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Pension fund boards need to speak up

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The need for greater oversight of company boards begs the question of whether major pension funds and sovereign funds ought to be less passive and exert more influence over the composition of boards and how they are compensated. As one American trustee recently, “It’s easy to point the finger of blame, but we have to conclude that the finger can also come back on us as investors. We need to force our way into the conversation. It’s a shame that we are having to fight so hard to be at the table.” He was referring to the fact that the US Council of Institutional Investors, which includes the likes of CalPERS and CalSTRS, did not testify in the October hearings on the financial crisis.

 At the Pacific Pension Institute’s November Asian Pension Fund Roundtable meeting in Kyoto, this mounting frustration at being ignored was harnessed by Ambassador Paul Speltz, who has served stints as executive director of the Asian Development Bank and as the US financial and economic emissary to China. In essence, Peltz told the assembled heads of some of the largest funds in Asia, ‘talking amongst yourselves is fine, but this is a rare opportunity to make yourself heard. The world is expecting change and US policymakers want to know what you think - they don’t often listen but right now they are looking for solutions’. The delegates were duly galvanised into producing a range of reform recommendations, particularly with regards to the effectiveness of investor voting, directors’ compensation, transparency of pricing and the misuse of leverage. There was also considerable discussion of the need for these deliberations to be on-going and coordinated across the globe, so that major investors could band together for a common good. Carolyn Widener, board chair of CalSTRS noted that while they were sending their messages to Washington, “I do feel somewhat frustrated. We have been advocating a lot of these ideas for a long time. What is interesting, in listening to the different approaches in each region, is that we agree on the transparency and regulatory issues, what we need to do is struggle to overcome our reluctance.”

 The PPI, a not for profit organisation based in San Francisco, is keen to play a role as forum for discussion of these issues. Interested parties are encouraged to contact the chief executive Marsha Vande Berg at marshavb@pacificpension.org, or visit their web site at www.pacificpension.org

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