Shareholder Activism

SHAREHOLDER ACTIVISM….The Nation has an interesting review this week from William Greider on the subject of pension fund activism and corporate responsibility:

The largest public pension funds, including CalPERS, have always been conflicted in their obligations to workers and retirees. They are supposed to invest only in the “best interests” of their beneficial owners, which traditionally has meant seeking the best financial returns. But they have often seemed to be playing for the other side ? trashing the environment, workers and communities, and cutting costs in ways that undermine long-term economic prospects. Dennak Murphy, a West Coast organizer for SEIU, crisply explains: “We have nearly 800,000 members, most of whom are in public employee retirement funds [including 210,000 in CalPERS]. The pension funds take their money and buy stocks in two or three thousand companies. Then a lot of those companies turn around and screw the workers.”

No other major investors in finance capital would tolerate such abuse for long ? they would dump the stocks and perhaps plot retaliation.

….Grossly oversimplified, the reform strategy is guided by two interacting principles: First, pension funds should invest to restore the once-common understanding that, in the long run, you can’t have a successful economy and a failing society (roughly speaking, that’s what the “market ideology” ignores). Second, while pension funds adopt this perspective to advance the self-interest of their members (including long-term financial soundness), they should also use their leverage to make the financial system incorporate these principles as the system’s operating routines.

There nothing in the article about my favorite hobbyhorse, grossly excessive executive compensation, something that’s the result of a crony culture that has caused market forces in CEO compensation to break down ? a breakdown that pretty clearly hurts both shareholders and workers. But I guess you can’t have everything. That aside, it’s a pretty good overview of what’s going on in the areas of corporate reform and shareholder activism.

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