The following are excerpts from the report issued earlier this week by the Advisory Committee on Shareholder Responsibility (ACSR). Part II, which recommends that Harvard divest from all companies doing business in South Africa, was supported by six members of the committee and opposed by five, with one abstention. Part III was supported by 11 members of the committee, with one abstention.

The ACSR--composed of students, faculty and alumni--makes non-binding recommendations to the Harvard Corporation on ethical questions related to the management of the University's endowment. The governing Corporation is now considering the report.

Advisory Committee on Shareholder Responsibility

Report on Harvard's Role as Shareholder Companies Doing Business in South Africa

During the past year Harvard's investment in companies that do business in South Africa have continued to provoke intense concern on the part of many in the Harvard community whose views have been conveyed to the Committee (ACSR) in numerous letters and written statements and in oral statements made at an open hearing held by the Committee in March. Many of these communications express profound dissatisfaction with existing University policies regarding Harvard's ethical responsibilities with respect to such investments.

As the result of initiatives undertaken by the Corporation Committee on Shareholder Responsibility (CCSR) and others suggested by the ACSR, several modifications have recently occurred in the implementation of Harvard's existing policies with respect to such investments. The committee has considered these modifications and other alternatives to existing University policies. This process of study and deliberation has persuaded the Committee that existing policies must be substantially changed. As developed below, however, the Committee is divided on the extent and nature of the changes that are appropriate.

Part I of this report sets forth the recent history and background of Harvard's policies with respect to such investments. Part II concludes that Harvard should divest itself of all shareholdings in companies doing any business in South Africa. Part III recommends major changes in the principles of social responsibility applied by Harvard to portfolio companies with South African operations; specific deadlines for executing those changes; and a regular process of monitoring and reporting on the implementation of Harvard's policies with respect to such companies.

I

In, 1978 the ACSR extensively studied and issued a unanimous report on the shareholder responsibility issues raised by Harvard's investments in companies doing business in South Africa. The Committee first concluded that South Africa presented unique issues of shareholder responsibility and that Harvard should therefore develop special policies for its investments in companies doing business there (hereinafter referred to as portfolio companies).

The Committee concluded that if a company decided to continue to do business in South Africa, it should adopt practices and policies aimed at eliminating all aspects of apartheid in the workplace (including unequal pay and the underrepresentation of non-whites in management and supervisory positions) and improving employees' lives outside the workplace in such areas as housing, schooling, and health facilities; establish an adequate minimum wage; and adopt policies permitting non-white employees to engage in collective bargaining. The Committee also concluded that U.S. banks should not make loans to the South African government or its public corporation.

Finally, the ACSR concluded that divestiture by Harvard might be appropriate in cases where companies have shown "intransigence in adopting policies advocated by Harvard" or where "management policy has demonstrated direct and substantial support of apartheid," as, for example, by making loans to the South African government.

In 1978 the Harvard Corporation adopted many of the ASCR's specific recommendations and enunciated four basic policies which have, since 1978, guided the decisions of the CCSR and formed the basic framework for the ACSR's recommendations to the CCSR:

1. Harvard does not invest in companies that conduct a majority of their business in South Africa.

2. With regard to companies doing less than 50% of their business in South Africa, Harvard will exercise its rights as a shareholder by voting in favor of resolutions that: a) encourage the use of enlightened employment practices and affirmative actions designed to improve the skills, opportunities, and the quality of life for the black majority of South Africa; b) encourage reasonable disclosure of information that is not already available and that is necessary in order for shareholders to exercise judgment with regard to the company's practices; c) call for withdrawal of the company entirely from South Africa, but only in cases where its presence clearly does more to strengthen apartheid than to ameliorate it or where the company is intransigent over a substantial period of time with regard to the implementation of ethical employment practices.

3. With regard to companies doing less that 50% of their business in South Africa, Harvard will consider divestiture for ethical reasons only when the company has substantially failed to implement reasonable ethical standards, defined as the Sullivan Principles or equivalent policies, when "persistent efforts over a substantial period of time to persuade the company to change its policies have demonstrably failed," and where there is clearly no hope for improvement.