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September 09, 1982 - Image 9

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The Michigan Daily, 1982-09-09

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The Michigan Daily-Thursday, September 9, 1982-Page 9
South Africa policy

* The University continues to invest in
several U.S. companies whose conduct'
in South Africa does not meet anti-apar-
theid guidelines, in direct contradiction
to a 1978 Regents' policy, a Daily
review of investment records shows.
Correspondence between the Univer-
sity and the companies in which it in-
vsts, and reports from two indepen-
dent research agencies, show that
several of these companies do not com-
with one or more of the Sullivan
inciples-a set of guidelines for U.S.
companies working in racially-
segregated South Africa. Investing in
these companies appears to be a
violation of the University Regents'
1978 resolution opposing apartheid in
South Africa, a policy adopted in
response to earlier student protests.
THE UNIVERSITY policy asks com-
panies to affirm the Sullivan Prin-
diples; work toward the enhancement
0(0 political, economic, and social rights
fpr their employees in South Africa;
and public disclosure of corporate

progress toward achievements in these
The investment office currently
monitors 42 University stock and bond
holdings to check compliance with the
1978 resolution. The policy states the
University will divest from companies
that do not "within a reasonable period
of time take reasonable steps" to im-
plement the measures outlined in the
Sullivan Principles.
To monitor the companies, the
University uses the Washington-based
Investor Responsibility Research Cen-
ter (IRRC), an agency that examines
and reports on South African sub-
sidiaries for educational institutions
and other investors; Arthur D. Little
Inc., a private consulting firm retained
by Rev. Leon Sullivan-developer of
the principles that bear his name; and
private correspondence between the
University and the individual com-
THE UNIVERSITY primarily uses
the investor services to alert the ad-
ministration to any companies that

might be violating the Regents'
guidelines, said Norman Herbert, the
University's investment officer, who is
responsible for monitoring the com-
panies. But most important in the
evaluation is the individual contacts
and direct exchange of information
with the companies, Herbert said.
The Little firm assigned poor ratings
last year to 13 of the companies in
which the University invests part of its
$120 million endowment. But the
University administration considers all
13 companies to be making sufficient
anti-apartheid progress to comply with
the Regents' policy.
In making its evaluation, the Univer-
sity has allowed reportedly minimal
corporate contributions outside the
South African workplace to substitute
for the deficient wages the companies
pay their black employees.
International Telephone & Telegraph
Corp.-a company in which the Univer-
sity holds a small amount of
stock-pays its highest ranking black
hourly employees in South Africa $345 a

month less than its lowest ranking
white workers, according to an IRRC
report. And, IRRC said, the company's
fringe benefits for blacks continue to
fall short of those offered at other U.S.
IRRC ALSO said that ITT's minor
contributions toward education in South
Africa are not enough to make up for
the company's inadequacies in wages
and benefits to its own employees.
Despite the company's concern for
black education, IRRC said that
"unlike almost every other company
interviewed, (the ITT subsidiary) has
no formal program to help employees
finance education for either themselves
or their children.
"The company has also given no in-
dication that it intends to improve its
minimum wage or fringe benefits.
Without improvements in these areas,
few black employees are likely to ob-
tain the discretionary income they need
to attend adult education courses,
school their children, or buy homes,"
IRRC concluded.

tate divestment bill
faces U' resistance

Legislation passed in May by the
state House of Representatives may
prompt a constitutional battle over who
has the ultimate authority over Univer-
sity investments.
The House-approved bill would
require all state universities and com-
munity colleges to withdraw their in-
vestments from U.S. companies with
business operations in racially-
segregated South Africa-a move
which the University has opposed for
An amendment to the bill requires
schools to divest from companies with
holdings in the Soviet Union because of
that nation's human rights violations.
But University officials say that if the
bill becomes law, the University likely
will ignore it. They maintain that the
University's Regents have autonomous
control over how the institution uses its
A state mandate to divest "would be
an unconstitutional exercise of
legislative authority," said Thomas
Roach, a lawyer and Democratic
University Regent from Saline.
University officials point to a section
of the Michigan Constitution which
states tit the Regents have "control
and direction of all expenditures from
the institution's funds."
But state Rep. Perry Bullard (D-Ann
Arbor), who sponsored the bill, disputes
*the University's claim. He said that
similar measures have been successful
in other states.
A Bullard aide, Dave Cahill, said that
it is within the state's police power to
enforce civil rights legislation. Cahill
compared the state's authority to en-

force anti-discriminatory legislation
with its power to arrest suspected
criminals within the confines of the
The Regents' refusal in 1978 to divest
from companies working in South
Africa was a motivating factor behind
the state legislation. Michigan State
University, along with a number of
other schools in the nation, divested in
the late 1970s..
Rather than withdrawing the Univer-
sity's investments in these companies,
the Regents argued that the University
could use its financial leverage to en-
courage progressive change in the
apartheid policies of South Africa. In
1978, the Regents passed a resolution
calling on the companies in which the
University invests to affirm non-
discriminatory employment practices.
The Regents also promised to divest
from any company which they deter-
mine is not making sufficient progress.
So far, the University has sold off its
holdings from one company but main-
tains investments in more than 40
others that do business in South Africa.
The Regents decided on their 1978
policy after a series of protests and
disruptions from students demanding
divestment. The demonstrators argued
that businesses operating in South
Africa support the economy of a racist
society, and hence racism itself. They
felt the University, in turn, should not
support those companies.
Since 1979., however, the, campus
movement on the South Africa issue has
all but vanished, and attention has
focused on action at the state level. The
state Senate is expected to take up the
bill this fall.

Reid Weedon, who directs the South
Africa evaluation for the other research
agency, Arthur D. Little Inc., con-
curred that progress for employees was
most important. Although he would not
comment on the ITT case, he said, "A
company must meet the basic
requirements first (such as those for
wages and fringe benefits), before it
can be accepted."
Brinkerhoff, University vice president
and chief financial officer, reported to
the Regents in March that they con-
sidered ITT to be in compliance with
the University's policy. They noted
ITT's financial and management sup-
port of St. Anthony's School, a multi-
racial training center, and continued
support of black South Africans at
American universities.
During the past 10 years, however,
ITT's contributions to the school have
amounted to $450,000 and the company
has supported a total of five black South
Africans in America, according to a let-
ter to the University from ITT Vice
President John Navin.
A second company that received a
poor rating from Little, but which the
University considers acceptable for in-
vestment, is INA Corp. (University in-
vestments of $1.9 million). As in the
case of ITT, Herbert and Brinkerhoff
pointed toward INA's efforts in various
South African educational projects as
evidence of INA's anti-apartheid
THE UNIVERSITY financial officers
said that while INA's "small size of
operation prevented it from increasing
its activities with respect to implemen-
ting the (Sullivan) Principles in 1980-81,
the company had not decreased its ef-
forts over the period."
But Weedon said his firm "bends over
backwards to take into account the size
of the company" when making an
evaluation. He said that he does not feel
INA's complaint with respect to its size
is justifiable.
Asked if a company could use its
smaller size continually as an excuse
for not making improvements, Herbert
said, "If and when we get more detailed
information, then we'll see. If there's no
(employee) turnover, then it's difficult
(for a company) to effect change."
A THIRD company in which the
University invests, Squibb Corp., paid
one of the lowest wages of any firm
visited by IRRC in 1980, according to an
August 1981 report. Herbert and
Brinkerhoff reported that Squibb
(University investments of $2 million)
was in compliance with the Regents
policy in March. In late July, Squibb
reported to the University that it had
sold its South African company.
The University's policy also asks
companies to fully disclose their ac-
tivities in South Africa, but one cor-
poration has refused several year's
requests for information and a second
still is being pursued by the investment
office to justify its poor rating from Lit-
Since 1980, Carnation Co. (University
investments of $330,000) has denied

several University requests for infor-
mation regarding the company's
progress in South Africa, despite one
warning from Herbert in December
1980 that "the University's continued
investment in Carnation is predicated
on your prompt and complete response
to our request for information."
THUS FAR, Carnation has refused-to
respond to three University questions
essential to evaluating the company's
performance. The questions deal with-a
breakdown by race of Carnation's
South African employees, statistics on
wages paid to both whites and ,non-
whites, and a description of the oppor-
tunities for promotion available to non-
white employees.
Herbert said in July that a change in
personnel at Carnation gave him hope
that the company would provide com-
plete responses to the University. But
Herbert has not received a response to
a questionnaire he sent to Carnation in
late June, and he sent a follow-up letter
August 26 asking again for a response.
Carnation, which has also refused
IRRC requests for interviews and on-
site visits, has stated that disclosing the
information the University has
requested would put the company at.a
disadvantage with its competitors. -,
ANOTHER company that has not an-
swered investment office inquiries suf-
ficiently, Motorola, Inc., was asked in
early June to explain its poor rating
from the Little firm, according to Her-
bert. Motorola's response was
inadequate, Herbert said, and he sent
them another letter requesting infoir-
mation in July. Motorola has not
responded yet.
Herbert said he finds direct contact
with the companies most useful iii
making his evaluation because the Li-
tle evaluation alone is "inadequate an
incomplete." He said he uses the Littl
survey to identify those companies that
need further examination.
Herbert also hinted that the Little
company, which is primarily a business
consulting firm, has a potential conflict
of interest when it evaluates a company
in an industry with which it regularly
The responsibility for assuring. that
companies comply with the RegefTt$
resolution rests with Herbert:
"Brinkerhoff and myself are those who
review (the South African issue) most
closely, though Brinkerhoff does not
look at all the corespondence. H
leaves it up to the investment officer,"
Herbert said.
BECAUSE "THERE are only so
many hours in a day," Herbert said he
employs a graduate student to help him
in the monitoring project. He said that
person is responsible for conducting
most of the research.
Beyond that, there is no direct review
of the companies within the University.
Both the Regents and a faculty commit
tee review annual summaries of the
monitoring process, but neither body is
closely involved.
In fact Physics Prof. Lawrence
Jones, who chairs the faculty comrit
See 'U', Page 11

Daily Photo
State Rep. Perry Bullard (D-Ann Arbor) is sponsoring a tilt that may force
the University to divest from companies with operations in racially-
segregated South Africa-a move the University traditionall has resisted.

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