Public employees of California vote against the activism of pension funds
Public employees of California vote against the activism of pension funds
The California Public Employees Retirement System this month said no, thanks to the activism of pension funds. Government workers overthrew Priya Mathur, the acting president of Calpers. She was defeated by Jason Pérez, a police officer who criticized Ms. Mathur's approach to environmental, social and government investments, or ESG. Mr. Pérez emphasizes the fiduciary duty of the agency to maximize the returns of investors.
Calpers represents nearly two million public employees, retirees and families in California. However, mostly appears in the headlines for their activism, such as the sale of the tobacco industry. "It has been used more as a political action committee than as a retirement fund," said Mr. Pérez. "I think the public agency [employees] they're just sick of the scams. "
Americans have always invested to achieve personal goals, such as saving for a house or college tuition for their children. Some find that an investment approach or specific ESG for each problem matches their personal philosophies. There is nothing wrong with people investing their own money however they want. But Calpers has a fiduciary duty with California public employees, who rely on him for retirement security.
Hester Peirce, a commissioner of the Securities and Exchange Commission, recently observed: "When a pension fund manager makes the decision to pursue his moral objectives at the risk of financial return, the administrator is putting other people's pensions at risk" . The danger to Calpers is real: in 2016, a consultant discovered that the beneficiaries of the fund lost up to $ 3 billion in investment profits between 2001 and 2014. The reason? A cession of tobacco participations for political purposes.
All this happens when the Calpers are still without funds. Worse still, its beneficiaries are stagnant. They are locked in the system and can not vote with their feet.
While Calpers beneficiaries demand a renewed focus on returns, activists continue to work on other channels to impose requirements based on the agenda of public companies. Last month, Senator Elizabeth Warren introduced a bill that would mandate the SEC to require all public companies to disclose the use of fossil fuels and greenhouse gas emissions. This month, a petition signed by 17 legal professors and institutional investors, including Calpers, asked the SEC to develop mandatory rules for public companies to disclose ESG information.
The petition argues that, since there are already many requests to the SEC for specific disclosures (administration of human capital, climate, taxes, human rights, payment relationships by sex and political expenditures), the agency should impose an ESG disclosure framework. wider. . The long list of possible disclosures underscores the problem. Requiring companies to account for a constantly changing list of social problems that are difficult to quantify distract from the legal and real purpose of disclosure: to provide the reasonable investor with the material information he needs to make investment decisions.
These proposals always offer supposed benefits to investors, but the mandatory disclosure of additional intangible information would be detrimental. In a speech in 2013, former SEC President Mary Jo White condemned the "information overload" in already inflated annual reports that conceal relevant disclosures for investors amid a sea of bizarre information. She summed up: "What some investors may want may not be what reasonable investors need." Translation: More information is not necessarily better information.
The demand for politicized corporate statements does not align with the SEC's mission to protect investors and facilitate capital formation. Instead, it would divert resources from business operations and growth. It is simply an attempt to embarrass public companies to comply with the demands of activists.
As Mr. Pérez put it, he criticized a proposal for the divestment of some arms retailers earlier this year: "This is nothing more than a political plan." His drive to prioritize performance over the policy clearly resonated with California's public employees; Legislators and pension fund managers must take note.
Mr. Atkins, CEO of Patomak Global Partners, is a former SEC commissioner.
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