A Thorn In its Paw

When the Harvard Corporation faced opposition to its South Africa related investments in the past five years, it almost exclusively confronted undergraduates. Students served as the gadfly conscience, driving home their conviction of the amorality of Harvard's investments by marching through Cambridge's streets by candlelight, boycotting classes, and blocking the entrances to University Hall. But this year, after having anesthetized student discontent with the rhetoric of open letters and imposing progress reports of its review of corporate activity in South Africa, the Corporation for the first time faced dissent from within--from its Advisory Committee on Shareholder Responsibility (ACSR).

In 1972, the Corporation created the ACSR in response to student demands that Harvard divest its stocks in Gulf Oil, seen by the students as a powerful supporter of Portugal's colonial government in Angola. The Corporation charged the ACSR with the task of advising it on the moral and ethical implications of Harvard's investments. In the seven years that followed, the ACSR began to do just that--and its advice coincided with the Corporation's actions almost blow by blow.

But during this year's proxy season, the ACSR recommended that the Corporation support four shareholder resolutions chiding management and seeking reform. It placed the Corporation in the unfamiliar and embarassing dilemma of having to choose between opposing the resolution, or turning a cold shoulder to the body it created to gather information and offer advice on investment decisions. The Corporation balked, taking the safest way out of the dilemma by abstaining on the four resolutions. But the ACSR's renegade votes showed that, far from disappearing, the South Africa issue continues to irritate the Corporation--a thorn in its paw which the has now been institutionalized.

This spring the ACSR chose to energize the legalistic and noncommittal jargon of the Corporation's case-by-case review policy by chiding companies that fail to operate in the interests of South African Blacks. Marking this new commitment, it changed a decision of a year ago and supported a resolution requiring Caterpillar Tractor to investigate the transfer of machinery from the private to the military sectors in South Africa. The Corporation, noting the sudden change of the ACSR, abstained on the resolution and said it would not reconsider the vote until the ACSR accounted for its new conviction. Detlev F. Vagts '49, professor of Law and ACSR chairman, said the ACSR "will generally support resolutions calling for corporate review committees" in South Africa.

In late April, a similar decision proved equally unsettling to the Corporation when the ACSR voted in favor of a proxy calling on International Business Machines (IBM) to curtail its computer sales to South Africa. It noted that computers may be used to maintain the records for the country's passbook system and other aspects of apartheid. But the Corporation abstained once again, noting that IBM's computers could go just as easily to hospitals and school as to the supporting network of apartheid.

Indecisiveness also characterized two other votes of the Corporation. It faced a proxy calling on Atlantic Richfield Company to halt its expansion in Chile until the Pinochet government loosens its restrictions on civil rights, and another committing Occidental Petroleum--the parent company of the polluter of the Love Canal--to establish a policy for responsible disposal of chemical waste. With the ACSR backing the two resolutions, the Corporation was once again caught between its reluctance to oppose management and its desire not to counter the urgings of the ACSR. Again, it abstained.

ACSR's glimmer of activism caught the Corporation off-guard. Until this spring, the ACSR consistently followed the Corporation's line on shareholder matters, backing management's position on all proxies. In response to the ACSR's pro-management alignment, the undergraduate representative to the committee resigned in the winter of 1979, saying the ACSR failed to fulfill its mandate by subordinating the moral and ethical implications of Harvard's investments to the financial. This year, however, with a new undergraduate member, and with the alumni, faculty and graduate student members weathered by five laborious years of debate on Harvard's South Africa-related investments, the ACSR followed a more progressive, independent path.

Robert A. Cameron '49, a committee member and the president of Johnson and Higgins insurance brokerage firm, says the ACSR is less conservative than in the past and "in general, its members are thinking a bit more, not just blindly voting" at the urging of certain committee members. Richard Valelly, a graduate student in government and committee member, also notes a "more receptive frame of mind" on the part of faculty and alumni members; both he and Vagts attribute the more activist votes in part to the fact that "students did their homework and presented their arguments well."

But Jorge I. Dominguez, professor of Government and a committee member, believes the ACSR's "very clear break from the votes of last year" goes deeper. Dominguez says there is a general feeling within the ACSR that a policy of actively encouraging corporations to accomodate the interests of Blacks in South Africa is more consistent with the University's policy than the more passive course the Corporation has followed. "If you do not see divestiture as a justifiable means to bringing change in South Africa, then you must take an activist stand and often vote against management" to ensure that it liberalized its business practices in South Africa, Dominguez says.

Vagts agrees with Dominguez, citing an "impatience on the part of the committee members with the pace of the Corporation's policy, and a sense that one ought to be moving to firmer prodding of the corporations."

Although Dominguez notes that the Corporation and its advisory committee disagree over the degree of zeal the University should show in encouraging corporate progressivism in South Africa, he believes the Corporation moved to a more activist position this year, though not "as far or as fast as the ACSR. The Corporation is no longer casting affirmative votes with management and is not holding the same uncritical position as last year," Dominguez says, adding that "the direction of the Corporation and ACSR was the same this year, with both moving at different degrees." Valelly disagrees, however, saying the Corporation's "view of management is the same as always. It abstained on the resolutions only to see if the ACSR would maintain its activist policy."

Hugh Calkins '45, chairman of the Corporation's Committee on Shareholder Responsibility, says the Corporation is concerned that the sudden shift in the ACSR's votes may saddle Harvard a reputation of inconsistency in the corporate world. The Corporation, therefore, will spend the summer "outlining ways that Harvard can maintain a consistent policy towards its investments from year to year so we stay away from the rapid shifts in opinion of the ACSR," Calkins says. One such means, he notes, would be a base to monitor corporate practices in South Africa, which Harvard is currently discussing with the Carnegie Foundation and other groups.

In addition, Calkins says the Corporation may scale down its annual review of company practices in South Africa from the 50 in which Harvard holds investments to about eight each year. "By reviewing the practices of only eight or ten companies each year on a rotating basis, Harvard could look more closely at these companies and be able to encourage reform from a well-informed perspective," he argues. But whichever new statement or program the Corporation adopts, Calkins says he expects Harvard to "maintain a continuous plugging away on its South Africa policy, seeing that companies adhere to the principle of Harvard's policy."

Even if the Corporation keeps an eye on corporate activities, however, it may continue to do little to publicize its still-conservative votes. The Corporation has not reported on the case-by-case review it launched in 1978 in almost 17 months. It has rejected the use of shareholder resolutions as a means to encourage corporations to increase benefits to Blacks and to undermine apartheid. And it has asked only one corporation (the Timken company) to withdraw from South Africa--and that move came through a proxy initiated by another shareholder.

As the ACSR continues to recommend action, however, the Corporation will be hard pressed to maintain its passive policies. The days of reacting to the cries of disenchanted students and other shareholders are dwindling. The new activism of the ACSR shows that the controversy over Harvard's South Africa related investments is now institutionalized, virtually built into the Corporation's administrative process. Although most analysts label the ACSR's recommendations "moderate," the committee's new activism shows that the movement of the Corporation's administrative gears will bring the controversy to the attention of the Corporation as readily as zealous student opposition. And with skepticism toward Harvard's South Africa-related investments built into the Corporation, it will be increasingly difficult for Harvard's Fellows to ignore the implications of these holdings, and more unlikely that the controversy will fade away. The Root Of All Evil Harvard's Top 15 Investments IBM  $56,900,000 Schlumberger  $55,200,000 Exxon  $52,600,000 AT&T  $51,700,000 Mobil Oil  $48,300,000 Standard Oil (Cal.)  $45,200,000 Atlantic Richfield  $33,000,000 Standard Oil of Indiana  $29,500,000 Getty Oil  $26,300,000 Superior Oil  $25,500,000 General Reinsurance  $23,200,000 Halliburton  $19,200,000 General Electric  $17,700,000 Xerox  $15,900,000 Raytheon  $15,700,000   HARVARD HOLDINGS IN DOLLARS