Repository: UIHistories Project: Board of Trustees Minutes - 1972 [PAGE 493]

EXTRACTED TEXT FROM PAGE:

1972]

U N I V E R S I T Y OF I L L I N O I S

483

its program for employment of the disadvantaged, while at Princeton, students identified X e r o x as a target corporation because of its implied support of apartheid and racism in southern Africa by doing business there. The writers further point out that any company which trades with South Africa may support that economy as much as a company with affiliates there. Perhaps no portfolio of securities could be established with no relationship with South Africa, Further, the writers indicate, purchase by the United States government of gold at $35 an ounce from South Africa is a form of subsidy in which every American participates — particularly since cash is a non-interest bearing debt of our government. T h e Carnegie Corporation has posed the question: is it better for General Motors to provide implied support for apartheid in South Africa by remaining there or withdraw, thereby depriving some three thousand nonwhite employees of their jobs? In the area of pollution, it seems agreed that almost all corporations pollute. How does the university determine what degree of pollution is the threshold for action ? It has been suggested that a screening process could be developed for questions such as these through use of reports or resolutions of the United Nations or reports or 'indictments' of federal or state agencies. 4 If the legal aspects of these devices were settled, they present a flaw. Once reported upon or 'indicted', the corporation is presumed guilty — in at least most cases — until it has been shown to have been found innocent. Due process and fundamental fairness would seem to preclude such solutions as these. Add to these difficulties the fiduciary aspect of trusteeship of institutional funds. For example, the rate of return of companies doing business in southern Africa is, in many instances, higher and more stable than others — in large part because those companies are said to be the most innovative, growth-minded, and successful companies. 5 The cost of transactions themselves — buying and selling — can be substantial. In an illiquid market, trading of large blocks of stocks could have important financial effects. Finally, to take precipitate or aggressive action could invite retaliatory strategies by corporations and governments. James Perkins, former President of Cornell University, has been quoted as asking, "In a contest of economic coercion, does anyone really think the university would win?" Most of the private universities considering the general problem have investment portfolios many times greater than those of public universities. Although they maintain professional advisers and staffs, they have expressed dismay at the prospect of maintaining surveillance over the wide variety of companies in which they own stock." In most cases, given the complexity of the issues involved, it is unlikely that the advisers who are qualified to counsel the University on purely financial grounds are equally qualified to deal with problems of social responsibility — and unrealistic to ask them to do so. In an attempt to answer this question, the Princeton University Community Council's Resources Committee suggested the following guidelines (which are fairly representative of the approach of other private universities) : " 1 . It is necessary to show that the corporation is directly involved in the practice. 2. T h e corporation's practice must be satisfactorily documented. 3. Deliberate actions will be regarded more seriously than inadvertent actions. 4. T h e distinctiveness of the offense will be considered; an offense would be much more serious if the company were exceptional or alone in committing it." B. What are the opinions of the university constituency with respect to the specific action contemplated? The second major problem concerns the difficulty of determining the wishes of the university's constituency with respect to these problems. T h e trustees of Stanford University, pointing out that it is precisely on issues of this kind (corporate "guilt") that members of the university community often differ most strongly,

4 F . I . S . A . , B.S.A., U.G.S.A., and G.S.A. statement of June 8, 1971 r e : University (of Illinois) policy concerning investments and the voting of stock proxies. 5 Malkiel and Quandt. • Stanford University, Report of the Trustees ad hoc Committee on Investment Responsibilities, April 13, 1971.