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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/
1
2 John M. Kline Case 511
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
Case 511 Doing Business in South Africa 3
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
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:
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
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.
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
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
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.
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
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
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.
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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.
• 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.
• 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

programs that will prepare, in substantial numbers,
blacks and other non-whites for supervisory, admin-
istrative, clerical, and technical jobs.
• 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.
• 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.
• 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.
• 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.
Case 511BACKGROUNDDETERMINING ETHICAL
CORPORATE ACTIONSTHE SULLIVAN PRINCIPLESU.S.
GOVERNMENT ACTIONSWHO DECIDES, AND
HOW?NOTESSELECTED BIBLIOGRAPHIC
REFERENCESAPPENDIX AAPPENDIX BPERIODIC
REPORTINGAPPENDIX C

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