New York — For the first time in a decade, no new United States businesses were begun in South Africa last year. And 28 companies left or made plans to withdraw in the last 12 months, according to the American Committee on Africa (ACA), a New York-based anti-apartheid group. A slumping economy, labor unrest, and political instability in South Africa prompted such decisions, most US executives say. Not public protests here. And the divestment campaign (to sell stocks of US companies in South Africa) has had little effect on stock prices, according to several recent studies.
But anti-apartheid protests are bringing about a fresh surge in the number of US companies signing the Sullivan Principles -- an activist equal rights code of conduct. And this year, an unprecedented six major pension funds with some $95 billion in total assets are filing shareholder resolutions to change policies in South Africa. As the season for annual meetings draws nigh, corporate boards are taking notice.
Last October, the Teachers Insurance and Annuity Association/College Retirement Equities Fund (TIAA/CREF) pressed the executives of 43 corporations to sign the Sullivan Principles or withdraw from South Africa. The $39 billion TIAA/CREF fund -- the largest private pension fund in the United States -- owns stock in the 43 companies.
Since then, 26 of the 43 companies signed the Sullivan Principles. Five firms have withdrawn from South Africa. Eleven have yet to sign, and one was sold from the TIAA/CREF stock portfolio.
The fund doesn't take full credit for the results. But ``TIAA/CREF is a powerful voice,'' spokeswoman Claire Sheahan notes. ``We think that in a rather short time we must have had some influence.''
Although several of the targeted companies agree that shareholders and the weight of public opinion influenced their decision to sign, none mentioned TIAA/CREF. ``Yes, people did write in and suggest that we sign. That was a factor,'' says Connie Kain at Chesebrough-Pond's.
But companies were also influenced by President Reagan's order last September banning federal assistance to US firms in South Africa (with more than 25 employees) who didn't sign the Sullivan Principles.
``Other American companies in South Africa were going in that direction and the government wanted us to, so we felt it was time to do it,'' says spokesman Wallace Dempsey at International Flavors and Fragrances.
It's estimated that some 330 US companies do business in South Africa. In 1985, the pace of new Sullivan signatures quickened. Since October, 34 US companies have signed on, bringing the total now to 202.
Pressure on US companies is ``definitely increasing,'' says Meg Voorhes at the Investor Responsibility Research Center (IRRC), a Washington-based nonprofit group.
The ACA confirms that 11 states and 43 cities and counties passed some kind of divestment and/or selective purchasing policies in 1985. Since 1976, 17 states, 60 cities, and 9 counties have taken such steps. (The divestment campaign calls for companies to leave South Africa and for stockholders to sell their stock in companies that do not comply.)
As an alternative to divestment, pension funds are pressuring corporations by shareholder resolutions. This entails submitting a policy statement for all stockholders to vote on at the company's annual meeting.
This year, the number of South Africa-related resolutions has doubled, says Ms. Voorhes at IRRC. In the past, social-policy resolutions drew little serious attention from management. A resolution capturing just 5 percent of all shareholder votes was considered a landslide.
But last year, a South Africa resolution -- backed by New York City Employees' Retirement System -- captured a record 23 percent of the vote at the Chesebrough-Pond's annual meeting. ``That's going to happen again this year,'' Voorhes predicts. ``I think it will be hard for companies to ignore.''
Yet, divestment proponents charge TIAA/CREF and other investment funds with taking an easy, half-way step. Signers of the Sullivan Principles, by their presence, still support apartheid, they say.
``The most significant and srategic firms -- Mobil, IBM, Caltex -- get the highest ratings [for compliance with the Sullivan code]. But the fact remains 40 percent of the installed computer base is IBM . . . Mobil still produces oil that gets sold to the police and military,'' asserts Richard Knight at the ACA.
Ms. Sheahan at TIAA/CREF counters: ``Given the size of our fund and our shareholder clout, we feel divestment is a non-action. It has no direct or lasting effect on companies in South Africa. It amounts to selling the stock and walking away from the issue. We feel its more effective to pressure management.''
Sheahan notes that TIAA/CREF expects companies to follow its own stricter version of the Sullivan Principles, and currently has its own fact-finding team in South Africa checking on compliance.
While shareholders may influence policy, they have little influence on a US firm's decision to stay or leave, says Richard Hull, a senior risk analyst at Frost & Sullivan, a market research firm. ``What's frightening firms is the growing militancy of labor in South Africa. The greatest consideration is political and economic uncertainty in South Africa.''
And the impact of US firms leaving worries Mr. Hull. Many are selling all or part of their stock, thus giving up control to local companies. As South African management takes over, ``it remains to be seen if the Sullivan Principles will go out the window. My feeling is they won't be as conscientious. And they won't have the capital resources of a large American multinational.''