A Clarification of the Current Dartmouth Policy

Since the 1978 vote of the Board of Trustees, and for many years prior to that vote, the College has not had any investments in South African firms or in corporations with their principal activities there. Although the 1978 vote of the Trustees did not include a prohibition of investments in South African firms, the Investment Office instructed all of its outside managers in 1978 that they should not invest "in any South African firm, or in any multi-national corporation whose principal activities are located in South Africa." This prohibition has been strictly adhered to since 1978.

Being confronted regularly in 1978 with shareholder resolutions calling for the implementation or endorsement of the Sullivan Principles by American corporations operating in South Africa, the College as a shareholder had to decide whether to support such resolutions. The Board endorsed the Sullivan Principles as a basic approach to personnel.piatters for American corporations doing business in South Africa and agreed to support "appropriate" shareholders' resolutions to implement them. In addition, the Board voted to "review the propriety of continuing an investor relationship with any corporation operating in the Republic of South Africa that fails to demonstrate adequate initiative in implementing the Sullivan Principles." Finally, "in order to provide a basis for ongoing assessment of developments" the Board elected to communicate with corporate management to elicit information on "company policy and practice."

The Board in 1978 did not vote to prohibit investments: 1) in companies refusing to sign the Sullivan Principles, or 2) in companies with any activities in South Africa (whether or not they have signed the Sullivan Principles), or 3) in companies issuing loans to the Government of South Africa or its parastatals.

Turning to that part of the 1978 vote which concerned the "continuation of an investor relationship" with any corporation operating in South Africa, it is important to note that divestiture is not automatic. Rather, implicit in the wording of the vote is the possibility that other means of persuasion short of divestiture can be employed before that final act. The vote was taken in context of the College's long-standing policy that Dartmouth, to quote the Advisory Committee on Investor Responsibility (ACIR): "would not initially invest in a particular corporation if that corporation's goals were clearly inconsistent with those of the Dartmouth community .... Clearly also, the College would divest itself in an orderly fashion of any investment holding in an organization Whose own policies were inimical to those of the College.

Thus, the 1978 vote clearly envisioned the case by case analysis of individual companies.

Dartmouth's general policy of divesting its holdings only in those situations when the Board either loses confidence in the management of a company, or if sufficiently serious moral issues have been raised for the Board to feel that the company is no longer worthy of the College's support, is consistent with the policies of the vast majority of sister colleges and universities.

Dartmouth is primarily an undergraduate liberal arts institution whose fundamental purpose is educational and not political or economic. As shareholders in corporations, institutions of higher education have an obligation to vote their shares when confronted with shareholder resolutions. However, most institutions are hesitant to respond to ethical considerations and social concerns by using their prestige and/or endowment assets to promote social or political goals. Instead, the radical step of divestiture is reserved for those corporations which persist in particular forms of behavior that depart substantially from broad societal goals. With the size of the College's endowment, a very large number of shareholder resolutions must be/reviewed on such wide-ranging issues as investments in U.S. companies doing business in South Africa, Chile, the Soviet Union and many more other countries, nuclear energy, hazardous waste disposal, affirmative action the list goes on and on. Although the ACIR was a moving force in the adoption of the 1978 vote on South Africa, in the ensuing years virtually all of the work of the Committee has focused on the analysis of shareholder resolutions. This has by no means been an easy task. The College prides itself on voting on each shareholder resolution which raises a social issue.

During the 1982-83 fiscal year the ACIR directed a substantial amount of its effort toward the College's investments in companies operating in South Africa. As the ACIR for the first time since 1978 began to review individual companies, this Office, at the instruction of the Trustees' Investment Committee, contacted those companies in the endowment which had not endorsed the Sullivan Principles. During the winter of 1983, the ACIR recommended certain changes in the College's existing policy. Since a number of Trustees had joined the Board in recent years (well after the 1978 vote), the Board at its April 1983 meeting decided to reassess its policy and to look beyond the South African question to examine the broader question of whether any use of the endowment for political and social purposes is desirable.

The broader issue raised at the April meeting was discussed at length at the August gathering of the Trustees. Prior to that meeting, the Trustees were provided with extensive materials concerning past Board discussions which gave the Board an opportunity to undertake a fully-informed review of its policies. At the August meeting, after a complete analysis and discussion, the Board determined to continue on its previous course.

During the fall of 1983, the ACIR began an extensive review of those companies in the College endowment which have not signed or endorsed the Sullivan Principles. Contrary to some of the exaggerated claims which have appeared, at that time there were approximately a dozen companies in the Dartmouth endowment which had not signed the Sullivan Principles. These companies as of September 30, 1983 had a fair market value of less than $11 million, representing approximately three percent of the College's endowment.

The ACIR's deliberations have not been easy, particularly since each company has responded differently to the College's inquiries in an effort to explain their operations in South Africa. Because several of the companies have been eliminated as part of the normal turnover in the endowment, and several others have elected to sign the Sullivan Principles, the number of non-signatories as of spring 1984 was down to about a half-dozen.

Faced with the problem of determining whether the reasons given for not signing were sufficient, and yet having limited financial information about the companies in South Africa, the ACIR decided, with the Board's concurrence, in late spring 1984 to send a list of comprehensive questions to each company, and to place the burden on each company to convince the ACIR that there were compelling reasons for not signing the Principles. The companies' responses will be reviewed this fall and ACIR will make its recommendations to the Trustees.

We encourage those who are interested in the Board's decision and the continued work of the ACIR to review the materials on reserve in Baker Library, including the annual reports of the ACIR, much of the material submitted to the Board of Trustees for its consideration, the Financial Report of the College, and a copy of the Sullivan Principles.

Associate College Counsel