Public pension funds should not be used to further political agendas
WASHINGTON (Aug. 13, 2015) – It’s crucial that public pension funds focus on shareholder-wealth maximization and not furthering a political agenda, concludes a policy brief released today by the R Street Institute.
In the new brief, which builds on earlier R Street research about proxy-access proposals in the 2015 proxy season, Associate Fellow Bernard S. Sharfman analyzes the recent effort by New York City Comptroller Scott Stringer to sponsor proposals at 75 publicly traded companies. By Stringer’s own admission, the companies were targeted for being involved in climate change-related industries, lacking board diversity or having inflated executive compensation.
“A public pension fund has a duty to its beneficiaries to answer one question before deciding to submit a proposal on proxy access: will the proxy access add or to or subtract from shareholder wealth?,” said Sharfman. “It’s clear that Stringer’s initiative did not ask that question, but instead assumed the conclusion that the ability to nominate directors is a fundamental shareholder right.”
Sharfman particularly questioned New York City comptroller’s decision, given that the city’s pension funds are underfunded by $46 billion.
Sharfman notes that proxy access opens opportunities for shareholders to issue annual threats to nominate candidates unless the board provides concessions to the shareholder’s favored stakeholders, such as labor unions.
“The lesson here is that the best case to be made for proxy access is not about increasing shareholder rights or even using the rights shareholders already have, but about shareholder-wealth maximization,” said Sharfman. “Using proxy access for other purposes is harmful to the beneficiaries of a public-pension fund.”
