Disinvestment
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Disinvestment, sometimes referred to as divestment, refers to the use of a concerted economic boycott, with specific emphasis on liquidating stock, to pressure a government, industry, or company towards a change in policy, or in the case of govennments, even regime change. The term was first used in the 1980s, most commonly in the United States, to refer to the use of a concerted economic boycott designed to pressure the government of South Africa into abolishing its policy of apartheid. The term has also been applied to actions targeting Iran, Sudan, Northern Ireland, Myanmar, and Israel.
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[edit] Targets
[edit] Nations
[edit] South Africa
[edit] Headline text
The most frequently-encountered method of "disinvesting" was to persuade state, county and municipal governments to sell their stock in companies which had a presence in South Africa, such shares having been previously placed in the portfolio of the state's, county's or city's pension fund. Several states and localities did pass legislation ordering the sale of such securities, most notably the city of San Francisco. An array of celebrities, including singer Paul Simon, actively supported the cause.
Many conservatives opposed the disinvestment campaign, accusing its advocates of hypocrisy for not also proposing that the same sanctions be leveled on either the Soviet Union or the People's Republic of China. Ronald Reagan, who was the President of the United States during the time the disinvestment movement was at its peak, also opposed it, instead favoring a policy of "constructive engagement" with the Pretoria regime. Some offered as an alternative to disinvestment the so-called "Sullivan Principles", named after Reverend Leon Sullivan, an African-American clergyman who served on the Board of Directors of General Motors. These principles called for corporations doing business in South Africa to adhere to strict standards of non-discrimination in hiring and promotions, so as to set a positive example.
[edit] Northern Ireland
There was also a less well-publicized movement to apply the strategy of disinvestment to Northern Ireland, as some prominent Irish-American politicians sought to have state and local governments sell their stock in companies doing business in that part of the United Kingdom. This movement featured its own counterpart to the Sullivan Principles; known as the "MacBride Principles" (named for Nobel Peace Prize winner Sean MacBride), which called for American and other foreign companies to take the initiative in alleviating alleged discrimination against Roman Catholics by adopting policies resembling affirmative action. The effort to disinvest in Northern Ireland met with little success, but the United States Congress did pass (and then-President Bill Clinton signed) a law requiring American companies with interests there to implement most of the MacBride Principles in 1998.
[edit] Cuba
Though in place long before the term "disinvestment" was coined, the United States embargo against Cuba meets many of the criteria for designation as such — and a provision more closely paralleling the disinvestment strategy aimed at South Africa was added in 1996, when the United States Congress passed the Helms-Burton Act, which penalized owners of foreign businesses which invested in former American firms that had been nationalized by Fidel Castro's government after the Cuban revolution of 1959. The passage of this law was widely seen as a reprisal for an incident in which Cuban military aircraft shot down two private planes flown by Cuban exiles living in Florida, who were searching for Cubans attempting to escape to Miami.
[edit] Sudan
During the late 1990s and early 2000s several Christian groups in North America campaigned for disinvestment from Sudan because of the Muslim-dominated government's long conflict with the breakaway, mostly Christian region of Southern Sudan. One particular target of this campaign was the Canadian oil company, Talisman Energy which eventually left the country, and was supplanted by Chinese investors.[1][2]
There is currently a growing movement to divest from companies that do business with the Sudanese government responsible for genocide in Darfur. Prompted by the State of Illinois - the first government in the U.S.A. to divest - scores of public and private-sector entities are now following suit. In New York City, Councilman Eric Gioia recently introduced a resolution to divest City pension funds from companies doing business with Sudan.
The recent divestment of assets implicated in funding the government of Sudan, in acknowledgment of acts of terrorism and genocide perpetrated in the Darfur conflict. In the United States, this divestment has taken place at the state level (including Illinois, which led the way, followed by New Jersey, Oregon, and Maine). It has also taken place at many North American Universities, notably Cornell University, Harvard University, Case Western Reserve University, Queen's University, Stanford University, Dartmouth College, Amherst College, Yale University, Brown University, the University of California, the University of Pennsylvania, Brandeis University, the University of Colorado, American University, University of Delaware, and Emory University. The Sudan Divestment Task Force [3] has organized a nationwide group which advocates a targeted divestment policy, to minimize any negative effects on Sudanese civilians while still placing financial pressure on the government. The so-called 'targeted divestment approach' generally permits investment in Sudan, and is thus radically different from the comprehensive divestment that ended apartheid in South Africa. Because targeted divestment permits investment in hundreds of multinational corporate and private-equity firms that support, lend legitimacy to, and pay taxes and graft to the government of Sudan, policy experts suggest that this "feel good" approach will have little impact on the Sudanese government's sponsorship of terrorism and genocide. Because of the massive deficiencies in the so-called 'targeted divestment approach,' human rights advocates recommend the more comprehensive approach to divestment that has been taken by the State of Illinois.[citation needed] Under this approach, sponsored by State Senator Jacqueline Collins, public pensions are prohibited from investing in any corporation or private equity firm that conducts business in Sudan, unless authorized to do so by the U.S. Government.
[edit] Israel
In 2004, the Presbyterian Church (USA), in a process they would later call "flawed", voted to begin a process of phased, selective divestment from companies operating in Israel. A tremendous backlash occurred in response to the Church's divestment overture in 2004, calling for an economic leverage/divestment process that dealt only with Israel. That resolution was couched in language asserting that the "occupation" was "at the root of evil acts". In 2005, the World Council of Churches followed suit. The New England Conference of the United Methodist Church, at its Annual Conference session held June 8-11, 2005, voted to urge the divesting of funds from companies that support the Israeli occupation of Palestinian Territories. The resolution stated:
- Whereas the United Methodist Church should not profit from the illegal Israeli occupation of Palestinian land or the destruction of Palestinian homes, orchards, and lives,
- Whereas we are committed to ensuring that our denomination’s money is used in a manner consistent with our beliefs, with international law, and with Christ’s teaching,[4].
The United Church of Christ also followed suit [5], endorsing a range of economic leverages that included divestment, but church leaders publicly announced that no divestment path was planned for their pension or foundation assets. Theological Rationale: We believe that God in love seeks blessing and not destruction for all peoples, and lays the same pursuit upon Jews, Christians and Muslims (Genesis 12:1-3, 17:15-20, 21:14-19; Joshua 5:13-15; Isaiah 42:5-7, 49:6; Jonah; Micah 4:2-4; Matthew 5:14-16, 5:23-24; Mark 3:35; Luke 6:27-36, 9:51-55, 10:25-37; John 3:16-17, 21:15-17; Revelation 22:1-2)[6]. Many of these denominational caucuses were criticized by their own members for their association with lobbyists and speakers from the controversial Sabeel Liberation Theology Center.
In 2006, the Presbyterian Church (USA) General Assembly by a vote of 483-28 adopted a balanced resolution that replaced language adopted in 2004 mandating a process of divestment focused on Israel - and endorsing instead the church's customary corporate engagement process. [7]
Other mainline churches have debated the subject of divestment. The Evangelical Lutheran Church in America rejected a pro-divestment resolution during the summer of 2005.[citation needed] The Episcopal Church USA ruled out the possibility of an Israel divestment later that year, and the United Methodist Church has also avoided divestment.[citation needed]
Similarly, a pro-divestment push was rebuffed in the city of Somerville, MA.[citation needed]
On May 27, 2006, representing more than 200,000 workers, delegates to The Canadian Union of Public Employees (CUPE) - Ontario convention in Ottawa voted overwhelmingly to support divestment. In their statement of principles they condemned what they called Israel's "apartheid wall", saying it is illegal under international law. [8]
On 27 April 2005, The Rawalpindi-Islamabad Citizens Peace Committee of Pakistan has called for a total boycott of US and British products to protest declaring war on weak nations [9]. Their release cites:“The local chains pay their American principals a royalty of 5% on each sale for using their brand names. It is this 5% that goes to bloat the coffers of the US corporations most of whom are major contributors to the state of Israel. Thus, consuming American fast food goes to strengthen the US and Israeli armed forces, US aggression worldwide and the Israeli atrocities on the Palestinians".
Pro-Palestinian student groups at many colleges and universities have petitioned their schools to divest from companies with ties to the Israeli military in 2002–2004, but to date every university divestment campaign has been unsuccessful in swaying the schools' administrations' investment decisions. Former Harvard President Lawrence Summers famously called those campaigns "anti-Semitic in effect, if not in intent."[citation needed]
As a response, many pro-Israel student advocacy groups throughout the nation have launched "Invest in Israel" campaigns, encouring donors to universities and the universities themselves to invest in Israel.[citation needed]
[edit] Others
Myanmar (formerly Burma) has also been the target of disinvestment campaigns (most notably one initiated by the state of Massachusetts.) Divestment campaigns have also been directed against Saudi Arabia due to allegations of "gender-apartheid." The University of California, Riverside's Hillel chapter has a Saudi Divestment petition circulating as of 2007.
Since 2007, several major international and Canadian oil companies had threatened to withdraw investment from the province of Alberta because of a proposed increase in royalty rates.[10][11]
[edit] Industries
[edit] Companies
- Talisman Energy - because of its status as the main Western oil company in Sudan in the early 2000s.
[edit] Criticism
Some hold that divestment campaigns are based on a fundamental misunderstanding of how equity markets work. John Silber, former president of Boston University, observed that while boycotting a company's products would actually affect their business, "once a stock issue has been made, the corporation doesn't care whether you sell it, burn it, or anything else, because they've already got all the money they're ever going to get from that stock. So they don't care." [1]
Regarding the more specific case of South Africa, John Silber recalled:
...when the students were protesting the South African situation, I met with them, and they said BU must divest in General Motors and IBM. And I said, "Why should we do that? Is it immoral to own that stock?" Absolutely immoral to own it. And I said, "So then, we're supposed to sell it to somebody? We can't divest unless we sell it to somebody. And if we burn the stock, that just helps General Motors, because it reduces the amount of stock outstanding, so that can't be right. If we sell it to somebody, we have just gotten rid of our guilt in order to impose guilt on somebody else." [1]
The common perception about the effectiveness of divestment lies in the belief that institutional selling of a certain stock lowers its market value. Therefore, the company's networth becomes devalued and the owners of the company may lose substantial paper assets. In addition, institutional divestment may encourage other investors to sell their stocks for fear of lower prices, which in turn lowers prices even further. Finally, lower stock prices limits a corporation's ability to sell a portion of their stocks in order to raise funds to expand the business.
