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Coalition calls for MIT to release investments

The MIT Corporation has no plans to divest its investments in US companies with operations in South Africa, according to President Paul E. Gray '54.

The Corporation currently owns approximately $150 million worth of securities in corporations which do business in South Africa, said Walter Milne, assistant to the Chairman of the Corporation.

Milne is also secretary of the Advisory Committee on Shareholder Responsibility. The Shareholder Committee advises the Executive Committee of the Corporation on investment and proxy matters.

Investments in these corporations make up about one-third of the Corporation's endowment, Gray said. The total endowment is approximately $800 million.

Several major corporations with operations in South Africa that the Corporation has investment in are International Business Machines Corp., DuPont, Exxon, Kodak, Johnson & Johnson, Merc, General Electric, and Warner-Lambert, Milne said.

Milne said that of the 30 companies with operations in South Africa in which MIT is invested, only Boeing and Dun and Bradstreet have not signed the Sullivan principles, a set of guidelines for fair and equitable business practices in South Africa. Leon Sullivan, a chairman of General Motors, drew up the principles over a decade ago.

Milne explained that Boeing had only "five or six employees" in South Africa, and that there was no "practical impact" to the company's refusal to sign. Milne was uncertain why Dun and Bradstreet was not a signatory.

The Sullivan principles are voluntary, and consist of suggestions that urge corporations operating in South Africa to be "good corporate citizens," according to Gray.

The Sullivan principles include the principle of equal pay for equal work, regardless of the race of the employee; elimination of discriminatory facilities in the

workplace, such as segregated washrooms; an emphasis on involvement in improving South African education; and a commitment to training non-white South African workers for leadership positions.

The policy of the MIT Corporation is to encourage those corporations doing business in South Africa whose securities the Corporation holds to sign the Sullivan principles, Milne said.

The Arthur D. Little Co., a consulting firm, annually audits all corporations that have signed the Sullivan principles. It publishes the results in a "report card" that measures the performance of the signatories against the principles. The report card can be used as an investment guide in several ways, Gray said.

The Shareholder Committee uses the report card to suggest a course of action to the Executive Committee, Milne said. The committee's past recommended actions include: encouraging deficient corporations to improve their Sullivan records, urging banks to refuse loans to the South African government and convincing corporations against expanding their South African operations.

"There is nothing immoral or unethical about owning securities in corporations that are doing business in South Africa, as long as we are satisfied that they are a constructive presence there," Gray said.

There are approximately 10 million workers in South Africa, Gray estimated. "Of those, about 100,000 are employed by US corporations," he continued, "so that's only about one percent of the workforce."

The effects of the Sullivan principles are nevertheless widespread, Gray said. "There's kind of an amplifier effect as South African corporations and multinationals follow our lead," he said, estimating that perhaps up to a million employees were being affected by the Sullivan principles.

"Divestment is not a moral issue," Gray continued. "I don't think that the companies whose investments we hold would see a divestment as a moral symbol. I think they would see it as a misguided action of sentiment."

Furthermore, the pressure for divestment is unlikely to achieve the desired results, Gray said. "The divestment protests are based on the view that US corporations are a major part of the [South African] economy, which just isn't true," he continued.

There are about 300 US corporations with operations in South Africa, Gray said. These corporations control 3 to 4 percent of all fixed assets in South Africa, he added.

Approximately 400 West German corporations and 1000 British corporations maintain operations in South Africa, Gray said. "The United States is not a major player in the economic scene in South Africa."

The desired results of divestment would be the withdrawal of US corporations from South Africa, leading to a destabilization of the region, Gray said. This is unlikely to occur for several reasons, he continued.

MIT's divestment is unlikely to affect any corporation's operations, Gray said, because university endowments make up a very small percentage of total corporate investments.

There would be no measurable impact if university-owned securities were divested, he claimed, as the market price would not change appreciably -- the securities would be purchased by another investor anyway.

Even assuming that the corporations responded to the divestors, it is not possible for a company to withdraw all of its assets from South Africa, Gray continued. The South African government does not allow corporations to repatriate. Instead, a withdrawing company must sell its operations to a South African corporation or another multinational.

"This results in a simple change of ownership, with little return for the United States," said Gray.

He suggested that the marketplace is a more influential factor with most corporations than endowment investments.

Gray emphasized his respect for those concerned with the problems in South Africa. "We all have the same ends in view," he said. "We're just using different means."