Proxy Votes: How They Work

When you own stock in a company, it entitles you not only to a share of the company's earnings--paid usually as quarterly dividends--but also a vote on company policy. Generally, for each share of common stock you own, you get one vote.

The company's ballot is called a proxy, and most companies send out their proxies each winter or spring along with their annual reports. Shareholders can mail in their votes before the annual corporate meeting--which most companies hold in April or May--or cast them at the meeting itself, where all votes are tabulated.

Proxies generally cover fairly routine matters: they ask shareholders to vote on the election of a board of directors or reapprove an auditing firm the company has chosen.

But a certain variety of proxy vote--known as a shareholder petition--can give concerned stockholders an opportunity to press for change in company policy for ethical reasons. Among questions which shareholders have had added to company proxies in recent years are proposals to ban work on nuclear arms, stop sales of computer technology to the Soviet Union, and, for companies with South African operations, implement the Sullivan Principles and Tutu Principles. These are a series of guidelines designed to improve working conditions for Black employees in the apartheid state (see box on this page).

Investment experts generally say that shareholder petitions are effective even if only 10 or 20 percent of voting shareholders support them. As long as a substantial minority of shareholders registers registers concern about a certain aspect of company policy, experts say, the directors often will take note of the concern and consider changes.

So how does any of this affect the University? Harvard has the potential to be a major player on proxy issues because a large portion of its $2.3 billion endowment is invested in stocks, bonds and other securities, including as Treasury bills, venture capital and money-market accounts. Because of daily trading, the percentage of endowment invested in each of those areas fluctuates, but generally at least 50 percent of the endowment is in stocks. And, like any stockholder, Harvard is regularly asked to vote on a wide range of proxy issues.

Income from those stock and other investments--along with tuition, government grants, and alumni donations--makes for a major portion of the budgets of each of Harvard's 10 faculties and numerous other departments. In the Faculty of Arts and Sciences, for example, interest on the endowment provides about 25 percent of this year's $190 million budget.

The seven-man governing Corporation, which includes President Bok, Treasurer Roderick M. MacDougall '51, and the five "Fellows" of the College, has the final say over how the endowment is invested, and also over how Harvard votes on proxies.

To advise it on how to vote shareholder petitions, the Corporation, in 1972 created the Advisory Committee on Shareholder Responsibility (ACSR), a 12-member group composed in equal parts of alumni, students and faculty. The ACSR's recommendations are advisory to a subcommittee of the Corporation itself, the four-member Corporation Committee on Shareholder Responsibility (CCSR). The body makes a final review of all proxy votes and makes recommended as to the full seven-man governing body.

The following is a list of South-Africa related shareholder petitions which have been submitted to companies in which Harvard owns stock. All of these petitions have been proposed for inclusion in upcoming proxies, but in some cases the exact proxy has not yet been finalized.

The source of the following list is the Investor Responsibility Research Center in Washington, D.C., a public-interest group which monitors ethical issues related to corporate operations. Data on company size is from the 1984 Standard and Poor's Register and from company spokesmen. Because the University publishes a full list of its investment holdings only once a year, figures for Harvard's holdings in each company are as of the June 30m 1984 tabulation. Each company listed was still in the Harvard portfolio as of February, according to the ACSR.

The list is not necessarily complete, because Harvard may sell its stock in these companies or the petitions may not appear on the proxy. In addition, the schedule for ACSR and Corporation review of these proxy issues could not be determined.

Bucyrus-Erie, South Milwaukee, Wise.

Size: 5300 employees. 1983 sales: $687.35 million.

Business: Makes construction, mining and petroleum-related equipment.

Proxy Vote: Sign Sullivan Principles.

Annual meeting date: April 30.

South African operations: According to spokesman Michael Decker, the company sells parts for mining machinery and employs 13 to 15 workers, some of whom are South African nationals. Decker said the company "endorses" the Sullivan Principles, but is not a signatory because the company's operations there are so limited. It costs about $7000 a year to have the Arthur D. Little Co., a Cambridge consulting firm, review a company's operations to see if it is complying.

Total shares of voting stock: 16.4 million. Harvard's holdings: 45,000 shares.

Champion Spark Plug, Toledo, Ohio.

Size: 13,500 employees. 1983 sales: $783.75 million.

Business: automotive equipment.

Proxy vote: implement Sullivan Principles.

Annual meeting date: April 29. Proxy will be finalized March 22.

South African operations: According to company spokesman Tony Bouger, Champion owns a plant in South Africa which makes spark plugs for sale in South Africa and Zimbabwe. The plant employs 94 people, 64 of whom are Black, Bouger said.

Total number of shares: 38.3 million. Harvard's holdings: 50,000 shares.

Ford Motor Company, Dearborn, Mich.

Size: 379,229 employees. 1983 sales: $37.1 billion.

Business: automobiles, commercial vehicles and related products.

Proxy vote: stop sales to South African military and police.

Annual meeting date: May 9, Proxy final by April 12.

South African operations: not available from company. A similar shareholder petition was decisively rejected about five years ago, according to a spokesman.

Total number of shares: 184.1 million. Harvard's holdings: 226,430 shares.

General Motors, Inc., New York, N.Y.

Size: 657,000 employees. 1983 sales: $60.03 billion

Business: automobiles, commercial vehicles and related products.

Proxy vote: stop sales to South Africa military and police.

Annual meeting date: May 24.

South African operations: In 1984, GM sold 44,000 vehicles in South Africa, winning about 8 percent of the passenger car market there and 16 percent of the commercial market. Specific figures for sales to military and police were not available, but spokesman George Schrecht said "sales to police and military would be nominal, very nominal. We don't make any vehicles in South Africa for any kind of specifically military operation." Schrecht said that GM was one of the 12 original companies to sign the Sullivan Principles, whose author, the Rev. Leon Sullivan, sits on GM's board. It currently has a category 1 Sullivan rating from Arthur D. Little Co., the highest possible.

Total number of shares: 313 million, owned by about 1.1 million separate shareholders. Harvard's holdings: 243,300

Kimberly-Clark Corp., Neenah, Wise.

Size: 32,753 employees. 1983 sales: $2.95 billion

Business: facial tissues, health care products specialty papers.

Proxy vote: sign Sullivan Principles.

Annual meeting date: April 18.

South African operations: Kimberly-Clark holds a 39 percent equity interest--it owns 39 percent of the shares of--Carlton Paper Corp. Ltd., a South African company.

Total number of shares: 45 million. Harvard's holdings: 17,500 shares.

Motorols Corp., Schaumburg, III.

Size: 71,000 employees, 1983 revenues: $3.79 billion.

Business: electronic and communications equipment.

Proxy vote achieve category L. Sullivan Principles rating.

Annual meeting date: May 6, Proxy will be finalized March 20.

South African operations: Owns one communication-equipment plant in Johannesburg which employs 200 workers, some of whom are Black, according to spokesman George Grumsroot.

Total number of shares: 118.4 million. Harvard's holdings: 58.958 share.

Phibro-Salomon, New York, N.Y.

Size: 45,000 employees, 1983 revenues: $26.7 billion.

Business: Industrial raw materialist such as minerals, coal and oil.

Proxy vote: no petroleum sales to South Africa.

Annual meeting date: May 1, Proxy will be finalized April 1.

South African operations: According to a spokesman, the company does 1 to 2 percent of its total business in South Africa, and is a signatory to the Sullivan Principles.

Total number of shares: 155 million. Harvard's holdings: 104,700 shares.

Raytheon Corp., Lexington, Mass.

Size: employees. 1983 sales: $5.51 billion.

Business: broad-based manufacturer of electronics and communications equipment and appliances.

Proxy vote: no new business in South Africa.

Annual meeting date: May 22.

South African operations: "Virtually nil," according to spokesman A. Newell Garden. A wholly-owned Raytheon subsidiary, Badger Co. of Cambridge, employees two Europeans who are working on a South African government plant to convert coal into synthetic oil. Raytheon has no equity interest in the company and does not have any factories there, Garden said.

Total number of shares: not available. Harvard's holdings: 110.276 shares.

U.S. Steel, Pittsburgh, Pa.

Size: 119,987 employees. 1983 sales: $18.91 billion.

Business: steel, chemical products, real estate, financial services.

Proxy vote: sign Sullivan Principals.

Annual meeting date: May 6.

South African operations: According to spokesman Bill Kestlen, U.S. Steel holds a minority equity interest in three small South African companies: Prieska Copper Mines, Feralloys, and Associated Manganese Minds of South Africa Ltd. The total number of employees of those companies is less than 100,000, Kestlen said, and U.S. Steel itself has no employees in the country. He added that a similar shareholder petition in 1981 was voted down.

Total number of shares: 107 million. Harvard's holdings: 79,500 shares.