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Case 511

DOING BUSINESS IN SOUTH AFRICA: SEEKING ETHICAL PARAMETERS FOR

BUSINESS AND GOVERNMENTAL RESPONSIBILITIES

John M. Kline Case study for the Carnegie Council on Ethics and International Affairs

“Multinational Corporations Should face the pos- sibility and the necessity of taking a moral posi- tion that is, in fact, superior to the position taken by the nation state. Given that it wants to pursue these moral policies, prudentially, what is the best way to do that?”

“If you attempt to change what’s going on in any country, this should be through government pol- icy, not corporate policy. Collective action on the part of the British, who have a major stake in the South African economy, and the Dutch and the Americans, should come about as government policy.”

“There is something to the principle of interfering in internal affairs. I think Americans would be especially outraged if a foreign multinational or somebody came here and started contributing money to a very extremist cause, either left or right. And it’s hard to straighten out either way, withdrawal or staying there and trying to influ- ence the internal affairs of South Africa, because either principle disturbs me.”

“Should a company . . . have to ask whether a strategy that it’s going to use, either following or not following the Sullivan principles, is going to lead to revolution or not, and what is its responsi- bility for precipitating a political revolution? Does it have a right to do that?”1

More than a decade has passed since serious public debate erupted over doing business in South Africa. These selected excerpts from the 1978 Second National Conference on Business Ethics highlight some of the key ethical considerations that confront policy makers in business as well as government. While many issues remain unresolved, enough important developments occurred during the 1980s to warrant a new examination of the intersection between international business ethics and public policy.

South Africa provides fertile ground for a wide- ranging discussion of ethical issues, but this case study will concentrate on questions of business responsibility in cases where national political sys- tems sustain or promote serious human rights viola- tions. Given the global scope and power of today’s multinational corporations (MNCs), do these firms have a corresponding ethical responsibility for politi- cal system issues within the countries where they operate? What factors determine the nature of an MNC’s responsibility, and are there ethical limits on how firms may seek to change a host nation’s poli- cies? Alternatively, if governments are solely respon- sible for actions on political system issues, are MNCs

Copyright 1997, 1991. Carnegie Council on Ethics & International Affairs Publications, Institute for the Study of Diplomacy, School of Foreign Service, Georgetown University, Washington, D.C. 20057–1025 http://data.georgetown.edu/sfs/programs/isd/

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an ethically appropriate vehicle for home govern- ments to use for coercion or intervention in another nation’s internal affairs?

BACKGROUND

This tale could begin at least as far back as 1948 when the Afrikaner Nationalist Party gained power in South Africa and reshaped a scattering of already existing racist laws and regulations into a coherent system of racial “apartness,” labeled by the Afri- kaans term “apartheid.” Ethical issues raised by this action were not seriously related to international business, however, until news scenes of tragic blood- shed captured the world’s attention. The initial sparks appeared following the Sharpeville massacre of 69 blacks in 1960 when several religious groups called for an end to foreign bank loans to South Africa. Opposition then languished somewhat until 1976 when at least 700 deaths in Soweto street demonstrations brought a firestorm of protests. The following year a young black leader named Steve Biko died while in police custody, cementing public revulsion at the South African government’s violent defense of its apartheid system.

There is no doubt that apartheid violates basic human rights, political and civil as well as economic and social. The country’s minority white population (14 percent) controls the government with little par- ticipation from mixed-descent “Coloureds” (8.7 per- cent) and Indians and Asians (2.6 percent), and no political rights for the majority black population (74.7 percent). Blacks were assigned and often forc- ibly relocated to ten rural and largely barren “Home- land” areas that occupy about 13 percent of the country’s land. Needed black workers could gain access (often without their families) to designated areas near white-dominated business centers, but their movement was tightly controlled through a passbook system. Housing, education and other social services were kept strictly separate and defi- nitely not equal.

The South African government made minor reforms in this system during the 1980s, but not until 1990 did major pillars of the apartheid struc- ture begin to crumble. Virtually all important laws were being changed by mid-1991 and former politi- cal prisoner Nelson Mandela now led the previously outlawed African National Congress Party (ANC) into negotiations with the South African government to develop a new constitution and political structure. These changes can be used in hindsight to support arguments about what actions should have been

taken during the 1980s, but caution is justified here because the final course of future developments and the causal link between past actions and current events both remain somewhat murky. Therefore, this case study will only discuss the ethical dynam- ics of the South African situation as it existed during most of the 1980s when crucial business and gov- ernmental decisions were being made.

Business in South Africa

The fundamental nature of ethical issues regarding business and South Africa arose from the expan- sion of foreign direct investment in the country dur- ing the 1960s and 1970s. Direct investment gives foreign firms an equity stake in a nation as opposed (or in addition) to a trading relationship with it. Direct investment is usually associated with other characteristics that also establish extensive busi- ness connections in the host country, including numbers of direct employees, tax payments to the government, closer supplier and customer relation- ships, local community involvement, and some- times certain types of domestic political activity.

Direct investment in South Africa by U.S. firms more than tripled from under $500 million shortly after the Sharpeville massacre to $1.8 billion at the time of Steve Biko’s death. Although over 300 U.S. companies eventually entered South Africa, Great Britain remained the largest investor nation and only about a dozen firms accounted for three- fourths of the U.S. direct investment. Nevertheless, U.S. MNCs represented large segments of important business sectors, particularly automobiles, petro- leum products and computers. The main ethical crit- icisms of these firms can be summarized in two charges: they were profiting from exploitation of the black population and were contributing to the main- tenance of a repressive apartheid regime.

The Public Policy Arena

Political action against the South African govern- ment has been sporadic and largely ineffectual. The United Nations General Assembly and Security Council have passed numerous resolutions since 1960 condemning apartheid. The General Assem- bly favors imposing broad economic sanctions to support this position, but binding action requires Security Council approval and U.S., U.K. or French vetoes turned back all proposed trade controls except an embargo on arms exports to South Africa adopted in 1977. Individual national policies roughly paralleled the U.N. positions. South Africa’s

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major trading partners, including the United States, periodically tightened or loosened the defined scope of controlled items, but South Africa developed self- sufficiency or found other nations willing to supply the items that it needed. Attempts by members of the U.S. Congress to increase significantly the scope of economic sanctions were consistently defeated by administration opposition until 1985–86.

With little success convincing government policy makers to adopt stronger sanctions against the South African regime, opponents of apartheid turned their efforts increasingly toward the private international business community. Protests, boy- cotts, and stock divestment campaigns were orga- nized against prominent MNCs doing business in South Africa to convince them to leave that country. As one advocate described the strategy:

Because of the present unwillingness of the United States and other nations to take strong action against South Africa, proponents of eco- nomic disengagement view action by nongovern- ment organizations as the only realistic way of severing the links with apartheid. . . . The most important of these economic efforts has been the divestment campaign.2

Bringing Pressure on Business

The divestment tactic relied on institutional inves- tors (primarily religious organizations and universi- ties) who were willing to sell their stock in companies doing business in South Africa unless the firms left the nation (termed disinvestment) or oth- erwise acted to oppose the apartheid system. These groups usually submitted shareholder resolutions and used discussions with corporate management to urge withdrawal before divesting their stock in the company. The strategy received substantial support in the 1980s when many U.S. state and municipal governments enacted legislation to divest public pension funds of stock in such offending compa- nies. Over one-half the states and three times as many localities eventually adopted such policies.

At the end of the decade several large cities enacted policies to prohibit public purchases from firms not meeting specified criteria for companies doing business in South Africa. This action, which pitted substantial corporate sales to cities such as San Francisco against declining sales prospects in South Africa, was an effective weapon to pressure corporate disinvestment. A critical point to note is that this political action occurred at the subnational level where special interest groups can often achieve

local success before achieving (if ever) victories in the Congress or Executive Branch, especially on issues related to foreign policy.

While various activist groups possessed different visions of how apartheid might be overthrown, the most common opinion held that the withdrawal of foreign firms from South Africa could either pres- sure the white government to enact changes or destabilize the nation’s economy sufficiently that the government would fall in a revolution. A coun- tervailing view suggested that MNCs could promote reform from within, either through the indirect effects of general economic development or through directly targeted programs that set progressive examples, assisted black workers and communities, and lobbied for the repeal of apartheid restrictions.

DETERMINING ETHICAL CORPORATE ACTIONS

This background summary leads us to the specific questions facing MNCs doing business in South Africa. What should foreign corporations do when confronted by a clearly unethical governmental sys- tem and a growing public clamor that calls the situa- tion forcefully to their attention? The major options appear to be withdrawal, promoting reform from within, or declining to act directly on the basis that private companies should not interfere in a political system unless mandated to do so by competent gov- ernmental authority.

The Polaroid Controversy

The first major corporate response to the ethical challenge posed by South Africa involved the Polaroid Corporation. Two black employees orga- nized a demonstration in October 1970 alleging in a leaflet that “Polaroid Imprisons Black People in 60 Seconds.” The charge related to reported use of Polaroid cameras for photographs used in the South African passbooks. Demonstrators demanded that the company state its opposition to apartheid, with- draw from the country, and turn over profits to black liberation or revolutionary groups. Polaroid, known at the time for its progressive race relations and community support programs in the United States, was caught by surprise. Their response is particu- larly interesting because Polaroid sales in South Africa occurred through an independent distributor; the firm had no plants, subsidiaries, investment, or direct employees in that country.

This early case focused on product use—Polaroid equipment in a passbook identification system that

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helped regulate the apartheid structure. No U.S. reg- ulations at the time prohibited the export, sale or end-use of this equipment. Does the seemingly tan- gential link of sales through an independent distrib- utor establish an ethical business responsibility for Polaroid for the political conditions in South Africa? If an ethical responsibility exists, what is its nature and is withdrawal an appropriate response?

Somewhat surprisingly to some, Polaroid prompt- ly acknowledged a corporate responsibility in this situation. Dr. Edwin Land, the founder and then still manager of the company, had actually set a “per- sonal ban” on selling Polaroid products to the South African government in 1948, but the firm’s enforce- ment had apparently been lax. Now a corporate spokesperson stated:

We have a responsibility for the ultimate use of our product. . . . In response to the charge we articulated a very strict policy of refusing to do business directly with the South African govern- ment. . . . We as a corporation will not sell our products in instances where its use constitutes a potential abridgement of human freedom.3

Four representatives from a committee of inter- ested employees visited South Africa to ascertain whether blacks there felt the company should with- draw. Acting on unanimous recommendations from this trip, Polaroid rejected the withdrawal option and embarked instead on a publicly announced “experi- ment” that enlarged the company’s scope of self- accepted responsibility. The firm negotiated an agreement under which not only was its indepen- dent distributor to discontinue direct sales to the South African government, but it also was to improve training, promotions, salaries, and benefits for its black employees. Polaroid further committed itself to give a portion of its South African profits to aid black education.

From the standpoint of measurable conse- quences, an audit after the experiment’s first year showed the distributor had adopted an equal pay for equal job principle. Black employee remuneration increased an average of 22 percent, eight black employees received promotions to supervisory posi- tions, and grants totaling $75,000 were made to black educational groups. The experiment continued for six years on the basis of comparable progress reports. The distributor even hired several controver- sial black dissidents, including Winnie Mandela.

Polaroid’s experiment abruptly turned sour in November, 1977 when a former employee of the distributor provided documentation to the Boston

Globe that clandestine sales had been made through a drug store account to South African government agencies. A Polaroid investigation substantiated the charge and the company immediately terminated its distribution arrangement with the South African distributor due to its violation of the agreed sales restriction. By not establishing any new distributor- ship arrangement, Polaroid thereby effectively with- drew from the country.

Beyond its path-breaking value, Polaroid’s experi- ence points up several noteworthy issues of defining and implementing ethical business responsibilities in South Africa. The company voluntarily defined its circle of responsibility more broadly than one might expect, given that it had no direct presence in the country and its sales there contributed less than one-half of one percent to annual corporate reve- nues. In fact, it assumed responsibilities that exceeded its ability to deliver fully on them, particu- larly since all actions except its own charitable con- tributions had to be carried out by the independent distributor. Despite their long-standing relationship and the importance of Polaroid’s account to the distributor, Polaroid lacked effective direct “control” over implementation of its self-accepted responsibil- ities.

Polaroid’s ethical dilemma becomes even more apparent if evaluated by a responsibility for product end-use. The company’s restriction on its South Afri- can distributor attempted to extend direct control to known next-party purchases, but Polaroid knew it could not reach other indirect sales. A Polaroid exec- utive was asked, “If you know that the government agencies can buy your products on the open mar- ket, aren’t you then just denying a direct link between the company and the government?” The executive replied: “That’s correct. There’s only one way to stop it completely, and that’s for Polaroid to go out of business.”4 In describing the company’s “withdrawal” from South Africa, the executive admitted: “Our goods are available there. Anyone can buy them anywhere on the world market, but in terms of a formal relationship it’s ended.”5

Polaroid’s withdrawal was nonetheless hailed among anti-apartheid activists as a significant step. The company’s well-reported actions dealt a blow to the South African regime and placed additional pres- sure on other firms to consider similar action. Polaroid recognized important differences between its situation and that of other MNCs, however, both in terms of its potential to do good in South Africa by staying and business costs associated with the withdrawal option. Again in the words of Polaroid’s spokesperson:

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I believe we said that the constructive engage- ment of the investor could still do some good. I think that’s maybe true. I don’t want to judge it. We were not an investor. . . . I think it might be a different story if we had, in fact, owned our dis- tributorship or bought it and could have con- trolled it, which we chose not to do.6

A final consideration from Polaroid’s experience is the fate of its attempts to improve conditions for black workers and others within its immediate circle of business activity. Some blacks undoubtedly bene- fited from Polaroid’s “experiment,” although critics argue that the number effected was too small to make any real difference. How should direct progress for some individuals on a “micro” level be measured against charges of indirect corporate sup- port of the apartheid system on a “macro” level? A related dilemma is managing ethical responsibilities to local constituencies when an MNC withdraws from a country. Polaroid arranged repair services for products already purchased in good faith by custom- ers and continued some corporate charitable contri- butions as well. The company acknowledged, however, that the cut-off of supplies to the distribu- tor likely meant “black employees will lose their jobs.”

THE SULLIVAN PRINCIPLES

Just nine months before Polaroid’s withdrawal, the chairmen of General Motors and IBM visited the South African ambassador in Washington, D.C. to present him with a statement of operating principles endorsed by twelve large U.S. MNCs for their subsid- iaries in South Africa. Accompanying the executives was Reverend Leon Sullivan, a black minister from the Zion Baptist Church of Philadelphia who also sat on General Motor’s Board of Directors. When Rev. Sullivan joined GM’s Board in 1971, he repeatedly urged the company to withdraw from South Africa because of the country’s apartheid policies. During a trip four years later he was urged by blacks in South Africa to help direct MNC resources toward change from within rather than withdrawal. Eighteen months of difficult negotiations with corporate lead- ers culminated in the statement of principles that bore his name.

An examination of the original six principles (see Appendix A) reveals that five address workplace reforms, covering many issues similar to Polaroid’s experiment such as equal pay for equal work, train- ing and promotion, and desegregation in work facili-

ties. The sixth principle expands on Polaroid’s outreach effort, pledging the signatories to “Improv- ing the quality of employees’ lives outside the work environment in such areas as housing, transporta- tion, schooling, recreation and health facilities.” In contrast to Polaroid, these companies had signifi- cant direct investments in South Africa, including substantial production facilities, employment and sales relationships. Furthermore, other firms soon endorsed the principles. By mid-1979, nearly one- half of the 280 U.S. companies then doing business in South Africa (representing about three-fourths of U.S. corporate employment there) had agreed to implement the principles.

Many critics were not satisfied with the micro- level reforms addressed by the Sullivan principles. With an eye fixed firmly on political system issues, one advocate of full economic disengagement from South Africa argued:

The code is flawed, however, because it fails to address directly the question of apartheid. It calls for workplace reforms that, at best, can affect only 1 percent of the black work force. Instead of focusing on conditions in South Africa and the role of the U.S. corporations in perpetuating the status quo, the debate about corporate involve- ment is shifted to a discussion of labor conditions for a tiny percentage of the work force.7

Implementation of the original six principles at times infringed on South African regulations, but the government chose not to make an issue of enforcing several so-called “petty apartheid” policies that, indeed, were subsequently revoked. As Rev. Sulli- van saw it, “the implementation of the Principles placed companies in confrontation with the law, but the changing practices of those companies brought modifications of the law and its enforcement.”8

The Sullivan principles were elaborated several times and an auditing process was established to rate firms on their compliance. One amplification of the Sullivan principles pledged signatory companies to support the rights of blacks to form their own unions rather than being represented by existing government-registered and white-dominated organi- zations. Donald McHenry, subsequently U.S. ambas- sador to the United Nations, had suggested in the early 1970s that:

It would be gratifying, for example, to see a com- pany helping to organize African workers, helping them to organize in an effective manner, and then negotiating with them, even though such

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activity does not have the sanction of law. . . . One is playing with fire in South Africa by doing these kinds of things, but it seems to me that this will have to be done if one is going to attack the social and political problems that remain after you increase wages and job opportunities.9

With the Sullivan Principles’ initiative, many com- panies did recognize (although perhaps not help organize) black unions, and MNCs are generally credited with negotiating and responding more posi- tively than other firms to these unions. While still in one sense a “workplace” issue, black union organi- zation in South Africa also provides important sup- port for systemic political change.

The fourth amplification of the principles required firms to oppose apartheid laws and regula- tions, seek their repeal, and commit financial and legal resources to assist equal access campaigns by non-whites. (See Appendix B.) This change marked a significant shift from corporate improvement of direct work-related conditions to an open political challenge to the country’s apartheid structure. The extension of corporate action into the legal arena seemed a clear necessary step to Rev. Sullivan:

Starting in the workplace and extending to the communities, the businesses must do all they can do to help change the inequalities of and injus- tices against black people. And the businesses must work to influence the government to rescind its unjust racial laws. Otherwise, the mul- tinational companies have no moral justification for remaining in South Africa and should be com- pelled to leave the country.10

Just how far, and in what manner, should MNCs go about changing a host government’s laws and practices? Operating individually and through a committee of the U.S. Chamber of Commerce in South Africa, many signatory companies publicly and privately urged South African authorities to end the apartheid system. General Motors made a well publicized offer to provide legal aid to any black employee prosecuted for breaking an ordinance against swimming at white beaches. The Wall Street Journal reported that “It is the first time a corporate executive has promised openly to back blacks engaging in acts of civil disobedience.”11

While acknowledging that swimming at white beaches “isn’t a burning issue” among all blacks, a local GM executive said: “We have to take a more active government to realize that they’ve got to change or this country just has no future.” (In

response, an irritated right-wing town council mem- ber warned: “What if people like me, and there are lots of them, decide to boycott GM cars?” But the GM executive replied that he knew the council mem- ber drove a Toyota anyway.)12

Just how far should MNCs go in supporting an end to apartheid? Protesters had called on Polaroid to contribute its profits to black revolutionary groups. In 1985, Rev. Sullivan noted in a speech that several white South African businessmen had just met outside the country with leaders of the out- lawed African National Congress, calling for an end to apartheid and endorsing political power-sharing with blacks. He concluded: “This was a significant move, and I have asked American business leaders to make a united front with these South African business leaders and work with their counterparts in South Africa for the complete abolition of apart- heid.”13 Was he implying that MNC executives should also meet with ANC leaders to plan the over- throw of apartheid? Are there ethical limits on actions MNCs can take in host countries, and are such limits different from those for local firms?

Finally, Rev. Sullivan saw a moral mandate for U.S. coercion or intervention as well as corporate action. In 1983 he endorsed a congressional bill that would mandate adherence to the Sullivan Principles by most U.S. companies, prohibit loans to the South African government except those for “equally avail- able housing, educational, and health facilities,” and stop Krugerrand (South African gold coin) imports to the United States. In other words, the voluntary prin- ciples should be made mandatory for all companies that had not volunteered, supplemented by U.S. government trade restrictions. As a harbinger of things to come, Rev. Sullivan went on to recom- mend:

After Congress adopts that bill, the best, though one of the least likely, of all possible actions for the U.S. government to take would be to set a date for the legal abolition of apartheid, after which time, if South Africa does not respond ade- quately, all U.S. companies and U.S. government presence would be required to depart from South Africa, whatever the strategic or other costs.14

Congress failed to adopt the proposed legislation, much less set the deadline suggested by Rev. Sulli- van. Since the public policy makers had declined, he decided to set a timetable himself. On May 7, 1985 he announced a two-year deadline for South Africa to abolish apartheid as a system. Failing that action, he would call for a complete withdrawal by all U.S.

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companies and a total U.S. embargo on all trade with South Africa. “The gauntlet must be laid. The evils of apartheid must come to an end.”15 On June 3, 1987, Rev. Sullivan disassociated himself with his principles, stating that they had failed to end apart- heid and that the more drastic steps of corporate withdrawal and a trade embargo were now neces- sary. (Signatory companies voted to continue the program on their own after Rev. Sullivan’s depar- ture.)

Were the Sullivan Principles a failure? The answer depends, of course, on what measurement standard is applied. Undoubted progress took place in the workplace and also in extended living conditions for employees of signatory companies. Some legal reforms also occurred, aided if not caused by corpo- rate actions. Opinions differ over the value that should be assigned to the numbers of people affected at the micro level and the pace of reform on macro systemic issues. Rev. Sullivan concluded that his efforts to stimulate reform from within had failed, so he returned to his early position calling for corporate withdrawal. Somewhat paradoxically, as Rev. Sullivan moved to disassociate himself from the program founded on his principles, the Executive Branch adopted, and Congress approved, a state- ment of principles similar to the first six Sullivan standards for all U.S. companies remaining in South Africa.

U.S. GOVERNMENT ACTIONS

Official U.S. foreign policy opposes South Africa’s apartheid system. Early proposals for economic sanctions failed, but the United States imposed an arms embargo in 1963 and supported the U.N. Security Council’s embargo in 1977. Domestic pol- icy decisions centered primarily on how broadly to apply the export controls. Under the Carter adminis- tration, all exports to South Africa’s military and police were banned. Under Reagan, these controls were relaxed to permit shipments of dual-use and non-military items. Some groups urged a complete ban on all exports and loans to South African gov- ernment agencies.

The U.S. House of Representatives passed a bill in 1983 containing expanded trade sanctions on South Africa, but the measure did not pass the Senate. A later proposal (The Anti–Apartheid Act of 1985), which included a ban on new investment in South Africa, passed both houses of Congress, but was vetoed by President Reagan. However, responding to growing pressure for a tougher U.S. stance against

apartheid, the administration then issued Executive Orders that implemented some of the legislative proposals, including tightened export restrictions on computers and nuclear technology; import bans on Kruggerands and South African munitions; restric- tions on new loans except for equally available edu- cation, housing or health facilities; and aid for black businesses and student scholarships. The Executive Orders also denied trade assistance for any U.S. firms doing business in South Africa that did not fol- low a Statement of Principles that were similar to the initial six Sullivan Principles. (See Appendix C.) These actions failed to mollify Congress, however, because they did not ban new investment in South Africa and because the Executive Order lacked per- manency, requiring annual renewal by the presi- dent.

In 1986, Congress passed the Comprehensive Anti-Apartheid Act (CAAA) over another presidential veto, writing into law an expanded version of the Executive Orders, including provisions from the bill vetoed the year before.16 The law contained addi- tional restrictions on South African imports and pro- hibited new investment except in businesses owned by black South Africans. The president could alter the law’s restrictions only if South Africa made “sub- stantial progress” toward dismantling apartheid and establishing a nonracial democracy. South Africa would have to free Nelson Mandela and other politi- cal prisoners and meet three out of four other spe- cific conditions, including repeal of the state of emergency and release of detainees held under its powers; legalization of political parties and participa- tion rights for all races; repeal of key apartheid laws; and agreement for unconditional “good faith” nego- tiations with black majority representatives.17

U.S. foreign policy as established by the CAAA seeks “to help to end the apartheid system in South Africa and to assist in the establishment of a non- racial, democratic form of government in that coun- try.” The U.S. objective is clearly therefore to achieve fundamental change in South Africa’s internal politi- cal structure. Specific measures approved in the CAAA to carry out this objective may constitute coercion or intervention in another nation’s inter- nal affairs, with some provisions using MNCs as instruments of U.S. foreign policy.

Sanctions such as the import ban on Krugger- rands and export restrictions on petroleum prod- ucts regulate business with South Africa. These trade controls are coercive in design, seeking to penalize the regime and pressure it to agree to domestic political change. This type of coercion could also be seen as a form of intervention in South Africa’s

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internal affairs. However, for purposes of this case study, the concept of intervention is associated more with measures that affect business in South Africa, primarily through the vehicle of MNC opera- tions.18

The legal establishment of an MNC’s operations within a host nation gives the company a split national loyalty that does not exist when it engages only in a trading relationship with unaffiliated firms in that country. Thus MNC establishment, generally involving some form of equity ownership, employ- ment, and management control, provides a possi- ble distinction between the notions of economic coercion and intervention in a host country. Coer- cion is applied more from outside the target nation by actions clearly within the acting nation’s jurisdic- tional authority. Intervention carries coercive pres- sure within a foreign nation’s boundaries by affecting the operations of MNCs established there. This distinction also may lead to different defini- tions and decisions regarding corporate ethical responsibilities.

The sanctions which could best be labeled U.S. government intervention through MNCs are the pro- hibitions against sales to specified government cus- tomers; the ban on any new investment; and the Statement of Principles for U.S. corporate opera- tions inside South Africa. Among these three, the first action presents the strongest case for an inter- vention label while the other two steps stop short of actions that would require more aggressive interven- tion within South Africa.

The selective sales ban reaches into South Africa through its extraterritorial application to U.S. subsid- iaries. This measure is different than a restriction on exports from the United States, or even exports from U.S. subsidiaries in third countries, since it also regulates the selective sale of goods actually pro- duced in South Africa. On the other hand, the prohi- bition on new investment is arguably an external financial control because it does not apply to rein- vested profits generated internally within South Africa (although it could prohibit new loans con- tracted from South African banks, if they were used to expand operations there).

The Statement of Principles presents a similar sit- uation. The Principles seek to influence how U.S. subsidiaries operate inside South Africa, but they are applied through a negative sanction (withdrawal of a privilege—U.S. trade assistance—for failure to employ the principles) rather than through manda- tory direct regulation. Equally significant, the U.S.- government-endorsed Statement of Principles does not include the Sullivan amplification calling on

firms to oppose apartheid laws and seek their repeal. In other words, the MNCs are not asked directly to engage in South Africa’s political process to bring about systemic change, although this is the stated purpose of the CAAA. The furthest the U.S. State Department goes is to say that companies cov- ered by the principles “are encouraged to take rea- sonable measures to extend the scope of their influence on activities outside the workplace,” but without any specific reference to laws or political activities.19

This implicit limitation on the use of MNCs for direct political action is consistent with international codes of conduct that condemn MNC interference in a host country’s internal political affairs.20 Some anti-apartheid groups argue that, given the clear vio- lation of human rights involved, this prohibition should not apply in the case of South Africa. Rev. Sullivan believed, and the signatory companies agreed, that direct political action in South Africa was an appropriate and necessary step to seek an end to apartheid. Although this goal parallels the CAAA’s statement of purpose, the U.S. Government appears more reticent than the companies in urging such direct political action.

Corporate Withdrawals

The alternative to MNCs promoting change within South Africa is the option for corporate withdrawal, which of course could be mandated by U.S. govern- ment policy, as was done in 1986 with Libya. In real- ity, significant U.S. corporate withdrawals had already begun, and were accelerating, even before the expiration of Rev. Sullivan’s deadline. Beginning with 1984 and peaking in 1987, reported U.S. disin- vestments numbered 7, 40, 53, 56, 29, 19 and 10 for 1984–90, respectively. As of March 1991 only 106 U.S. companies still had direct investments or employees in South Africa.21

Corporate withdrawal announcements some- times cited the slow pace of apartheid reform but did not link their actions to a desire to cause eco- nomic deprivation that would cause the overthrow of the South African regime. Most companies suc- cumbed to a combination of declining economic prospects in South Africa and the increasing “has- sle” costs from public pressures in the United States. The South African controversy occupied far more valuable management time dealing with its public relations aspects than justified by the tiny pro- portion of revenue represented by that market, par- ticularly when balanced against penalizing actions by U.S. authorities such as restrictions on city

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procurement contracts and denial of the U.S. foreign tax credit.

Companies balanced numerous objectives in structuring their withdrawal, including financial compensation, continued or future market access, protection of patents and trademarks, and responsi- bilities to South African employees, customers and community support programs. Depending on the nature of their operations and the priority given these objectives, firms came to different decisions. Corporate withdrawals include complete shut- downs, sales to other companies or local managers, and third-party trust arrangements. Variations in- volve whether the MNC continues to provide prod- uct, technology or licensing rights to the successor firm. Anti-apartheid activists, who initially wel- comed the withdrawal announcements, soon la- beled many moves a “sham,” complaining of “corporate shell games . . . [that] won’t serve a main objective, to deprive the racist South Africa regime of critical products such as computers and cars.”22

General Motors left South Africa at the end of 1986, selling its subsidiary to a local management group which renamed the firm Delta Motors. No details were released on financial arrangements nor on whether the agreement included a possible GM buyback option. GM reportedly provided funds to retire the subsidiary’s debt and finance retooling operations. In addition, non-equity ties provide Delta with technology and component supplies from GM units in the United States and Europe. The new management indicated it will continue to restrict sales to the South African police and military as called for under U.S. law, although U.S. controls do not regulate vehicles using parts supplied from Europe. Delta and GM managers expected GM’s pio- neering black employment programs to continue, but black union representatives said new manage- ment had “really put the screws on” and cited the appearance of a rival union with reported tacit ties to management.23

Judging by the company’s public statements, GM recognized three areas of responsibility it had when considering its withdrawal: financial performance, employees in South Africa, and the goal of ending apartheid. Their strategy blended these goals by maintaining non-equity ties deemed essential to the survival of Delta Motors and its employment. According to GM, licensing and supply arrange- ments contribute to Delta’s “economic viability,” which is “consistent with, and in furtherance of, GM’s expressed policy of not adversely affecting the employment situation among non-white workers at Delta.”24 (GM had provided about 2,800 jobs in

South Africa, making it one of the largest foreign employers.) Chairman Roger Smith added political system goals to the employee responsibility con- cept, saying:

Our main objective (in pulling out) was to create a financially sound organization which will have a greater chance of long-term viability and will con- tinue to be a positive force in the ending of apart- heid.25

Clearly the GM chairman still endorsed the idea of progressive internal reform, but the company had shifted from pursuing it directly from within to encouraging it indirectly from outside when GM ended its direct managerial control and equity investment.

IBM sold its South African operation on March 1, 1987, to an independent trust essentially controlled by its former local managers. As with GM’s action, the trust includes some arrangements for employee equity and profit-sharing, although less than one- quarter of IBM’s work-force was non-white and they reportedly would receive a less than proportionate share of the benefits. A news article on IBM’s with- draw strategy reported that “By selling the subsid- iary to an offshore trust of its own making and financing the sale, IBM sidestepped political pres- sure, stayed in the market and indirectly can take money out of South Africa at a preferential exchange rate.”26

The former subsidiary (renamed Information Sys- tems Management or ISM) is IBM’s sole marketing and service representative in South Africa, operating with technology and product supply contracts. IBM continued making contributions to black education, business, and legal reform programs. IBM reports that ISM complies with U.S. regulations prohibiting sales of IBM products to South African police, mili- tary or apartheid-enforcing agencies, including sev- eral agencies not on the U.S. government’s proscribed list. If IBM’s restrictions on its product sales are indeed tighter than U.S. government speci- fications, it represents a turnaround from earlier pol- icy statements regarding the proper role of corporate decision-making. In 1981 IBM’s Board of Directors recommended against a shareholder reso- lution that called for additional sales restrictions, stating:

We continue to believe that imposing an embargo against a foreign government is engaging in the conduct of foreign policy. The conduct of foreign policy should be reserved to the U.S. government.

10 John M. Kline Case 511

If the proponents wish to expand this embargo, the proper way to achieve that expansion is through the U.S. Government, not in a stock- holder proposal to IBM.27

Interestingly, IBM’s withdrawal may diminish the ability of either the company or the U.S. govern- ment to influence computer sales in South Africa. The trust that purchased IBM’s subsidiary quickly established a joint venture with Barlow Rand, another South African firm, that developed a com- plex network of new corporate ties. According to ISM’s chairman, this link-up stemmed from “a strong need for local development and manufacture because of the sanctions threat. As I examined future scenarios, it became clear that we had to join up with a company with local manufacturing capa- bility.”28

A final corporate withdrawal story reveals a dif- ferent mix of objectives, methods and results. East- man Kodak shut down its South African operations in 1987, provided separation benefits to many of its 488 employees, and banned shipments to South Africa from any of its worldwide units. Company managers, however, admitted “we can’t stop all our 500,000 world customers from deciding to resell to the South African operations which replace us.” The executive director of one such local firm agreed, issuing a “business as usual” pledge. “We are com- pletely confident that with our worldwide connec- tions we will continue to obtain all the Kodak products South Africa needs, as well as the latest technological developments.”29

In February 1988 Kodak acquired Sterling Drug which had a subsidiary in South Africa. That unit was sold and Sterling followed Kodak’s lead, ban- ning the supply of any products to South Africa, including “sales to any party which we know or have reason to believe will ship Sterling product, in fin- ished form or otherwise, to South Africa.”30 Opin- ions can differ regarding product responsibilities, however. Merck also sold its South African subsid- iary in 1988, but announced long-term agreements to continue supplying health care products to the new South African owner.

The company has long endeavored to make its medicines available wherever they are medically needed. It would be to the detriment of all South Africans, including the already disadvantaged non-white majority, if the company failed to meet that obligation.31

WHO DECIDES, AND HOW?

The wave of U.S. corporate withdrawals from South Africa highlights a number of the critical questions about an MNC’s ties to a host country and how the nature of its business operations may affect its ethi- cal responsibilities toward that nation and its people. The principal question examined in this case study is whether the parameters of ethical corporate responsibility extend to political system issues. Are MNCs ethically responsible—capable and account- able—for bringing about change on a macro politi- cal level?

In the context of South Africa, do MNCs invested in that country bear more ethical responsibility for apartheid’s violation of human rights than corpora- tions that only engage in external trading relation- ships? If the answer to this question is “yes,” then legal and operational distinctions between doing business with and in South Africa are important con- siderations when assessing ethical responsibility for purposes of both public policy and ethical business conduct, including the form and objectives of corpo- rate withdrawal actions. If the answer is “no,” greater attention should be directed to the estimated 6,000 U.S. companies that still do business with South Africa although they do not maintain units in that country. This issue also raises questions as to whether a home government’s ethical responsibility should lead it to regulate trade or MNC investment operations in order to coerce or intervene in South Africa to bring apartheid to an end.

MNCs also can face questions about how they carry out their ethical responsibilities. If charged with changing an unethical host nation’s political system, what are the ethical limits, if any, on the methods they should employ? MNCs can promote political change indirectly through assisting (growth and progressive reform) or damaging (withdrawal) an economy. MNCs could also attempt to lobby for legal change, violate unethical laws, and support or collaborate with revolutionary forces that seek to overthrow the government. Do ethical limits on MNCs’ methods differ depending on whether the firm is doing business with or in South Africa, and do they differ from acceptable limits on domestic companies?

One of the costs of doing business on a global scale is that MNCs are continually buffeted by diverse political forces. The intersection between the ethics of business and public policy is therefore an integral part of the international affairs system. Developments over the past decade in South Africa provide a valuable and continuing test case of

Case 511 Doing Business in South Africa 11

attempts to determine the ethical parameters for business and government responsibilities when con- fronted with violations of basic human rights by an entrenched national political structure. Who decides who should do what, and how? Answers to these

simple yet complex questions will influence the out- come in the still urgent case of South Africa. The same questions apply to many other case circum- stances, in the past and in challenges yet to come.

NOTES

1. Dharmendra T. Verma, “Polaroid and South Africa,” Proceedings of the Second National Conference on Business Ethics: Power and Responsibility in the American Business System, ed. W. Michael Hoffman (Washington, DC: University Press of America, 1979), pp. 391–94.

2. Jennifer Davis, James Cason, and Gail Hovey, “Eco- nomic Disengagement and South Africa: The Effective- ness and Feasibility of Implementing Sanctions and Divestment,” Law and Policy in International Business, Vol. 15, No. 2 (1983), pp. 559–60.

3. Tom L. Beauchamp, Case Studies in Business, Soci- ety, and Ethics, 2nd ed. (Englewood Cliffs, New Jersey: Prentice Hall, 1989) p. 243.

4. Verma, “Polaroid and South Africa,” p. 384. 5. Ibid., p. 379. 6. Ibid., p. 387. 7. Davis, et al., “Economic Disengagement,” p. 551. 8. Rev. Leon Sullivan, “Agents for Change: The Mobili-

zation of Multinational Companies in South Africa,” Law and Policy in International Business, Vol. 15, No. 2 (1983), p. 434.

9. Richard A. Jackson, ed., The Multinational Corpora- tion and Social Policy: Special Reference to General Motors in South Africa, (New York: Praeger Publishers, 1974), p. 106.

10. Rev. Leon Sullivan, “The Role of Multinational Cor- porations in Helping to Bring About Change in South Africa,” Ethics and the Multinational Enterprise: Proceed- ings of the Sixth National Conference on Business Ethics, ed. W. Michael Hoffman, et al. (Lanham, MD: University Press of America, 1986), pp. 381–82.

11. Steve Mufson, “GM Manager Challenges a South Africa Race Law,” Wall Street Journal, 21 February 1986.

12. Ibid. 13. Sullivan, “Role of Multinational Corporations,”

p.385. 14. Sullivan, “Agents for Change,” p. 440. 15. Sullivan, “Role of Multinational Corporations,” p.

385. 16. “The Comprehensive Anti–Apartheid Act of 1986”

(Public Law 99–440). Subsequent sanctions imposed against South Africa, mainly in amendments to other leg- islation, include an Amendment to the Bretton Woods Agreements Act prohibiting U.S. support for IMF support to countries engaging in apartheid; an amendment to a 1987 deficit reduction bill denying U.S. companies in South Africa a foreign tax credit for income taxes paid to the South African government; and a 1987 Department of Transportation appropriation bill provision prohibiting

take-off and landing rights in the United States for South African-owned aircraft.

17. Subsequent to the drafting of this case study, on July 10, 1991, President Bush lifted the CAAA sanctions on South Africa, declaring that the law’s specified condi- tions had been met. Some groups, including the Congres- sional Black Caucus, argued that not all political prisoners had been released and negotiations had not yet pro- ceeded far enough to warrant lifting the sanctions. The President acted within his authority, however, and insuffi- cient political support existed to reimpose sanctions. The Statement of Principles for corporations doing business in South Africa was not affected because that initiative arose from a different section of the CAAA. The European Com- munity also reacted to the South African government’s reform actions, lifting their sanctions in April of 1991.

18. This use of coercion and intervention concepts is suggested for discussion purposes to focus on different types of business entities as they do business with or in South Africa. For more traditional applications of these concepts to ethics in international affairs, see Michael J. Smith, “Ethics and Intervention,” Ethics & International Affairs, Vol. 3 (1989) pp. 1–26; Joseph S. Nye, Jr., Ethics and Foreign Policy (Wye Plantation, Queenstown, Mary- land: Aspen Institute for Humanistic Studies, 1985); and Charles W. Powers, “Ethics and United States Trade Pol- icy,” Trade, Inflation, & Ethics: Critical Choices for Ameri- cans, Vol. 5 (Lexington, MA: Lexington Books, 1976).

19. Chester A. Crocker, “South Africa: Report on the President’s Executive Order,” United States Department of State, Current Policy No. 817, May 1986.

20. See, for example, the 1976 OECD Guidelines for Multinational Enterprises and the draft United Nations Code of Conduct on Transnational Corporations.

21. Alison Cooper, U.S. Business in South Africa 1991, (Washington, DC: Investor Responsibility Research Cen- ter Inc., 1991), p. 71.

22. Dennis Kneale, “GM, IBM and Others Departing South Africa Are Faulted For Plans to Continue Sales There,” Wall Street Journal, 24 October 1986.

23. Jennifer Kibbe and David Hauck, Leaving South Africa: The Impact of U.S. Corporate Disinvestment (Wash- ington, DC: Investor Responsibility Research Center Inc., 1988), p.43.

24. Cooper, U.S. Business in South Africa 1991, p.71. 25. Dorin P. Levin and Roger Thurow, “GM to Leave

South Africa, Sell Operations,” Wall Street Journal, 21 October 1986.

26. Dennis Kneale, “Leaving South Africa, IBM, Others

12 John M. Kline Case 511

Sell Units To Employee Trusts,” Wall Street Journal, 24 August 1987.

27. IBM Shareholder Resolution submitted for discus- sion at the annual meeting in 1981.

28. Kibbe and Hauck, Leaving South Africa, p.45.

29. William Claiborne, “Kodak Products to Stay on Sale in South Africa,” Washington Post, 20 March 1987.

30. Cooper, U.S. Business in South Africa 1991, p.184. 31. Ibid., p.78.

SELECTED BIBLIOGRAPHIC REFERENCES

Beauchamp, Tom L. Case Studies in Business, Society, and Ethics. 2nd ed. New Jersey: Prentice Hall, 1989.

———. “Polaroid In and Out of South Africa,” pp. 240– 246.

Brown, Peter G. and Douglas MacLean. Human Rights and U.S.Foreign Policy: Principles and Applications. Lexing- ton, Massachusetts: DC Heath and Company, 1979.

Cooper, Alison. US Business in South Africa 1991. Washing- ton, D.C.: Investor Responsibility Research Center Inc., 1991.

DeGeorge, Richard T. Business Ethics. 2nd ed. New York: Macmillan Publishing Company, 1986.

———. “U.S. Firms in South Africa,” pp. 373–380. Donaldson, Thomas. The Ethics of International Business.

New York: Oxford University Press, 1989. ———. “Disinvestment,” pp. 129–144. Gladwin, Thomas N., and Ingo Walter. Multinationals

Under Fire: Lessons in the Management of Conflict. New York: John Wiley & Sons, 1980. References to South Africa contained in: “Human Rights—The Issues,” chapter 5.

———. “Human Rights—The Conflicts,” chapter 6. ———. “Labor Relations,” chapter 11. Hoffman, W. Michael, ed. Proceedings of the Second

National Conference on Business Ethics: Power and Responsibility in the American Business System. Wash- ington, D.C.: University Press of America, 1979.

———. Verma, Dharmendra T. “Polaroid and South Africa,” pp. 357–395.

Hoffman, W. Michael, et al., eds. Ethics and the Multina- tional Enterprise: Proceedings of the Sixth National Con- ference on Business Ethics. Lanham, Maryland: University Press of America, 1986.

———. Carstens, Kenneth M. “A Case for Sanctions Against South Africa,” pp. 387–399.

———. Fourie, D. G. M. “Multinational Enterprises, Sanc- tions, and South Africa: A Host Country Perspective,” pp. 411–418.

———. Koplowitz, Wilfred D. “United States Corporations in South Africa: A Case for Staying,” pp. 443–447.

———. Luddington, David M. “The American Multina- tional Enterprise and South Africa: Maintaining the Proper Balance,” pp. 419–434.

———. Sullivan, Leon H. “The Role of Multinational Cor- porations in Helping to Bring About Change in South Africa,” pp. 379–386.

———. Werhane, Patricia. “Moral Justifications for Doing

Business in South Africa,” pp. 435–442. ———. Wolpe, Howard. “South Africa: The Time Has Run

Out,” pp. 401–410. Jackson, Richard A., ed. The Multinational Corporation and

Social Policy: Special Reference to General Motors in South Africa. New York: Praeger Publishers, 1974.

Kaempfer, William H., James A. Lehman, and Anton D. Lowenberg. “Divestment, Investment Sanctions, and Disinvestment: An Evaluation of Anti–Apartheid Policy Instruments.” International Organization. 41, (Summer 1987), pp. 457–473.

Kibbe, Jennifer, and David Hauck. Leaving South Africa: The Impact of US Corporate Disinvestment. Washington, D.C.: Investor Responsibility Research Center Inc., 1988.

Law and Policy in International Business. 15,2 (1983). ———. Chettle, John H. “The Law and Policy of Divest-

ment of South African Stock,” pp. 445–528. ———. Davis, Jennifer, James Cason, and Gail Hovey.

“Economic Disengagement and South Africa: The Effectiveness and Feasibility of Implementing Sanc- tions and Divestment,” pp. 529–563.

———. Sullivan, Leon, Rev. “Agents for Change: the Mobi- lization of Multinational Companies in South Africa,” pp. 427–444.

Matthews, John, Kenneth Goodpaster, and Laura Nash. Policies and Persons: A Casebook in Business Ethics. New York: McGraw–Hill, 1985.

———. “Dresser Industries and South Africa,” pp. 430– 447.

Minter, William. “South Africa: Straight Talk on Sanctions.” Foreign Policy. 65, (Winter 1986–87), pp. 43–63.

Myers, Desaix, III. U.S Business in South Africa: The Eco- nomic, Political and Moral Issues. Bloomington, Indiana: Indiana University Press, 1980.

Nye, Joseph S., Jr. Ethics and Foreign Policy. Wye Planta- tion, Queenstown, Maryland: Aspen Institute for Hu- manistic Studies, 1985.

Powers, Charles W. “Ethics and United States Trade Pol- icy.” In Trade, Inflation, & Ethics: Critical Choices for Americans, 5, Lexington, Massachusetts: Lexington Books, 1976.

Relly, Gavin. “The Costs of Disinvestment.” Foreign Policy. 63, (Summer 1986), pp. 131–146.

Smith, Michael J. “Ethics and Intervention.” Ethics & Inter- national Affairs. 3, (1989), pp. 1–26.

Case 511 Doing Business in South Africa 13

APPENDIX A

Original Sullivan Principles

(1) Nonsegregation of the races in all eating, com- fort and work facilities.

(2) Equal and fair employment practices for all employees.

(3) Equal pay for all employees doing equal or comparable work for the same period of time.

(4) Initiation and development of training pro- grams that will prepare, in substantial numbers, blacks and other nonwhites for supervisory, admin- istrative, clerical and technical jobs.

(5) Increasing the number of blacks and other nonwhites in management and supervisory posi- tions.

(6) Improving the quality of employees’ lives out- side the work environment in such areas as housing, transportation, schooling, recreation and health facilities.

We agree to further implement these principles. Where implementation requires a modification of existing South African working conditions, we will seek such modification through appropriate chan- nels.

We believe that the implementation of the forego- ing principles is consistent with respect for human dignity and will contribute greatly to the general economic welfare of all the people of South Africa.

APPENDIX B

The Statement of Principles for South Africa (formerly the Sullivan Principles) (text includes amplifications as used for 1990 ratings)

Principle I. Non-segregation of the races in all eat- ing, comfort and work facilities.

Each signatory of the Statement of Principles will proceed immediately to:

• Eliminate all vestiges of racial discrimination.

• Remove all race designation signs.

• Desegregate all eating, comfort and work facili- ties.

Principle II. Equal and fair employment practices for all employees.

Each signatory of the Statement of Principles will proceed immediately to:

• Implement equal and fair terms and condi- tions of employment.

• Provide non-discriminatory eligibility for bene- fit plans.

• Establish an appropriate and comprehensive procedure for handling and resolving individ- ual employee complaints.

• Support the elimination of all industrial racial discriminatory laws which impede the imple- mentation of equal and fair terms and condi- tions of employment, such as abolition of job reservations, job fragmentation, and appren- ticeship restrictions for blacks and other non- whites

• Secure rights of black workers to the freedom of association and assure protection against victimization while pursuing and after attain- ing these rights.

• Involve black workers or their representatives in the development of programs that address their educational and other needs and those of their dependents and the local community.

Principle III. Equal pay for all employees doing equal or comparable work for the same period of time.

Each signatory of the Statement of Principles will proceed immediately to:

• Design and implement a wage and salary administration plan which is applied equally to all employees, regardless of race, who are per- forming equal or comparable work.

• Ensure an equitable system of job classifica- tions, including a review of the distinction between hourly and salaried classifications.

• Determine the extent upgrading of personnel and/or jobs in the upper echelons is needed, and accordingly implement programs to accomplish this objective in representative numbers, ensuring the employment of blacks and other non-whites at all levels of company operations.

• Assign equitable wage and salary ranges, the minimum of these to be well above the appro- priate local minimum economic living level.

Principle IV. Initiation and development of training

14 John M. Kline Case 511

programs that will prepare, in substantial numbers, blacks and other non-whites for supervisory, admin- istrative, clerical, and technical jobs. Each signatory of the Statement of Principles will proceed immediately to:

• Determine employee training needs and capa- bilities, and identify employees with potential for further advancement.

• Take advantage of existing outside training resources and activities, such as exchange pro- grams, technical colleges, and similar institu- tions or programs.

• Support the development of outside training facilities, individually or collectively—including technical centers, professional training expo- sure, correspondence and extension courses, as appropriate, for extensive training outreach.

• Initiate and expand inside training programs and facilities.

Principle V. Increasing the number of blacks and other non-whites in management and supervisory positions.

Each signatory of the Statement of Principles will proceed immediately to:

• Identify, actively recruit, train and develop a sufficient and significant number of blacks and other non-whites to assure that as quickly as possible there will be appropriate representa- tion of blacks and other non-whites in the management group of each company at all lev- els of operations.

• Establish management development pro- grams for blacks and other non-whites, as needed, and improve existing programs and facilities for developing management skills of blacks and other non-whites.

• Identify and channel high management poten- tial blacks and other non-white employees into management development programs.

Principle VI. Improving the quality of employees’ lives outside the work environment in such areas as housing, transportation, schooling, recreation, and health facilities.

Each signatory of the Statement of Principles will proceed immediately to:

• Evaluate existing and/or develop programs, as appropriate, to address the specific needs of black and other non-white employees in the areas of housing, health care, transportation and recreation.

• Evaluate methods for utilizing existing, ex-

panded or newly established in-house medical facilities or other medical programs to improve medical care for all non-whites and their de- pendents.

• Participate in the development of programs that address the educational needs of employ- ees, their dependents, and the local commu- nity. Both individual and collective programs should be considered, in addition to technical education, including such activities as literacy education, business training, direct assistance to local schools, contributions, and scholar- ships.

• Support changes in influx control laws to pro- vide for the right of black migrant workers to normal family life.

• Increase utilization of and assist in the devel- opment of black and other non-white owned and operated business enterprises including distributors, suppliers of goods and services, and manufacturers.

Principle VII. Working to eliminate laws and cus- toms which impede social, economic and political justice. (This was originally known as the “Fourth amplification.”)

Each signatory of the Statement of Principles must proceed immediately to:

• Press for a single education system common to all races.

• Use influence and support the unrestricted rights of black businesses to locate in the urban areas of the nation.

• Influence other companies in South Africa to follow the standards of equal rights principles.

• Support the freedom of mobility of black work- ers, including those from so-called indepen- dent homelands, to seek employment opportunities wherever they exist, and make possible provisions for adequate housing for families of employees within the proximity of workers’ employment.

• Use financial and legal resources to assist blacks, coloreds and Asians in their efforts to achieve equal access to all health facilities, edu- cational institutions, transportation, housing, beaches, parks and all other accommodations normally reserved for whites.

• Oppose adherence to all apartheid laws and regulations.

• Support the ending of all apartheid laws, prac- tices and customs.

Case 511 Doing Business in South Africa 15

• Support full and equal participation of blacks, coloreds and Asians in the political process.

With all the foregoing in mind, it is the objective of the companies to involve and assist in the education and training of large and telling numbers of blacks and other non-whites as quickly as possible. The ultimate impact of this effort is intended to be of massive proportion, reaching and helping millions.

PERIODIC REPORTING

The Signatory Companies of the Statement of Princi- ples will proceed immediately to:

• Report progress on an annual basis to the inde- pendent administrative unit Reverend Sullivan established.

• Have all areas specified by Reverend Sullivan audited by a certified public accounting firm.

• Inform all employees of the company’s annual periodic report rating and invite their input on ways to improve the rating.

APPENDIX C

The State Department’s Principles

1. Desegregating the races in each employment facility,

2. Providing equal employment opportunity for all employees without regard to race or ethnic ori- gin,

3. Assuring that the pay system is applied to all employees without regard to race or ethnic origin,

4. Establishing a minimum wage and salary struc- ture based on the appropriate local minimum eco- nomic level which takes into account the needs of employees and their families,

5. Increasing by appropriate means the number of persons in managerial, supervisory, administra- tive, clerical and technical jobs who are disadvan-

taged by the apartheid system for the purpose of significantly increasing their representation in such jobs,

6. Taking reasonable steps to improve the quality of employees’ lives outside the work environment with respect to housing, transportation, schooling, recreation and health, and

7. Implementing fair labor practices by recogniz- ing the right of all employees, regardless of racial or other distinctions, to self-organization and to form, join or assist labor organizations, freely and without penalty or reprisal, and recognizing the right to refrain from any such activity.