Pension-fund activism poses risks to beneficiaries

Pension-fund activism poses risks to beneficiaries, as it can lead to a decrease in investment returns. This is because activist investments often come with a high cost, which can be passed on to beneficiaries in the form of higher fees.

Investors who engage in activism may also take on more risk, which can result in losses for the pension fund. In some cases, this can lead to a decrease in the overall value of the pension fund.

Pension-fund activism can also create a conflict of interest, where the interests of the activist investors may not align with those of the beneficiaries. This can lead to decisions that benefit the activist investors at the expense of the beneficiaries.

AFSCME's pension fund activism is a force to be reckoned with, with 1.6 million active and retired members having more than $1 trillion in retirement assets invested in over 150 public pension systems across the country.

This magnitude of assets gives AFSCME a significant presence in the financial markets, making it a major player in the pension fund landscape.

AFSCME works to ensure that plan participants have a voice by identifying and taking advantage of opportunities for members, retirees, and allies to be appointed or elected as trustees.

To fulfill their mission, trustees and staff of public pension systems must invest billions of dollars prudently, ensuring sufficient funds will be available to pay retirement benefits many years into the future.

The current financial crisis was brought about by a stock market focused on short-term corporate returns and fueled by excessive executive compensation, poor corporate governance, and lax oversight of capital markets.

Many studies have demonstrated a positive correlation between good corporate governance practices and corporate performance.

AFSCME's program of trustee education and activistism has made it a recognized leader in the area of improving corporate governance in companies owned by worker pension funds.

AFSCME will continue to work to ensure that retirement money is invested wisely, keeping the retirement benefits promised to public employees safe and secure.

AFSCME and its affiliates will continue and expand efforts to get AFSCME members, retirees, and allies elected or appointed to public pension boards.

AFSCME will support its members, retirees, and allies who are trustees of public pension funds by providing them with materials, training, and technical assistance to ensure they exercise their fiduciary duty and vote their proxies in accordance with best practices.

Pension-fund activism has its roots in the 1960s, when institutional investors began to take a more active role in corporate governance. The first pension fund to engage in activism was the California Public Employees' Retirement System (CalPERS) in 1961.

In the 1970s and 1980s, pension funds like CalPERS and the New York City Employees' Retirement System (NYCERS) started to use their shareholder power to influence corporate decisions. They began to file proxy resolutions and engage in dialogue with companies to address issues like executive compensation and corporate governance.

Pension funds' growing influence in the market led to the establishment of the Council of Institutional Investors (CII) in 1985. The CII aimed to promote best practices in corporate governance and provide a platform for institutional investors to share knowledge and coordinate their efforts.

The CII's influence helped to shape the modern corporate governance landscape, including the adoption of the Securities and Exchange Commission's (SEC) proxy access rule in 2010.

Targeting BlackRock is a key aspect of pension-fund activism. BlackRock is the world's largest asset manager, with over $7 trillion in assets under management, making it a significant player in the global economy.

BlackRock's size and influence have led pension funds to focus on the company, pushing for more sustainable and responsible investment practices. This includes efforts to reduce greenhouse gas emissions and promote diversity and inclusion.

One notable example is the push for climate action, where pension funds have been urging BlackRock to divest from fossil fuels and invest in renewable energy sources. BlackRock has faced pressure from investors and activists to take a more proactive stance on climate change.

BlackRock's CEO, Larry Fink, has acknowledged the importance of environmental, social, and governance (ESG) factors in investment decisions, but critics argue that the company's actions do not match its words.

Pension funds are often managed with the goal of maximizing returns, which can lead to investments in companies with questionable ethics or environmental track records.

Investing in companies with poor environmental records can have long-term consequences for the planet.

The article section "Investment Strategies" notes that some pension funds invest in companies with high carbon emissions, which can contribute to climate change.

Pension funds often have a significant stake in companies, giving them considerable influence over their operations.

As a result, pension funds can inadvertently support companies that engage in practices that harm the environment or exploit workers.

Investing in companies with poor labor practices can also have negative consequences for beneficiaries.

According to the article section "Social and Environmental Impact", some pension funds invest in companies with a history of labor disputes or poor working conditions.

The lack of transparency and accountability in pension fund management can also pose risks to beneficiaries.

The article section "Transparency and Governance" highlights the need for better disclosure of investment strategies and performance metrics.

Beneficiaries may not be aware of the risks associated with their pension fund investments, which can lead to a lack of trust and confidence in the system.

The article section "Beneficiary Engagement" notes that many pension funds fail to provide clear and timely information to beneficiaries about their investments.