2.A.(5) Report of Investment Committee.

At the invitation of Trustee Stoner, Mr. J. D. Mulholland, Treasurer of the University, read the following recommendations from the Investment Committee of the University.

• (a) Voting of proxies. It was recommended that the following statement be added to the Consolidated Endowment and Trust Fund policy statement approved by the Board May 6, 1977, following the Investment Management guideline:

  Consistent with the investment objectives and guidelines previously stated, it is desirable that Indiana University recognize more fully responsibilities arising from its corporate ownership. The University will consider social, moral and public policy responsibilities and related concerns of the University community and where appropriate to its interest, act through the process of proxy voting. Each issue will be reviewed and voted for on its merit, and not on whether it is initiated by management or by a shareholder.

  Guidelines for the voting of proxies.

  1. At Investment Committee meetings, the Treasurer will present for review those issues expected to be raised in shareholder resolutions including those of Indiana University.
  2. Recognizing that there is a wide range of possibilities in voting proxies (such as voting for management or shareholder sponsored resolutions, abstaining and informing management of the reasons for such vote, voting against management or shareholder sponsored resolutions and informing management of the reasons for such vote) the Treasurer will, after his analysis, present a recommendation to the Investment Committee.
  3. When an issue receives a majority vote of the Investment Committee, the Treasurer will vote as directed on that issue.
  4. If the Investment Committee feels the issue deserves wider discussion, the Treasurer will take the steps necessary to secure greater input prior to the Committee’s decision on the issue.
  5. A report on voting of all proxies will be given to the Board of Trustees by the Investment Committee. Data obtained for review of issues will be retained by the Treasurer.

  (It should be noted that this policy on voting of proxies and guidelines for the voting of proxies will apply to all investments held by the University, and not just those investments held by the Consolidated and Endowment and Trust Fund.)

  Trustee Wolfe expressed his concern that there be input from alumni and students on issues of proxy vote. Mr. Mulholland replied that the Committee had discussed this matter and concluded that if a subject had widespread concern, such as the stock in companies doing business in South Africa, and a majority vote of the Committee was not practicable, or the Committee believed there was a need for wider discussion, then paragraph #4 of the recommendation would be followed and the Committee would call on students, alumni, faculty, staff, and anyone interested for their expressions of attitudes and opinions.

  President Ryan noted that while he personally urged the Board to adopt the recommendations, he was forced to ask them to recognize that the recommendations are not easy to carry out. It is apparent, he said, that University officials are imposing on themselves a burden about which they are not yet clear as to implementation, but have every intention of taking steps and making arrangements that will enable them to comply with the specific recommendations. Trustee Stoner added that the Committee recognized the difficulties and they have asked The Trustees to authorize an analysis of the cost during the first year of operation, following the adoption of the recommendations, if they are indeed adopted. He said that when the costs are known and evaluated, the Board can reassess what had been done, with a view toward continuation or modification of the procedure.

  Following these comments, and upon motion duly made and seconded, item 2.A.(5)(a), voting of proxies, was approved unanimously.

• (b) Stock of corporations doing business in South Africa.

  Mr. Mulholland read the following, also recommended by the Investment Committee:

  INDIANA UNIVERSITY
  Board of Trustees Policy on Investments
  In Corporations Doing Business in the
  Republic of South Africa

  WHEREAS, The Board of Trustees of Indiana University is aware that the current policy of the United States Government is to neither encourage nor discourage investments in the Republic of South Africa by United States Corporations; and

  WHEREAS, the Board is aware that South Africa currently is a country whose governmental policies and practices deprive individuals of basic freedoms on the basis of race, although it is by no means the only country in which large scale, purposeful and systematic violations of basic human rights are occurring; and

  WHEREAS, the Board strongly opposes the apartheid policy of South Africa and wishes to take steps necessary to make its position known to corporations doing business in South Africa in which it is an investor; and

  WHEREAS, the Board recognizes and is aware of the increasing concern of the University community on the issue of the University's investments in corporations doing business in South Africa; and

  WHEREAS, the Board believes that improvement of conditions for non-white South Africans at the work place is a worthwhile and attainable objective which can be influenced by the University's investment policy.

  NOW, THEREFORE, BE IT RESOLVED:

  1. All corporations doing business in South Africa in which the University has investments will be requested to affirm to the University their subscribing to the principles of the Sullivan Statement, the European Economic Community codes of conduct or the equivalent.
  2. The Treasurer will inform such corporations that it is the University's desire that they should take steps to improve the political, economic, and social conditions for their non-white South African employees. Corporations will be requested to do so through proxy voting by the University of resolutions directed toward that end, and through letters sent to the corporation by the Treasurer.
  3. If a corporation neither affirms the principles of the Sullivan Statement, the European Economic Community codes of conduct or the equivalent, nor takes other steps to improve the rights of its non-white employees in South Africa, and after review and verification of such facts by the Investment Committee, the investment will be sold and no further investment made in that corporation until the desired changes in the corporation's conduct have taken place and have been made known to the Investment Committee.
  4. Voting of proxies of corporations having holdings in South Africa will follow policy and guidelines as adopted by the Board of Trustees.
  5. A report of action under this resolution will be given to the Board of Trustees. Data obtained by the Treasurer on this issue will be retained in the Treasurer's files.

  In regard to this recommendation, Trustee Stoner commented that the Committee, during its discussions, considered the question of divestiture of the stocks held in corporations doing business in South Africa. The Committee reached the conclusion that, while divestiture "leaves us clean," at the same time it "leaves us powerless." It was the opinion of the Committee that, as a last resort, when a company in whom the University has investments has been afforded the maximum reasonable opportunity to alter its activities, and has not done so, then The Trustees should divest themselves of the stock they hold in that company.

  Trustee Black asked the source of information that the Committee would rely upon in making judgments. Trustee Stoner replied that each company would be contacted in writing and asked for a statement as to whether or not they have agreed to the principles of the Sullivan Statement or that of European Community, or have taken some equivalent action. If they have agreed to the principles of one or all of the above, then The Trustees are justified in concluding that the company is acting in a way consistent with The Trustees' principles. If the company has not agreed to any of the three, or does not reply to the inquiry, additional inquiries will be made, and if the facts warrant it, then The Trustees will sell the stock in the company. Trustee Stoner went on to say, following a comment by Trustee Gates, that even though there is at hand a final list of corporations which support the Sullivan Statement or the others, it is the intention of the University to write to all of the companies in which investments are held for a specific statement of reply to be retained in University files.

  Following the discussion, and upon motion duly made and seconded, item 2.A.(5)(b), regarding stock of corporations doing business in South Africa, was approved unanimously.

  Subsequent to this action, President Danielson introduced Professor James Vaughan, who had requested an opportunity to make some remarks about the South African seminar or the entire matter. Professor Vaughan congratulated the Board on the manner in which it had arrived at its decision, even though he said that it was one which he would not have reached. He went on to say that this was the only instance during the year of his service as Co-Secretary of the Faculty Council in which the intellectual force of the University has had an apparent influence on a decision reached by the Board. He added that there was no intended irony, saying that much of his work during the year with the University Faculty Council had been spent in finding out how to get things done and considering techniques rather than goals. He said that he sincerely wished that the Board, faculty, administration, and students could be more concerned with intellectual issues, and added that it seemed that such issues tend to become neglected when things run smoothly. Professor Vaughan believes there should be more seminars on more topics. He believes the Board should be more involved and is convinced that the emphasis of everyone should be on education and research, for unless that emphasis is made, the University will suffer. He believes that which has made the University great is not its running, but its accomplishments.