South Africa - The Beginning

 The case of South African apartheid is the most important case study in looking at Yale’s practice of ethical investing, because it represents the longest and the largest instance of student advocacy concerning Yale’s investments, lasting for more than eight years and involving numerous student and community organizations.  More importantly, the formation of Yale’s ethical investment policies was largely in response to the ethical questions raised by the South African situation.

The anti-apartheid movement at Yale and in New Haven, which achieved national and international recognition, was largely unsuccessful in its attempts to petition Yale to act on its own ethical investment guidelines.  While Yale certainly provided leadership in the academic study and intellectual development of ethical investing, it never practiced even the minimum guidelines, the Sullivan principles, with regards to its own investments in South Africa.  This case study will not report on the effectiveness of the global divestment movement in pressuring the South African government to end apartheid.  Rather, we focus on the disparity between Yale’s stated policies and its actions.

What follows is a summary of our research of the development of Yale’s ethical investing structures within the historical context of student anti-apartheid work.  This research is based on the documentation of the Yale-New Haven Anti-Apartheid movement in the Sterling Memorial Library’s Manuscripts and Archives collection, which includes student research about the Yale Endowment and the situation in South Africa, records of student actions, as well as the public statements Yale made about its policies regarding South African investment during this time period.  We did not have access any of the minutes from the Corporation meetings, the CCIR meetings, or even the ACIR meetings, which means little information about any of the shareholder letters the ACIR may or may not have sent, except for what was documented by Yale student research at the time.  Neither did we have access to Yale’s actual ethical investment policies.  All of these important records are restricted, and we presume they are sealed for fifty years, like the rest of the Corporation’s records.

Yale’s Policies and Actions:
The publication of The Ethical Investor

1969—Yale administrators, Corporation members, faculty, and students, as well as Associate Chaplain Samuel N. Slie began conversations about the social responsibilities of institutional investors.[1]
1969-1970—An interdisciplinary academic seminar explored the responsibility of universities “to consider the social consequences of corporate activities from which these institutions derive an endowment return.”[2]
1972—Publication of The Ethical Investor.
1972-1973—Creation of the Advisory Committee on Investor Responsibility, which was meant to implement the recommendations of The Ethical Investor.[3]

1978- the Ad Hoc Committee on South African Investments

After significant dialogue with the Yale/New Haven Anti-Apartheid Committee, an Ad Hoc Advisory Committee on South African Investments was formed to study the issue and produces a report.  Conclusions and recommendations of this report included:

   1. Yale had a moral responsibility as an educational institution and as “an investor in banks and companies which do business in South Africa” to take action against apartheid.
   2. “Yale’s participation in businesses that [were] insensitive to the dictates of human rights and that [inflicted] social injury of this kind [impaired] its capacity to maintain the moral climate necessary for the proper discharge of its educational function.”
   3. Yale should have undertaken a “multifaceted, incremental policy, one of escalating pressure,” which only utilized divestment as a last resort.   Specifically, the committee recommended:

    * Asking banks to stop lending money to the South African government
    * Divesting from banks which refused to do so

4. Additionally, two of the committee members went further to recommend that Yale engage in dialogue with all of the American companies in which it owned stock, and not just banks, about the possibility of terminating their business in South Africa
With regards to the University’s decision making structure on investor responsibility, the Committee made two further recommendations:

“In order to avoid even the appearance of a conflict of interest, the Yale Corporation will wish to make note of the suggestions within the University Community that those members of the Corporation directly affiliated with companies or banks doing business in South Africa abstain from voting on the recommendation of this Report; and that the President and Provost of Yale not serve as directors of companies and banks doing business with or in South Africa.”[4]

That the university study the option of creating a new decision making structure for carrying out its investor responsibility.  The committee concluded that :

"The present scheme allocating the decisional authority to the Corporation can be questioned, first because it causes many conflicts of interests, as revealed by the South African case, inasmuch as the criteria for University policy do not necessarily coincide with those that govern the businesses of which many Corporation members are affiliated; second, because giving content to the duties of the ethical investor invariably raises issues that are likely to transcend the special qualifications of the members of the Corporation; and third, because the Corporation does not include representation from significant sectors of the University Community, namely, the faculty, students, and staff."

The Corporation’s Response
Also in 1978, the Corporation responded to some of the suggestions in the Ad Hoc Committee’s report by publishing a statement on “Ethical Investment Policy and South Africa.”  This policy provided for the university to urge the companies in which it owned stock to sign on to the Sullivan Principles (see appendix B).  In theory, after an undefined “reasonable amount of time,”[5] the University could consider the possibility of divesting from companies which did not follow the Sullivan principles or alternatively, had not committed to undefined “equivalent performance.”[6]   The Corporation made minor changes to this policy in October of 1984 and November of 1985, to acknowledge the ‘pass’ laws and the fourth amplification of the Sullivan Principles, respectively.[7]
In the face of widespread student and community support for complete divestment, Yale organized a fact-finding trip to South Africa during the summer of 1986.  Despite an ongoing academic boycott of South Africa, Yale intended to make connections with South African Universities during this trip.[8]

As late as September of 1986, barely a month before a Republican-controlled Congress passed the Comprehensive Anti-Apartheid Bill over President Reagan’s veto, Yale was still publicly supporting a policy of “constructive engagement” with the South African government[9].  In reality, Yale was not even enforcing its own policies of ensuring that the companies in which it owned stock had signed onto the Sullivan Principles[10].  In contrast, over 40 universities, 70 national and local churches, the state legislatures of Massachusetts, Connecticut, and Michigan, as well as the cities such as Washington DC and Philadelphia had partially or completely divested from South Africa.  Over twenty-five other cities had pending legislation regarding divestment.[11]

The Context
During these years, the Yale-New Haven Anti-Apartheid movement had achieved national significance because of the Northeast Anti-Apartheid Conference it organized and hosted in Dwight Hall[12].   Internationally, Yale student and community activism had endorsed by both the African National Congress and Bishop Desmond Tutu:[13]

“We in the African national congress of South Africa would like to thank you the students & workers of Yale University for your efforts to isolate the racist regime of South Africa and put pressure on the transnational corporations which have been giving support to that white minority government.  Your efforts serve to enhance the struggle of the people of South Africa who have been denied their rights to self-determination and to live as human beings in the land of their forebears.”
---message from the African National Congress

“I endorse and support the activities of the Yale Divestment Campaign and I join with those faculty, students, staff and community members of Yale University in calling on the board of trustees of Yale University to divest completely of its stocks in companies doing business in South Africa.  Economic sanctions are our last chance for reasonable, peaceful change in South Africa.  I call upon the trustees of the Yale Corporation to make the moral decision.”
--Bishop Desmond Tutu

Furthermore, Yale student research showed just how little the University had actually done to follow its own policies. According to research done by the Coalition Against Apartheid, during the mid-1980s Yale still had over $300,000,000 invested in South Africa. (This amount is confirmed by Yale’s Vice President for Finance’s 1986 public report.)  One third of this money was invested in companies which were not complying with the Sullivan Principles, and one fourth of this money was in banks that still lent money directly to the South African government.  These students wrote in their report that “the record of [Yale’s] companies is dismal, and actually worsening, to the point where about 90% of our holdings are divestible under current Yale policy.”[14]

It should be noted that these Yale students made every possible attempt to dialogue with the ACIR about following through on their policies, by “attending all ACIR meetings in 1983/1984 and 1984/1985, regular correspondence with the CCIR and the Corporation as a whole, a presentation to the entire Corporation on April 4, 1984, meetings with individual corporation members and administrators in 1984/1985, and a meeting with the CCIR in December 1985.”[15]

Yale student research also uncovered the fact that at least four members of the Yale Corporation had significant financial ties to companies that operated in South Africa, including one corporation member, Mr. Loucks, who had over $5,000,000 in holdings, as well as a chairmanship and two directorships in companies that did business in South Africa.[16]  Apparently, the 1978 Ad Hoc Committee’s recommendation that Corporation members affiliated with such companies should not participate in the decision-making about Yale’s South African investment policy had not been accepted by the Corporation.

This case study shows that Yale did not follow through even on the minimal guidelines (namely, making sure their companies followed the Sullivan Principles) which the Corporation had publicly agreed to in response to the systematic violence of South African apartheid.   This complete failure of the structures Yale had set up for ethical investing occurred in the face of a powerful, long-lasting and internationally significant anti-apartheid movement in the Yale and New Haven community, and at a time when there widespread public support for divestment in the US as well as an enormous global divestment movement against South Africa.  Given this, we can only conclude that there is little hope for the University to ever respond effectively to cases of ‘grave social injury’ caused by companies it owns, unless significant reforms are made to the ACIR/CCIR structure.

[1] The Ethical Investor, by John G. Simon, Charles W. Powers, Jon P. Gunnemann, Yale University Press, 1972 (page vii)
[2] Ibid.
[4] Ad Hoc Committee Report, pages 12, 13, 14, 24, Sterling Memorial Library Manuscripts and Archives
[5] “Yale University Investments and South Africa,” September 19, 1986, Office of the Vice President for Finance and Treasurer., Sterling Memorial Library Manuscripts and Archives
[6] Dissenting Statement of four corporation members, The Rt. Rev. Paul Moore Jr., Eleanor Holmes Norton, Deborah L. Rhode, Paul E. Tsongas, November 2, 1985. Sterling Memorial Library Manuscripts and Archives
[7] “Yale University Investments and South Africa,” September 19, 1986, Office of the Vice President for Finance and Treasurer., Sterling Memorial Library Manuscripts and Archives
[8] Ibid.
[9] Ibid.
[10] Dissenting Statement of four corporation members, The Rt. Rev. Paul Moore Jr., Eleanor Holmes Norton, Deborah L. Rhode, Paul E. Tsongas, November 2, 1985. Sterling Memorial Library Manuscripts and Archives
[11] A Pamphlet on Divestment by the Coalition Against Apartheid, c. 1985-1986, (page 6), Sterling Memorial Library Manuscripts and Archives
[12] Student flyer, Sterling Memorial Library Manuscripts and Archives
[13] Student flyer c. 1985-1986, Sterling Memorial Library Manuscripts and Archives
[14] A Pamphlet on Divestment by the Coalition Against Apartheid, c. 1985-1986, (pages 6-7), Sterling Memorial Library Manuscripts and Archives
[15] Student flyer, c.1986, Sterling Memorial Library Manuscripts and Archives
[16] Student flyer, Sterling Memorial Library Manuscripts and Archives