolutions is a sufficient demonstration of social concern.

"As all of us who have been working in this area of corporate responsibility for several years know, the voting of proxies will not, in the act itself, produce social change," the CIC writes. Advocates hope to persuade institutions eventually to adopt more aggressive strategies: introducing original resolutions, speaking publicly at annual meetings, publicizing proxy votes, holding public hearings, and initiating meetings with management to press for what the advocates call needed change.

What evidence is there that the ACSR will adopt an increasingly more important and progressive role? To start, optimists may point to the committee's votes on Caterpillar Tractor and Phillips Petroleum proxies. The ACSR was unanimous in endorsing a request for Caterpillar's disclosure of data regarding South African operations, and in opposing Phillips's exploration for oil off Namibia's coast.

In addition, student, alumni, and faculty ACSR members report general satisfaction with the quality of committee discussion and with the open-mindedness of other members.

"The committee, as a whole, has shown a basic concern for the issues. There's been no question so far on basic principles," said John J. Hogan '73, one of the ACSR's two undergraduate members.

Furthermore, the undergraduate committee of House representatives which last Fall elected the undergraduate ACSR members, has continued to meet and conduct research and to plan possible campaigns for the students' positions.

But at this point, there is at least as much reason for doubt as for hope. Both in terms of the ACSR's operation, and regarding the Corporations's attitude toward corporate responsibility.

Caterpillar and Phillips presented relatively easy issues to deal with. The Corporation had already adopted a policy favoring disclosures. In the case of Phillips, the proxy statement merely argued against investments which the U.S. government has already discouraged.

The seemingly clear-cut aspects of the legal situation in Namibia made a deeper evaluation of relevant moral and political issues unnecessary. Because the problem of Continental Oil is identical with Phillips's, it is likely the ACSR will deal with that question, too, without ever coming forward with an analysis of competing political claims in Namibia. Thus, the Namibian issues provide little basis for predicting the committee's further behavior.

On less clear-cut issues, the ACSR's votes may arouse even more skepticism. The committee voted down a resolution aimed at establishing a committee at General Electric to study the company's conversion to a peace-time economy. There was no need to force G.E. to create a committee already clearly in its interest, the majority reasoned.

But the ACSR vote on the G.E. proxy took the undergraduates by surprise, said Martin J. Auerbach '73 an undergraduate representative. Because they didn't know the vote was scheduled, Auerbach said he was unable to prepare adequately for a thoughtful vote.

Ordinarily, a vote of the student committee representing all the Houses determines the votes of the two ACSR undergraduate members.

The ACSR should have voted to establish the committee because no evidence of real peace-time conversion yet exists, according to Joel Motley '74, chairman of the Undergraduate Committee on Shareholder Responsibility.

"To be reluctant to force G.E. to make every statement, every investigation into what they are doing and why, at this time, is regressive," Motley said.

The committee has also been unable to deal yet with its own plans for the future. Meetings at which votes are taken are still held behind closed doors, and few students or ACSR members attended the one open discussion meeting the ACSR has conducted.

Many members think the committee may investigate matters of corporate responsibility beyond other shareholders' proxy resolutions after the current "proxy season" ends this May.

The committee wants to look into questions raised last December by Richard Wilson, professor of Physics, regarding the safety standards of nuclear reactors built by G.E. and Westinghouse, said Stanley S. Surrey, professor of law and ACSR chairman.

Farber said he believes that this Fall the committee might look into government contracts signed with Lear Siegler, Inc., an issue recently raised at Harvard by the New American Movement.

But the most telling basis for doubt remains--in the attitude of the Corporation. Although businesses have probably spent millions on mass media advertising designed to portray corporations as socially responsible, the Corporation, in voting for the Caterpillar disclosure, did not want to ask Caterpillar to go to the trouble or expense of sending the disclosure automatically to all stockholders.

Furthermore, because the Corporation already established a policy favoring disclosures, the vote for the Caterpiller disclosure represented no radical shift. Should the Corporation vote April 23 for Phillips's withdrawal from Namibia, it would set the first precedent for Harvard's voting against management in matters of policy.

It is unlikely that Bennett will support any anti-management fight, or at least so it seems from his past voting record. Until a new treasurer is named, only one other pro-management vote could send the resolution out of the subcommittee's hands to the full Corporation. The Corporation has not shown any predisposition toward acting as an advocate of other people's social responsibilities.

It does not appear that the Corporation expects to take a more aggressive moral stance. Unless Corporation members announce their votes in advance of the companies' annual meetings, members of the Harvard community will be unable to debate those votes to affect the outcome.

Initially the dissipation of student pressure and the natural tendency of students and faculty to assume that Harvard fulfills its responsibilities simply creating thoughtful committees may leave the ACSR less impetus to expand its activities on behalf of corporate responsibility.

Last year, it seemed tenable to argue that the establishment of bureaucratic mechanisms for considering shareholder issues would dissipate what would otherwise be heated student and faculty debate. It seems this year--given the relative inactivity even of black activist groups--that only the ACSR and IRRC have made regular discussion of proxy issues at Harvard likely at all.

The ultimate basis for skepticism regarding the Corporation's involvement in responsible shareholders' actions is the status of the Corporation itself as part of the business world. It is likely that most Fellows believe Harvard's social responsibility is to earn maximum profit in order to preserve the University, that is, their own Corporation. How likely they are to address the political questions of investment squarely is, at least questionable.

"The moral purposes of this University will be questioned as the Corporation's votes come to light," Motley said. "Harvard must realize that we're all implicated in the kinds of activities which support our way of life, in finding human ways of dealing with the corporate technologies universities have helped to develop."

How the Corporation votes next week on the ACSR's Phillips recommendation, the way the ACSR handles the Exxon issue, and the kinds of tasks the ACSR sets for itself when the pressure of other people's proxy resolutions is off will reveal more about the ACSR's potential as a progressive force. But whether investment policy can be changed to reflect the University's supposedly moral purposes, depends largely upon the intensity of independent political action--perhaps a more persistent kind of political action than that which led to the ACSR's creation in the first place.