Eliot Spitzer Wants your Pension

Today, Slate features a rant by disgraced former New York Governor Eliot Spitzer that includes distortions and falsehoods so blatant that they wouldn’t merit a response if they didn’t come from so loud a megaphone.

Spitzer is miffed at the U.S. Chamber of Commerce for opposing the major expansions of government power currently being proposed in Washington.The Chamber, he says, has a “right to be wrong” (wrong in Spitzer’s universe apparently being anything that opposes the expansion of government), but it doesn’t have a right to do it with “our money.”

“Our” money? Yes, according to Spitzer, the publicly held companies that are members of the Chamber have an obligation to promote a liberal agenda — or at least not oppose it — because that’s what shareholders want. What he bases this belief on is hard to fathom. Has he polled a substantial sample of all (or a least a substantial majority of) America’s publicly held companies? Public company shareholders are a diverse lot; to ascribe uniform political views to them as whole is absurd, to put it mildly.

But even if a majority of shareholders of a majority of companies were left-leaning, all responsible shareholders share the same goal, independently of political views: Increasing shareholder value. Spitzer claims that, “It is corporate leadership, though its support of the chamber, that has injected politics into the corporations that we own.” Yet its not support of politics that seems to irk Spitzer so much, but support of policies he doesn’t favor.

“So what should be done?” he asks.  He wants “public pension funds [to] pressure the board to drop the chamber membership. If one activist state comptroller begins to build this coalition, the other state pension funds will follow.” Somehow, in Spitzer’s universe, this isn’t playing politics.

Moreover, Spitzer’s claim that institutional investors have shown a “passive, permissive attitude toward the management” is blatantly untrue, as a casual look at the board of the environmental activist investment fund Ceres makes clear. Ceres lists as Co-Chair none other than the CEO of the California Public Employee Retirement System. Ceres describes itself as “a national network of investors, environmental organizations and other public interest groups working with companies and investors to address sustainability challenges such as global climate change.”

This brazen hypocrisy is merely annoying, but it’s Spitzer’s substantive recommendation that is really harmful. California’s state employee retirement funds provide a good example. Last year, the California State Teachers’ Retirement System reversed its politically correct no-tobacco-stocks policy after it acknowledged that the tobacco ban had cost the plan $1 billion in lost gains.

In addition, many union pension funds today are severely underfunded, largely as a result of politicized investment strategies. The AFL-CIO’s 2008 Key Votes Survey actually boasts that, “The AFL-CIO and leading institutional investors continue to work with President Obama, Senate Banking Committee Chairman Chris Dodd, and House Committee Chairman Barney Frank to pass landmark ‘say on pay’ bill” and that, “in 2008, the AFL-CIO Office of Investment, working with leaders of the Interfarith Council on Corporate Responsibility (ICCR), successfully drafted and presented a new shareholder proposal on health care reform.”

The only logical connection either of these efforts could have to the AFL-CIO fulfilling its fiduciary duty in ensuring that the companies in which its pension funds own shares are being well run is that the AFL-CIO’s fund managers believe themselves to be so incompetent to the task that they simply cannot do it without a federal law helping them along.

And it is that kind of activism that Spitzer wants more of. Responsible shareholders should be thankful that he no longer has the power to force it on them.

For more on the politicization of pension funds, see here and here.