NCPA - National Center for Policy Analysis

PUBLIC PENSION FUND MANAGERS FURTHER UNION INTERESTS AT TAXPAYER EXPENSE

January 27, 2005

California public-sector pension funds are being used by politicians and union activists to further an anti-corporate agenda, writes Nicole Gelinas of the Los Angeles Times.

Unlike private-sector fund managers, who try to maximize returns on investment, public fund managers are free to pursue political objectives with their investments because they know that taxpayers will make up the shortfall if their investments don't pan out.

It is thus worrisome that public pension funds -- now worth more than $2 trillion nationwide -- are becoming increasingly powerful in boardrooms across the country, says Gelinas:

  • Energized by recent corporate scandals, public fund managers have begun meddling with corporate management, using share ownership as a platform from which to fight management.
  • In 2003, the California Public Employees? Retirement System (CalPERS) voted to reduce further investments in companies that take over work previously done by the public sector.
  • Last year, CalPERS fought to bring down Safeway's CEO, purportedly to safeguard the pension fund's shareholder interests.

With Safeway saddled with poor competitiveness as a result of a costly labor structure, a rational investor with no confidence in Safeway's board would just dump the stock. Therefore, taxpayers end up bearing the risk of CalPERS insistence on maintaining corporate influence in the company, says Gelinas.

Source: Nicole Gelinas, "Meddling by Public Pension Funds Is Picking California's Pocket," Los Angeles Times, January 14, 2005. Browse Safeway Flyer.

 

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