Corporate governance has become increasingly politicized in recent years, with very real consequences for investors and financial institutions of all kinds. From a looming funding crisis facing the nation’s public pension system to the emergence of quasi-regulators operating with unchecked powers and limited scrutiny, there has been increased focus on politically motivated investments, often at the expense of traditional fiduciary responsibility aimed at maximizing returns.
The role and influence of proxy advisory firms is under a microscope as regulators and business leaders question their growing power. In the world of proxy voting, the two largest advisory services for institutional shareholders control an estimated 97 percent of the market. ACCF research finds automatic voting and over reliance on their recommendations decreases the ability of companies to advocate for themselves or their businesses in the face of an adverse recommendation.
Unfunded liabilities at CalPERS, the nation’s largest public pension fund, have grown from a surplus of $2.9 billion in 2007 to a deficit of more than $138 billion, despite the broader bull-market. Four out of every five taxpayer-dollars collected by New York City’s personal income tax are spent paying down the city’s public pension fund system’s liabilities, a 567 percent increase over the past 15 years. Learn how politics is increasingly driving pension decisions – and hurting taxpayers along the way.
As ESG investing has risen as an investment priority, research finds significant disparities in ESG ratings due to a lack of standardization, inconsistencies, and subjective interpretation influenced by a number of biases – including company size, geography, and industry specific criteria. As a result, major rating agencies have significant differences in the accuracy, value, and importance of their individual ratings to investors, and arguably undermine the validity of ESG investment strategies.
“We cannot afford to lose funding for law enforcement officers in exchange for a socially responsible investment policy…The CalPERS board has a fiduciary responsibility to the membership to deliver the best returns possible.”
– Sacramento Bee, Jul. 17, 2017
“Pension costs have crowded out and will likely to continue to crowd out resources needed for public assistance, welfare, recreation and libraries, health, public works, other social services, and in some cases, public safety.”
– Stanford Institute for Economic Policy Research, October 2, 2017
“It is easy to be a “socially responsible” investor with other people’s money. But when those politically manipulated pension portfolios fail to meet the retirement systems’ lofty investment return assumptions, it jeopardizes the financial health of the systems established to provide benefits to millions of government employees and that force taxpayers to make up the difference.”
– Orange County Register, Apr. 7, 2017