vious year and elected to support disclosure, even though they felt the amount of detail asked for was excessive. One institution pointed out that IBM had already disclosed the information requested at last year's APIC seminar.

Other institutions, regardless of how they finally decide to vote, said they preferred to consider only the IBM proposal itself and not the history of the resolution. Still others saw the 1973 disclosure as a sign of bad faith on IBM's part but voted with management in 1973, citing the company's good record in South Africa. (In testimony before the House subcommittee on Africa, Assistant Secretary of State for Africa David Newsom commended IBM for being the only American firm paying all its South African employees above the minimum effective level.)

One institution that abstained on the resolution, citing IBM's record, wrote a letter to management urging the company to answer specific questions regarding products and services provided to the South African Govemment and suggested that management make available to all shareholders the answers to Congressman Diggs' questionnaire.

Of the four resolutions concerning Namibia (South West Africa). two received votes that were among the lowest and two were among the highest of the year. The first two, American Metal Climax and Newmont Mining, with 1.8 per cent and 1.4 per cent votes, respectively, were asked to wind up operations in the formerly mandated territory, where they have been doing business since 1946. Phillips Petroleum and Continental Oil-the other two firms-were asked to stop new exploration activity off the Namibian coast. These resolutions received a 4.2 per cent and a 5.2 per cent vote, respectively.

The main rationale behind the filing of all four resolutions was that South Africa's mandate over the territory had been revoked by the United Nations, an action supported last year by the World Court. Because of U.S. policy specifically discouraging investment in Namibia, the church resolutions pointed out that stockholders could not be certain of their liabilities if an independent, indigenous govemment came into power. Many institutions bought this argument and also the one that urged the companies not to cooperate with the South African Government (as they must if they are to invest in the area) in order to stop the spread of South Africa's apartheid policies. But most made the same distinction made by the State Department in enunciating its policy toward Namibia: that the weight of the U.S. position falls mainly on those firms that initiated their Namibian investments after new U.S. policy was announced in 1970. It was on this basis that AMAX and Newmont received low votes; their early investment would likely qualify them for U.S. Government aid in obtaining recompense in case of seizure.

The Namibian votes illustrate a point that arose time and again during the spring. More often than not, institutions voted on quite technical, legalistic grounds, rejecting because of language resolutions they said they affirmed in principle.

Perhaps the season's most confusing bit of byplay occurred when a second resolution filed with Newmont was omitted from the company's proxy material with the acquiescence of the SEC. When the SEC later reversed its stand, the company had already printed its proxy material. Thus the resolution (calling on Newmont to establish equal-opportunity as a principle worldwide, with special reference to Namibia) had to be raised from the annual meeting floor by Dr. Howard Schoemer of the United Church of Christ. According to Richard B. Leather, secretary and general counsel for Newmont, the measure got one-third of one per cent of the total vote, only 400 votes more than the 65,500 shares owned by the United Church of Christ.

Newmont originally told the SEC that it would be illegal, according to South African law, for the company to initiate an affirmative action program for Black workers in Namibia. Stating that its papers of incorporation specifically barred the company from engaging in illegal activities, management declared it could not even consider the resolution.

When the SEC reversed its decision, it noted that the United Church of Christ's supporting statement (the 200-word paragraph ac

companying the resolution) asked the firm to take all "legal" steps to achieve equal opportunity. The Newmont equal-opportunity resolution thus highlighted a problem that remains murky-whether a res olution must stand on its own or whether supporting statements are proper vehicles for clarification.

And, of course, many observers felt it was odd that the SEC had never considered the legal status of Namibia. The SEC general coun sel who spoke with Update was not aware that the U.S. no longer recognizes South African law as legitimate in the territory.

The United Church of Christ also filed an equal-opportunity resolu tion with Mobil Oil, but the company, while opposing the proposal in its proxy material, did not challenge it with the SEC.

The Mobil resolution received a remarkably small percentage of votes-1.8-and caused no small amount of grief among "liberal" institutional investors, who continually asked. "How can anyone vote against equal opportunity? The answer was that many institutions were bothered by the resolution's call for worldwide equal opportunity, believing that management simply could not be held accountable for initiating affirmative action programs in such places as Moslem countries where women, by force of custom, could not be treated the same as men. Others expressed concern that the company might be called upon to do something illegal in South Africa.

Some institutions who are included in the 2.9 per cent abstention vote sent letters to Mobil expressing their concern for the employment problems of Mobil in South Africa and explaining their difficulty with the resolution.

Although the First National City Bank resolution fell into a category that should have easily attracted a sizeable number of antimanagement votes, the resolution-calling for the company to dis close information about its South African operation-received only a 1.01 per cent vote. The first reason many institutions cited for not voting for this disclosure was that the annual meeting, held March 27, took place before many of the social-responsibility committees had even gotten together for the first time. "I guess we just massed that one," an institutional investor remarked at the APIC seminar held the day after the First National City Corporation meeting, adding that his organization held half a million Citicorp shares or fourtenths of one per cent of the 48 million Citicorp shares represented at the meeting

In an effort to further explain the First City vote, one institutional representative, whose institution had voted for all disclosure resolutions in 1972 but this year abstained or voted against all the shareholder proposals, noted: "I guess the composition of our board changed somewhat from last year to this and has become more conservative. The first vote that came up was First National City and we have three bankers on the board who argued vigorously against it. If the First National City vote had not come up first, I doubt that they would have argued so strongly against the other disclosure resolutions."

The resolution that called on Exxon Corporation to establish a committee to look into the company's plans to explore for oil off the coast of Angola raised many problems. The church group worded its proposal so it would not conflict with what the SEC might interpret as shareholder interference with management's prerogative to make day-to-day business decisions. Instead of requesting that the company reverse its decision to apply for an exploration license off the Portuguese territory, it asked that the firm form a committee with representation from the African liberation forces in Angola, from the churches, from organized labor and the American Black community-a committee that would look at all the ramifications of such a move.

Observers who had hoped that they would be able to see some clear institutional voting pattern that differed from the pattern of voting on last year's Gulf Oil resolution were disappointed. The Gulf resolution had called for disclosure of information on the company's involvement in Angola. Even people who might have voted for the Gulf resolution simply as a protest against Gulfs dealing with the Portuguese colonialists pointed out that the corporation had been involved in the colony since before the inception of the independence

This chart gives the voting figures on southern African resolutions Some companies disclosed the number and percentage of abstentions. New mont and General Electric would not release the number of shares represented a the meeting (the figure needed to compute the abstention rate). GE calling is unavailable. Newmont saying that it "might be used for statistically mproper purposes." Thus, the percentages of votes for and against the GE and Newmont resolutions represent only those shares that were voted and are not a percentage of all shares represented at the meeting. (In all other cases, percentages are based on all shares represented at the meeting)

There is, of course, a danger that abstention rates will be misinterpreted Abstentions--failures to vote on a particular resolution when other resolunons on the proxy are voted do not necessarily show a substantive reservation about a particular company practice or about the resolution in question. Some abstentions reflect shareholder reluctance to vote on anything but routine business matters; some abstentions may mean that the shareholder had no information about the problem being broached and chose not to take a stand. Most abstaining institutions interviewed by Update, however, sent letters to management explaining their reservations

movement and therefore could not be expected to give up its invest

ment.

This year's voters did not tum that argument around in order to vote for the Exxon resolution (did not, in effect, stop the company from going in before it had a big investment to protect). In effect. then, the institutions that debated the Exxon vote by and large divened the discussion from Exxon's plans in Angola to the merits of outside participation in a management decision. Exxon argued that such a time-consuming process would effectively prevent the company from competing for the required license and that it would be tantamount to precluding Exxon's participation.

The institutions reluctance to influence a substantive corporate move is reflected in the low-1.8 per cent-vote the resolution received, the abstention rate was 2.3 per cent, the second lowest of the season

THE DECISION-MAKING PROCESS

Proxy season 73 distinguished itself by being a year in which more institutional investors voted more social-responsibility questions than ever before. But despite an obviously increased sophistication among the major nonprofit institutional investors surveyed by Update, different institutions found themselves at varying stages of readiness to deal with social-responsibility issues

The University of Maryland's investor responsibility committee.

on the one hand, couldn't even obtain a list of investments from the university administration, MIT, on the other hand, began to question the importance of the whole proxy process, after voting for five

years, wondering if universities could play a more effective role in addressing social responsibility questions.

But the middle ground, on which most institutions settled, immersed them in the proxy process to the exclusion of almost any other options. The board of Oberlin College, for instance, vested the president and his administrative assistant with the job of voting proxies, but ruled out the possibility of selling off "irresponsible" firms

Most universities, including Oberlin, have geared up for the proxy season by establishing committees, usually advisory in nature, to consider proxy questions as they arise The major university goal when forming such committees has been to elicit some kind of consensus of the university community, thus committees usually consist of faculty, students, administration and alumni. In organizations like The Ford Foundation, where there is no immediate constituency as such, one min has been charged with the responsibility of sifting through the issues

Leslie V. Porter. Ford's investment manager in charge of social responsibility, notes that the Foundation is anxious to insure that its investments do not conflict with the Foundation's overall mission. And this year. Porter-in a unique move--has attempted to link program people with investment analysts at the Foundation. "It just seemed to me important in a place like this to have our program people, say in an area like drugs, sit down and talk to the investment people who were dealing with these companies. Ultimately, this kind of integration should become more and more important."

The single major innovation of proxy season 173 that has enabled the institutions to vote so many proxy issues is the newly established

Investor Responsibility Research Center, a Washington-based group born out of the desire of several major universities for information on all proxy questions-southern Africa, political contributions, antipersonnel weaponry, etc.-and their wish to discuss these issues with like-minded institutions.

The Center, which now boasts 62 member-subscribers, prepares background and "options" papers on each resolution so members, who pay up to $5,000 yearly for the service, are able to get a concise report on each proxy resolution.

Despite its utility, IRRC has not gone without criticism, specifi cally from the Center on Corporate Responsibility, which has charged that IRRC is acting as a buffer between the advocates and the institutions. The Center has further charged that IRRC isolates the institutions from the advocates and feeds them advocates' views with an inevitable bias.

Not all those who are critical of IRRC are completely negative. Martin Auerbach, a Harvard student who serves on that university's investment advisory committee, notes that he was not entirely pleased with IRRC's work, but concedes that the organization did enable many institutions without resources to consider an unprecedented number of proxy questions.

If anything. proxy season '73 has been the season of decisionmaking. The idea of voting proxies and spending money in order to decide how to vote them is well entrenched; indeed the entire process has been legitimized and given the Ivy League imprimatur. Yet, some observers have complained that institutions are so wound up in creating decision-making structures that they have lost sight of the is

sues.

All in all, interest in the entire process seems to be confined to a narrow circle of people within any institution. There have been few student rumblings at universities this spring and despite efforts to enlist student participation on committees working to study proxy issues, nearly no interest has been shown.

Raymond Hill of Princeton notes: "If anything, we've upped the level of apathy on campus this year." At Harvard, student disinterest has also been strong. Peter Shapiro, managing editor of the Harvard Crimson, says the paper initially entertained suspicions that the University's social responsibility panel wouldn't get much done. But even he admits that the committee-in obtaining four proresolution votes, two abstentions and one pro-management vote-did better than most students had expected.

But above all, this year's decision-making process revealed a definite reluctance to cast anything resembling a protest vote. Member after member of investment advisory committees told Update that managements could not be held accountable for executing responsi bilities that were in the least bit ambiguous or easily misinterpreted. One exception to the no-protest-vote rule was at Harvard where the university voted for two resolutions without agreeing completely with their language. The resolutions, GE and Caterpillar disclosure, won Harvard support despite the fact that the university saw no need for the requested information to be sent to all shareholders.

But most institutions would agree with Ford's Porter who says, "Resolutions are taken on their face value. If we support a resolution in principle but have trouble with the language, we will abstain and write to management telling them we agreed with the resolution but had problems with its language."

CORPORATE REACTION

If the institutions are comfortable with the proxy-voting process, the corporate community seems to have been made distinctly uneasy by all the sudden attention to social responsibility issues. But even within that discomfort the range of reaction varies greatly. Because of their lawyers' interpretation of an SEC regulation requiring equal treatment for all shareholders, General Electric refused to discuss their disclosure resolution, stating that their official rebuttal was all that could be said. Exxon, on the other hand, felt free to participate in the APIC seminar held in March and was willing to discuss its reaction to the church resolution with any stockholder who had ques

tions.

A good indication of the closing of corporate ranks to inquisitive institutional investors was the failure of the Project on Corporate Responsibility to attract any corporate participation to its seminar early in the proxy season. The seminar was finally canceled. The APIC seminar met with somewhat greater success, although resistance was also greater than it had been the year before. The only major presentation was made by Exxon. Caterpillar Tractor, which had opposed South African disclosure because its South African opera tion was such a small part of its business, made no presentation, but a company representative attended the APIC meeting and agreed to answer questions.

Refusing to participate were IBM (which had spoken at the 1972 APIC seminar), General Electric. AMAX, Continental Oil, Mobil Oil, Newmont and Phillips Petroleum. First National City's annual meeting was held the day before the APIC seminar, therefore Citicorp was not asked to speak.

When asking the companies what the vote had meant to management, Update received answers ranging over a wide spectrum. A First National City spokesman insisted, "The vote speaks for itself." Newmont's general counsel said, "When something is one person's bag and there is no response to it, we try not to waste time on it" He was referring to Episcopal Churchman Bill Johnston's withdrawal resolution. An Exxon source said, "Our board is hearing expressions such as the resolution proponents bring. It's a relevant input into our decision-making."

One indication of corporate response is the level at which issues are discussed. More often than not the people who were best informed about the resolutions or the advocates positions were those in the public relations office. Even where the chief executive officer of a corporation had been included in discussions with the church filers, the major campaign mounted to win the votes of institutional investors was principally a public-relations effort.

Except perhaps in the cases of Newmont and AMAX, the corpor ations are generally correct when they assert that their South African presence is a small part of their worldwide business. So it is easy to understand their impatience with the churches for raising issues they do not see as important. Executives who are not accountable for performance in the social responsibility area repeatedly asked APIC when the churches were going to drop the issue.

Exxon representatives, while assuring that there would not be a hardening of attitude on the part of management toward the "Angola people," indicated the "very small vote does perhaps mean that next year there will be less time spent on the issue than this year."

Representatives of Continental Oil, the company that came closest this year to a real understanding with the church group, concluded the proxy season with what seemed a concession to moral pressure and also what some saw as an unusual stand. Continental indicated it would continue to look for oil but would reassess its posture if it found any.

PROXY SEASON '73: AN OVERVIEW

As the proxy season wended its way through vote after vote, two general reactions emerged to set this year's tone on social responsi bility issues. One attitude sees progress as evidenced by increased corporate sensitivity to the issues. "As an educational process, this year's proxy season has been very successful," one institutional representative summarized. Another, more cynical view has also found expression, although clearly it is the minority outlook. Put succinctly, as it was by one institutional representative: "All this stuff is like watching a debate between Norman Mailer and James Baldwin. It's entertaining as hell but has absolutely na relevance to anything."

Both points of view contain a certain amount of truth. Corpora tions and institutions that have never thought much about southern Africa--perhaps never heard of Namibia-have been sensitized to the fact that there are real concerns there. But, as the more cynical of the two quoted institutional representatives would insist, this has not necessarily translated itself into any change of policy toward those areas.

Icontinued on pg 6

This chart is a sampling of voting patterns revealed by APIC 1973 survey Dashes simply indicate cases in which particular stocks were not held. Some institutions asked. not to be identified and are referred to generically

The insurance firm cited acknowledged a radical departure from its voting last year when it cast all provies with management. This year, the company told APIC it voted n the subcance of the revolution and its assessment of managements ensitivity to the su The company voted against management on the Phillips resolution because of US Government policy descouraging new. Namibian investment

The Ford Foundation seems to have come closest to voting the substance and intent of the southern Africa resolutions, abstaining only on AMAX and Nes mont. the longBE Namibian investors Harvard, which also attempted to get to the intent of resolu bens, sand it feit compelled to abstain on Exxon's entry into Angola because its invest ment advisory committee could not reach a majority opinion (A portion of the com mittee wanted additional research on new investment in Angola, despite the fact that Harvard last tear compiled a voluminous report on current investment there New investment in Namibia seems to have been a clearer issue, given US policy on the subject, and Harvard voted for the Phillips and Continental resolutions.

Although the university voted for the Caterpillar resolution even though it thought the information requested was excessive and should not go to all shareholders, it voted against IBM disclosure because it felt IBM had already made the information available through the disclosure, its answers to the Diggs questionnaire and what the company was willing to tell upon request of specific shareholders

The MIT votes and the votes of the West Coast school cited both reflect a new attitude among institutions that have been voting these issues longer than most-to abstain and persuade management rather than vote against it. The latter institution, however, also admitted that its board had changed composition this year, becoming more conservative than its last year's board which voted for all declosure revolutions Bryn Mawr noted that it voted against the Exxon resolution only because it cast its votes too late The school however, wrote management, explaining that it had intended to abstain Dartmouth reported its Phillips proxy arrived too late to be voted TIAA CREF said it would have voted its shares for the FNCB disclosure but missed the vote Vanderbilt also reported that the FNCB vote came too early to be considered by its committee which had not yet convened

37-052 O 74 15

It could be argued that the entire proxy process is a futile exercise, that the people of southern Africa gain nothing if American universities and foundations feel socially responsible or if corporations reveal for the first time the wages they pay in southern Africa. Others contend that recent moves by American and British firms to pay their African workers more and to extend to them fringe benefits already enjoyed by white workers must be seen as direct results of the discussions here.

Does any of this bring Amencan firms any closer to the churches' goal of withdrawal? No, but the church talk about withdrawal has helped the companies realize that they have to start proving that their presence is doing some good for South African Blacks. As one corporate official admitted, pressures for withdrawal do stimulate the company to reform itself in South Africa.

Although universities have geared up quickly to consider the proxy questions, they have, by and large, been reacting to student pressure-albeit pressure from two years ago. Talks with university representatives confirm that the schools are far from becoming resolution-filing pressure groups themselves. And an adversary relationship between the universities and the corporations simply does not exist. Businessmen with ties sometimes to the very companies who were being challenged were sitting on boards of universities that were deciding how to vote the universities' shares. For example, AMAX was represented on the boards of Columbia and Comell; an IBM director sat on the boards of Johns Hopkins and Yale; Continental Oil, Mobil, Exxon and Phillips Petroleum were represented on the boards of NYU, Harvard, MIT and Columbia, respectively. Harvard was careful to point out that Albert L. Nickerson, the Harvard trustee who is a former Mobil Oil director, disqualified himself on the Mobil equal-employment resolution, but interlocking ties between corporate and university board rooms don't have to be direct in order to be important.

Pointing this out is in no way tantamount to saying that other directors did not disqualify themselves from final voting or that they were necessarily even a part of the smaller financial committees on the universities' boards that participated in the final vote. It merely serves to show that corporate management and university management often begin from the same basic predilections. As one member of Princeton's investment advisory committee put it, “We don't really need to solicit management's point of view. Hell, our board is management."

Stephen B. Farber, special assistant to Harvard President Derek C. Bok, is quick to acknowledge the relationship between the universities and the corporations. "These are issues of investor responsibility." he says. "It is not intended to be a slap at management for a shareholder to express its view on particular issues of social concem that affect its corporation. Harvard does not consider that it has an adversary relationship with management.”

Further evidence of the more or less natural alliance between insti

Social Investment News

The World Council of Churches claimed in a recent statement that its campaign against investment in southern Africa is beginning to show results, although not the kind it advocates.

According to a World Council announcement, issued from Geneva, many firms have agreed to improve their wages and working conditions in southern Africa in response to the Council's efforts. (Johannesburg Star, May 26, 1973.) The Council, however, reiterated its call for total withdrawal of foreign business from souther Africa.

⚫ The National Council of Churches' Corporate Information Center has published a study on the activities of Newmont Mining Corporation and American Metal Climax in Namibia.

The report criticizes Newmont and AMAX for being Namibia's largest employer of contract labor and also points to differences in treatment of whites and Blacks at the Tsumeb Mine. Blacks, for ex

tutional investor and corporate manager is evidenced by the discom fort investors often feel when called upon to cast anti-management votes. As one institutional investor said, "If you vote against management on an issue, you write a very apologetic letter to them explaining that you are not really voting against the company, just disagreeing or demonstrating concern. And if you vote for management. you write them a letter saying. 'Listen, you guys, we may be giving you our vote on this one, but you better get on the ball and shape up. It really begins to look all the same, no matter what you do.” Management, the churches and the institutions all agreed at the outset of the proxy season on one thing. that the actual votes the resolutions received would not be significant. But the way various institutions voted was going to be important, everyone claimed, because it would show corporations that the nation's major educational institutions were concerned enough with the problems of southern Africa to register anti-management sentiments.

What was not foreseen, and what must be admitted now, is that most of these institutions were not prepared to make judgments on moral grounds. The "favorite" resolution of most institutional inves tors involved Namibia, and for a very good reason: U.S. Govern ment policy leans toward disengagement and 1971's World Court decision provided something of a legal precedent on which an institution could vote its proxy. Princeton, entranced with the legal ramifi cations of the Namibia question and how it affects AMAX, Newmont, Phillips and Continental, decided to embrace the issue for an entire year-abstaining from the vote and undertaking a major study of the situation.

In the end, the proxy season seems to have raised more questions than it answered. Is the proxy contest the way to handle these issues? MIT, for one, seems to be heading toward a no answer. Does a proxy battle broaden consideration of the issues? In many ways it is the only way institutions can be compelled as good stockholders to consider the issues. As Bayley F. Mason of Oberlin put it, "It's one thing for students and faculty to sit around and make statements about government foreign policy, it's quite another for the college to have to take a stand. And social responsibility questions are the ones where we legally must take a stand, we hold stock and we have to vote proxy questions."

For the most part, no institutions are planning any major revisions of their process for next season. And, the churches have yet to announce whether they plan any new strategy or whether they are going to stick to the same tack. But one impression does emerge. Relevant or not, effective or not, the proxy season has become an annual rite that each year has involved increasing amounts of time from corpor ate executives, university managements and other institutional inves tors. Unless the MIT view prevails or institutions become convinced that there simply isn't enough payoff to justify all the effort. the spring air is likely to remain heavy with talk of social responsi bility and proxy votes.

ample, the report charges, receive a tiny bunk in a barracks while whites get a free house or a subsidized furnished apartment (Washington Afro-American, April 28, 1973).

The National Council of Churches reports that pay for African workers in Zambia's mine is about 31⁄2 times that of pay for African miners in Namibia. (Rand Daily Mail, April 27, 1973.)

The report, published in conjunction with the Council's proxy fights with Newmont Mining and American Metal Climax, notes that there are discrepancies between white and Black wages in both countries, but suggests that the higher Zambian scales refute the claim that Namibian miners are better paid than their counterparts in Black-ruled African countries.

According to the report, Black workers in Zambia carn about $186 per month compared with $54 per month for African miners in Na

mibia.