University of Virginia Library

APPROVAL OF STATEMENT CONCERNING UNIVERSITY INVESTMENTS IN COMPANIES
WITH SUBSIDIARIES OR AFFILIATES IN SOUTH AFRICA

The following statement was approved by a divided vote. All Visitors present voted in favor except Visitor Holton who voted against the motion for approval of the statement.

Questions regarding investments in United States companies, subsidiaries or affiliates with operations in South Africa have been presented to the University in its capacity as a shareholder by the Student Council and others associated with the University who have a concern over the racial policies of the South African government. Specifically, the Board of Visitors has been requested to indicate its policy on divestment from the endowment of securities of U. S. companies with operations in South Africa. The Board, through the Finance Committee and the University's financial administration, has continuously monitored its investments in U. S. companies with operations in South Africa for the past three years. The report of the Vice President for Business and Finance dated January 19, 1981, provides a summary of the recent activities in this regard.

Responsibility for investment of the University's endowment funds rests with the Board of Visitors and particularly the Finance Committee. In meeting its fiduciary responsibility, the Board seeks to earn a satisfactory return on invested funds consistent with a prudent level of risk. Additionally, the Board seeks to manage endowments in harmony with the following considerations:

1. The University is a community of scholars with a rich heritage of diversity. As a public institution it is answerable to a wide variety of constituencies.

2. The University requires a sturdy and stable economic base to carry out its educational mission. Relationships with those who provide endowment funds to the University, and the results of endowment investment, have an important part to play in levels of tuition students pay, the level of faculty salaries, and the quality and quantity of support services that the teaching and research faculty receive.

The Board has engaged professional investment advisors to select those investments which in their judgement satisfy the investment guidelines established by the Finance Committee. Managers are evaluated on their ability to serve the University's economic interests. The Board depends upon its advisors to exercise good judgement in selecting investments in companies which are responsible corporate citizens, for as a practical matter the Board would have no way to monitor each company's position over the wide variety of possible social, economic and political issues.

In fulfilling its fiduciary responsibility, the Board must act in a prudent manner on all investment matters. While the cost of divestment and exclusion of approximately 300 U. S. companies from the endowment investment universe cannot be precisely ascertained, it is apparent from the report of the Vice President for Business and Finance that the potential cost and the increased investment risk are substantial.

In carrying out its mission, it is the Board's view that the University should not take a position with respect to issues of a political character. The Board believes that the political dimension of the act of divestment would in itself raise significant questions of fairness and consistency apart from its effects on the ability of the University to carry out its central purpose. The Board, however, is concerned with regard to the integrity and policies of organizations and corporations with which it associates in the course of its activities. For example, assurance of a corporation's commitment to equal opportunity is a prerequisite to execution of a contract with the corporation.

Similarly in investment of endowment funds in corporations doing business in South Africa, the University, in order to be informed, takes note of whether a corporation subscribes to the Sullivan Principles, and requests of corporations which do not, a statement of their policies regarding equal opportunity regardless of race in the course of their South African operations. Failure of a corporation to set forth a program of an affirmative nature in this regard will be reported to the Finance Committee for its consideration and report to the Board. To date no such failure has occurred.

There are many other issues which to many may not seem as compelling but which, at the same time, are considered by others to be of importance. However, it is the Board's view that fundamental questions, such as the desirability of discouraging or prohibiting American business presence in South Africa, should be decided through the political process.