Banking on Change

Just as the subject of divestment from Sudan has consumed the Harvard campus in the past year, the University’s investments in companies with financial ties to the South African apartheid regime was the preeminent topic of debate on campus in the late 1970s.

Even among those who felt that the moral implications of the University’s financial decisions should be considered, opinions varied on whether it was tatus and to vote on companies’ internal policies or whether it was better to make a statement and divest.

In the spring of 1980, the Advisory Committee on Shareholder Responsibility (ACSR) recommended that the Harvard Corporation affirm two shareholder resolutions that prohibited the companies from selling products to the South African government.

This was the first time the ACSR suggested that the Corporation support such resolutions. However, the Corporation disagreed with the evaluation and abstained from voting on them.

GIVING ADVICE

After student activists protested the University’s investments in a company operating in Angola in 1972, the University created the ACSR to examine the ethical ramifications of the Corporation’s investments and recommend courses of action.

When students and faculty began voicing their opposition to the University’s investments in companies which did business with the South African government, the Corporation once again delegated the responsibility for deliberating these issues to the ACSR, a committee made up of alumni, students, faculty and an administrator.

The anti-apartheid movement grew on campus throughout the late 1970s, and its momentum increased due to the work of the Southern African Solidarity Committee (SASC), an undergraduate organization formed in the fall of 1977.

“We tried to bring all sorts of demands and pressures on the Harvard Corporation...and we did for a while there raise the consciousness of the campus,” says Matthew M. E. Rothschild ’80, who was an active member of SASC during college.

The circulation of student and faculty petitions and a demonstration in the spring of 1978 were directed toward the goal of divestment from “stocks, corporations and banks that were doing business with the apartheid regime in South Africa,” according to Rothschild.

“The feeling all along was that Harvard administration was not stepping up to the moral plate on this and was refusing for reasons that were not cogent to do what a moral institution should do, which was to wash its hands of the grime of apartheid,” says Rothschild, who is now editor of The Progressive, a magazine that advocates peace and social justice in the United States.

The Corporation decided against divestment, setting off a 3,500-person march through Cambridge three days after a smaller demonstration.

However, the Corporation specified that the ACSR would perform a case-by-case review of the companies in Harvard’s stock portfolio, aimed at evaluating their dealings with South Africa and recommending whether Harvard should continue to invest in related companies.

“The chief function of the ACSR was to advise corporations on how to vote on proxies of the shares that Harvard owned,” says Detlev F. Vagts ’49, Bemis Professor of International Law at Harvard Law School and ACSR chairman in 1979-80, referring to the various shareholder resolutions that were being proposed to influence corporations’ practices in South Africa.

The Corporation “didn’t grapple with these problems…[it] just decided whether a company was a good investment,” says Vagts.

In the Corporation’s 1978 statement deciding against divestment, it had justified i“We oppose divestment under normal circumstances not merely—or even primarily—because it costs the University money, but because it is an ineffective means of pursuing ethical ends.”

The ACSR also favored shareholder resolutions over divestment, according to Vagts.

“We thought more would be accomplished by having American firms push to upgrade things and improve conditions for black workers,” says Vagts, whose daughter protested in favor of divestment while he sat on the ACSR. “If IBM sold its South African investment...nothing would be achieved, because they would probably be bought by someone who was less interested,” in the political consequences of its actions, he adds.

RECOMMENDED, NOT DECIDED

Not until 1980, however, did the ACSR advise the Corporation to support any of these shareholder resolutions.

In fact, one of the resolutions had been rejected by the ACSR the previous year. At the time, Vagts attributed this shift to the new composition of the committee.

Julie Fouquet ’80, undergraduate representative to the ACSR and chairwoman of the Undergraduate Committee on Harvard’s Shareholder Responsibility (UCHSR), had resigned from the ACSR in February of 1979. She told The Crimson that she did so because she felt that the committee was “stalling” on the South Africa issue and was prioritizing financial benefits over moral responsibilities.

After a year of absence from the ACSR, though, the UCHSR decided that its abstention from the ACSR’s deliberation process was not effective. So they sent a representative—Michael L. Waldman ’82—back to the ACSR.

“Initially we [the UCHSR] said we’re not going to have anything to do with it, because we think you should divest in all circumstances, but eventually I was sent, saying ‘we’ll be part of the process, but the University needs to be tougher on corporations that wish to do business in South Africa and play a more active role in making those corporations a more positive force of change,’” says Waldman.

He joined the ACSR in February 1980—a month and a half before the ACSR made its ground-breaking decision to support a shareholder resolution.

This unprecedented recommendation was characterized in The Crimson as “the first time [the Corporation] faced dissent from within…[after] student charges of the committee’s ineffectiveness and its near-perfect record of following the Corporation’s line.”

The change in ACSR’s attitude was due to the escalating racial conflict in South Africa, according to Vagts.

“The situation seemed to be getting tenser and worse, so that inaction didn’t seem any longer to be a good idea,” Vagts says.

One of the shareholder resolutions that the ACSR endorsed would have forbidden Caterpillar Tractor from selling its vehicles to the South African government military police, who were allegedly using the vehicles in their oppression of the black population,

The other resolution would have requested that IBM refrain from selling to the South African government, which was buying three quarters of its computers from IBM and passing many of them on to places such as population control centers, according to an article in The Crimson.

Upon reviewing the ACSR’s research and recommendations, the Corporation Committee on Shareholder Responsibility (CCSR) rejected them, abstaining on the two resolutions.

The CCSR, a three-member subcommittee of the Corporation, justified its decisions by stating that the situation in South Africa had not changed significantly since the ACSR’s rejection of the Caterpillar resolution the previous year, and that the IBM resolution would prevent public service institutions like hospitals and schools from receiving important technology.

Hugh Calkins ’45, chairman of the CCSR from 1969 until 1986, told The Crimson in 1980 that “the sudden shift in the ACSR’s votes may saddle Harvard with a reputation of inconsistency in the corporate world.”

One of his concerns, he said at the time, was the accuracy of the information about corporate practices in South Africa, which had influenced the shareholder resolutions and the ACSR’s decision. He said that the Corporation would consider working with other universities and the Carnegie Foundation to set up a field office in South Africa to monitor the corporations.

However, Waldman recalls being “disappointed that the Corporation didn’t seem to be following our recommendations.”

DIVESTMENT STILL DEBATED

The ambiguous relationship between the ACSR and the CCSR, resulting from the CCSR’s veto power, continued throughout the 1980s and through to today.

According to The Crimson, the ACSR recommended complete divestment in 1984, but the Corporation decided against following the recommendation.

Eventually, the Corporation divested partially from its South African-related stock, selling one-third of its holdings in 1986.

This April, following the recommendation of the ACSR, the CCSR decided to divest from PetroChina, an oil company with ties to the Sudanese government.

But divestment is still under debate as a tactic for dealing with other oppressive regimes.

“You have to consider whether the one-time impact of washing your hands of a horrible economic situation or horrible regime is outweighed by the potential advantages and positive impact you can have by being a positive player,” Waldman says.

—Staff writer Nina L. Vizcarrondo can be reached at nvizcarr@fas.harvard.