In Corporate Governance after the Financial Crisis
Public employee pension funds are vulnerable to being used as a vehicle for advancing political/social goals unrelated to shareholder interests generally. Mid-decade activism by CalPERS, for example, reportedly was “fueled partly by the political ambitions of Phil Angelides, California’s state treasurer and a CalPERS board member,” who planned on running for governor of California in 2006. In other words, Angelides allegedly used the retirement savings of California’s public employees to further his own political ends.
Another CalPERS case in point:
In 1999, the legislature enacted SB 105 (Burton) which obligates CalPERS and CalSTRS to support, whenever feasible, shareholder resolutions at domestic and international corporations in which those funds have invested that are designed to encourage, among other things:
- Increased representation of individuals from underrepresented religious groups in the work force, including managerial, supervisory, administrative, clerical, and technical jobs; and
- Banning of provocative religious or political emblems from the workplace.
Cal. Gov’t Code Section 7513.5. While this law is limited to operations in Northern Ireland, it is surprising to see that the California legislature actually mandated support for: (1) affirmative action based on religion; and (2) restraints on free speech.
It's a classic example of how activism by public pension funds can be counter to the interests of othger investors, coupled with an unusually blatant attack on free speech and freedom of association.
