Thursday, 15 November 2007

CalPERS news & investor representation

Two bits of news from the giant US public sector pension fund CalPERS. Firstly, and unsurprisingly, the fund has weighed in on the side of proxy access in the US market. More interesting to me, the fund has also unveiled a set of principles that guide its 'engagement' with regulators and federal lawmakers.

Here's the blurb:

The new policy guidelines include provisions to:
• Support the independent investment authority of CalPERS trustees and administrators, and oppose federal restrictions on investments except those determined by the government to be against the U.S. national interest;
• Sustain policies for a healthy, accessible and transparent global marketplace; and oppose those that might limit its health, transparency, or sustainability;
• Back up actions and policies aligned with goals of the Sarbanes-Oxley Act, which addresses corporate accounting misdeeds; and policies enhancing greater communication and transparency between companies and investors;
• Support efforts to better align shareowners and corporate directors; give shareowners an effective way to nominate qualified directors; afford them input on executive compensation entailing enhanced transparency on design of compensation policies, stronger linkage of performance and compensation, and the opportunity to review compensation policies; and policies that encourage implementation of majority vote election procedures for directors; and
• Endorse policies for improved transparency and timely disclosure of environmental risks; the development of a clear, predictable national climate change policy and more energy efficient economy; and energy and transportation policies that nurture competitiveness and innovation leading to meaningful greenhouse gas reductions.

This is the first time I am aware of a pension fund doing anything like this but I think it is a really sensible idea. It's not just in the US that individual pension funds are responding to official consultations or regulatory proposals, and setting out a frame of reference for doing so is a useful initiative. It allows people to see whether you live up to the position you claim to take...

There is a broader point here too about investor representation. Trade bodies and collective organisations claiming to speak on behalf shareholders sometimes have their own organisational priorities, and who do they really represent? For example, when the ABI responds to proposals on governance reform is it representing insurers as large listed companies which are subject to governance rules, or as large institutional investors seeking high standards in investee businesses? I don't mean that particularly as a dig at the ABI. They are often better on governance issues than some others (!), and other organisations have similar conflicts.

Looking much further ahead, is there a way to represent the real shareholders - pension scheme beneficiaries - somewhere in the institutional architecture, or to network those with a TU affiliation? Now that many union members are in DC schemes I would argue that there is an even greater need to do this. A post for another day I think.

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