William C. Thompson, Jr.

I share the outrage of the global community over the slaughter of the estimated 200,000 to 400,000 men, women and children in Darfur. Millions more are suffering in the worsening humanitarian crisis and are facing death from increasing violent attacks, starvation, diseases and exposure to squalid conditions in overcrowded, makeshift camps in Darfur and neighboring Chad.
 
The worsening humanitarian crisis is a clarion call to the global community to mobilize a massive humanitarian relief effort to save lives in Darfur and Chad. Governments and non-governmental organizations, businesses and investors must act now.
 
Foreign companies with operations in Sudan are well-positioned to actively assist the efforts of international aid organizations faced with the daunting challenge of providing relief to the millions of displaced persons and refugees. These companies can assist in providing food, water, medicines, shelter and telecommunications – a critical component of the infrastructure for humanitarian relief agencies in Darfur. Rather than divesting, U.S. institutional investors should use the more effective leverage of their equity ownership in these companies to support this critical effort.

Undoubtedly, divestment proponents are sincere. However, divestment will not help to address the urgent humanitarian crisis. U.S. divestment will have little effect on foreign companies doing business in Sudan, and much less on the economy and government of Sudan. Given the urgency of the humanitarian crisis, divestment is an inappropriate, though well-intended, reaction.

Some proponents assert that there are parallels to the South Africa divestment movement of the 1980s. I disagree. Unlike the period of the South Africa divestment, in which state and local legislation preceded federal legislation, 1997 federal legislation prohibiting nearly all exports to or imports from Sudan, excluding informational materials and certain humanitarian goods, precedes state Sudan divestment legislation.

Federal pre-emption has been established as the basis on which state and municipal divestment legislation could be overturned. On February 23, 2007, the United States District Court for the Northern District of Illinois, Eastern Division, permanently enjoined enforcement of the Illinois Sudan Act. The Act, which prohibited the investment of public funds, including pension funds, in Sudan or in companies doing business in Sudan, was challenged in court by the National Foreign Trade Council (NFTC), along with eight Illinois municipal pension funds, and eight beneficiaries of public pension funds on four counts, including unconstitutional state interference with federal foreign affairs power. In addition, on October 13, 2006, President Bush signed into law the Darfur Peace and Accountability Act of 2006 (DPAA) and simultaneously issued Executive Order 13412, implementing several provisions of the DPAA. A key focus of both the DPAA and the Executive Order is to respond to the continuing humanitarian crisis and to assist peacekeeping and reconstruction efforts in Darfur

Compared to the more than 100 U.S. companies that were present in South Africa, spanning approximately 29 industry sectors, the absence of U.S. companies in Sudan renders divestment an ineffective tool for imposing economic pressure on the government of Sudan. Of note, the genocide in Darfur occurred within the last four years, despite existing U.S. federal sanctions.

Unlike the strategic divestment campaign of the African National Congress (ANC) in South Africa, with representatives and offices in South Africa and other countries, there are no similar organizations in Sudan calling for foreign divestment from Sudan as part of a broader strategy. The South Africa divestment campaign was effective, in part, because of its global coordination by the ANC as part of its broader campaign against the Apartheid regime.

As the investment adviser to the New York City pension funds, I am actively pursuing efforts to mobilize foreign companies in which our funds are invested to assist in providing humanitarian relief in Darfur. On January 17, 2007, I joined with the United Nations Global Compact and the UN Principles for Responsible Investment in hosting an informal consultation with institutional investors and businesses, at the UN Headquarters, to discuss the development of a framework for institutional investors and businesses to collaborate in protecting human rights in conflict zones, such as Sudan. The event was well-attended and successfully established the pillars of common purpose and understanding upon which the participants will move forward to develop a collaborative framework.

In June 2006, I wrote to companies doing business in Sudan in which the New York City pension funds are invested urging them to take a leadership role in supporting the efforts of international organizations. These organizations include the United Nations Commission for Refugees (UNHCR) and the UN Office for the Coordination of Humanitarian Affairs (OCHA), which provide food, water, medicines and shelter to the displaced people and refugees of Darfur, and assist in international efforts to return them safely to their villages. I also urged the companies to use their leverage to persuade the Sudanese Government to end the violence and live up to its commitment to disarm and demobilize the janjaweed militia.

Collective action by institutional investors could be effective in spurring foreign companies in Sudan to provide humanitarian relief. The Chairman of the Board of Executive Directors of Schering AG, Dr. Hubertus Erlen, in his reply to my June 7, 2006 letter, wrote, “We believe that the United Nations is the best qualified institution to deal with the humanitarian crisis and help stabilize the country and are confident that it will take appropriate measures accordingly. Companies can be involved in this important process, but I believe it would not be helpful if they act on their own. Schering is open to support efforts of the United Nations and provide help, especially concerning drugs supplies.”

Divestment is not the answer to the humanitarian crisis in Darfur. Institutional investors and businesses must mobilize to assist in providing urgently needed humanitarian relief.

William C. Thompson, Jr. became New York City’s 42nd Comptroller on January 1, 2002. He was re-elected in November 2005 and began his second term on January 1, 2006. As custodian and investment advisor to all five of the City’s pension funds, Thompson manages a combined portfolio of more than $93 billion. In this role, Thompson has invested hundreds of millions of dollars in affordable housing and commercial real estate in New York City, helping increase housing and job opportunities within the five boroughs. The Comptroller has also spearheaded the creation of the largest Emerging Managers program in the United States. With the approval of the New York City Pension Funds, the Comptroller authorized a $175 million allocation to a groundbreaking Emerging Managers program targeting first-time funds, particularly those managed and owned by women and members of minority groups. Thompson has been a leader among institutional investors in advancing important corporate governance and corporate social responsibility reforms such as the repeal of the classified structure of corporate boards and the annual election of directors, the establishment of a board protocol for addressing shareholder proposals that win majority votes, a prohibition against workplace discrimination based on sexual orientation and gender identity, the adoption of stronger standards of director independence for members of key board committees, as well as the adoption of standards for the protection of the environment and human rights globally. Thompson graduated from Tufts University, where he currently serves as a member of the Board of Trustees.