Public shareholders should wield their power
– David H. Webber is a Boston University School of Law professor. The opinions expressed here are his own –
Like a well-armed, well-trained army standing idly by while the citizens it is supposed to protect get crushed, public pension funds have done little to protect public employees from the well-financed corporate attack on their rights. It’s time they join the fight.
Public pension funds invest the retirement savings of public workers, with total assets of around $2.7 trillion. One out of 10 U.S. corporate securities is owned by public pension funds — in other words, owned by public employees. Skillful use of this shareholder power could swiftly and decisively push back the power of corporate lobbies and help fend off attacks on workers.
Consider an example. Last year, a senior adviser of Blackstone Group, one of the world’s largest financial advisers with $111 billion in assets, publicly touted the standard line about how public employees are purportedly overcompensated. But last month, the company released an extraordinary public statement: “Blackstone’s view on public employee pensions is clear and unambiguous … We oppose scapegoating public employees by blaming them for the structural budget deficits that cities and states face.”
What prompted this paean to public workers from one of Wall Street’s most elite institutions? Answer: 37% of Blackstone’s assets belong to state and local public pension funds. Unhappy with what it perceived to be Blackstone’s wavering commitment to these workers, New York City’s public-pension fund recently cancelled a meeting with the company. The Blackstone flip-flop took place right afterwards.
Blackstone is not alone in its constant pursuit of public-employee money to invest. Wall Street and the corporate elite participate in a nearly constant effort to attract labor’s massive capital, with money managers hoping to profit from management fees and corporations hoping to boost share price and broaden their investment base. Public pension assets constitute an untapped source of public employee power. Here are examples of how they can start using it.
It is widely understood that corporate interests have helped fund, through campaign contributions or through donations to lobbies and other organizations, entities that support attacks on the jobs and retirement security of public employees.
Public pension funds should contact the management of these companies to oppose the use of their shareholder dollars against the interests of public employees. In a Wall Street and corporate world in which competition for state and local pension fund money is fierce, even the mere expression of displeasure without any further concrete action could obtain surprisingly effective results.
Public employees should also demand that their pension funds undertake an immediate review of the funds’ current investment portfolio. The review should specifically determine if the funds invest with entities that threaten the employment or retirement security of public employees.
In the aftermath of Citizens United, in which the Supreme Court opened the door to direct corporate funding of elections, such internal reviews are imperative to make sure that public employee money is not being spent by corporations to attack public employees.
Second, for any bank or corporation or investment manager that is unwilling to stop using public pension moneys to attack public employees, fund board members and investment staff should begin assessing the viability of investment alternatives. The funds should identify investments of equal risk profile and profit potential, and consider shifting their investments, if possible, to entities that do not fund attacks on public-employee rights. They should establish policies to guide such decisions in accordance with the fund’s fiduciary duties to its participants.
Imagine the impact these steps could have if taken by public pension funds across the country who manage trillions of dollars in assets. By insisting that public employees’ own retirement savings not be used against them, these funds could make sure that their shareholder dollars are not being abused for political purposes, but are being invested towards companies that are focused on pursuing profits and increasing shareholder value.
Public employees have been unfairly attacked by well-funded antagonists. It’s time they start putting their own money to work in the fight for their rights.