`To divest or not to divest' a gnawing issue for universities. Fiscal reality can cloud conscience over South African apartheid

College and university presidents are caught between a South African rock and a financial hard place. With the opening days of school has come increased pressure on those who manage college endowments to shed their institutions' stock in companies doing business in South Africa.

On Monday, Georgetown University announced it would divest all its holdings in such companies: $28.6 million, or 16 percent, of the school's total endowment. The 45 companies involved include Mobil, IBM, and General Motors.

The divestment move presents a fiscal dilemma for colleges and universities, says Peter Magrath, president of the University of Missouri. He says that the best return on the university's stock comes from companies that have some investment or business in South Africa, and that making South Africa a criterion severely restricts the investment choices.

Today, 128 of the Fortune 500 companies do business in South Africa, according to the Investor Responsibility Research Center (IRRC), which follows the divestment issue. That figure includes Coca-Cola, which recently announced it would pull out of the country within nine months.

Other academics, however, aren't so sure that stocks in those companies fare better than the market.

``A university that is managing an endowment fund and elects to divest would not face a formidable constraint'' in finding attractive investment candidates, says Michael Bradley, a professor at the University of Michigan, who has been studing the effect of divestment on the stock market.

Professor Bradley notes that as of last spring, divestiture had had little effect on the stock of companies operating there.

``The biggest dilemma is for research universities,'' says Dr. Magrath, who is also chairman of the executive committee of the Association of American Universities, which represents major public and private research universities.

He notes that one-fourth of the University of Missouri's $400 million of investments is in companies that do business in South Africa. Those companies, including Monsanto and McDonnell Douglas, also donate a great deal of research money to the school.

``What am I supposed to do,'' Magrath asks, ``go to Richard Mahoney [chief executive officer of Monsanto] and try to get Monsanto involved in [funding] the university's projects? It's difficult for American universities to go to Xerox, IBM, and others, and solicit contracts when they then turn around and say [the companies] are immoral.''

Dr. Bradley agrees, noting that it has been the smaller colleges that have most often shifted their endowments. Often more financially independent (especially if they don't have large research centers), ``they don't have as much to lose,'' he says. But, he notes, the fiscal pressure extends to general corporate giving.

According to the Council for Financial Aid to Education, the major donors to education (primarily colleges and universities) were: IBM, AT&T, General Motors, Exxon, General Electric, Atlantic Richfield, Du Pont, Shell, Amoco, and Chevron. Six of the 10 do business or direct investment in South Africa, according to the IRRC. (AT&T and General Electric have indirect investments; Amoco and Arco have no dealings in South Africa.)

As yet, it's difficult to determine just how much university money is being pulled out of South African-related companies.

Spero Kripotos, executive vice-president of CDA Investment Technologies, says that most endowment funds are managed by other institutions and that the shift can't be broken down.

He says, however, that his company is getting more requests for specially constructed indexes that exclude companies that have investment in that country. He says he suspects that a large proportion of those requests come from endowments.