Pensions and Capital Stewardship Project

The Pensions and Capital Stewardship Project was established to educate and inform workers, scholars and researchers, and practitioners on issues of retirement security, including employment-based retirement plans, and of pension fund governance, management, investment, and related matters.

The Future of Retirement

Controversies over the future of Social Security, challenges to public and private sector defined benefit plans and the rise of defined contribution and other private-accounted based schemes are evidence of serious and pressing concerns about the ability of households to sustain themselves through the transition to retirement and beyond. These concerns about the adequacy of income are exacerbated by ones relating to the cost of health benefits and the expense of care and support, especially long term care during retirement.

For these reasons, the Pensions and Capital Stewardship Project is currently focusing its work on retirement security to include ways in which it can be extended and enhanced for more households in America.

Pension Plans: Institutions, Systems, and Practices for Investment

Pension stewardship and the choices made by those responsible for overseeing trillions of dollars in retirement plan assets have a tremendous significance for active and retired plan participants’ ability to enjoy retirement income.

These choices also have profound implications for internal corporate stakeholders including workers, shareowner's, and management as well as the larger community that is affected by employment trends, economic development and growth, the environment, worker and human rights, and social services.

The Project’s work on pension plans focuses on institutions, systems, and practices of pension fund investment that encourage capital markets and corporate policies to work more effectively for workers and the health and well-being of the community at large.

A Unique Partnership

The Pensions and Capital Stewardship Project is unique in that it has gained the interest of and financial support from diverse players in the pension community including unions, pension fund investment managers and consultants. In all of its work, the Project will be able to draw upon international experience with similar issues. The Project has established relationships with scholars, union leaders, trustees, and others active on these matters in Canada, the UK, Holland, and Australia and has brought in speakers from Sweden and South Africa.

Capital Matters: Managing Labor’s Capital

In spring 2007, the Project convened the fifth annual Capital Matters: Managing Labor's Capital conference. The success of previous conferences, organized by the LWP, and attendees’ enthusiasm for the creation of a long-term program to spur research, education, and engagement on the kinds of issues discussed were the reasons for the LWP establishing the Project.

The 2006 conference brought together public and Taft-Hartley pension trustees, labor leaders, members of the pension investment community, legal and other scholars and researchers, and others to discuss the impact of private equity investment on capital markets, pension funds and stakeholders in targeted enterprises. They also considered the opportunities that investments in infrastructure offer, how those opportunities might be taken up, and if so, their impact on government and public sector workers. Participants considered critical challenges for pension fund governance and how those challenges might be met. They assessed what makes for effective labor representation on pension boards. Attendees considered the need for ensuring retirement security for all, the role of employment-based retirement plans in it, a proposal for achieving that goal. Finally they explored the nature and effectiveness of securities class action litigation in relation to recoveries by aggrieved shareholders and changes in corporate behavior and governance and learned about recent research on corporate executive and director self-dealing with respect to stock options.

An International Collaboration

The Pension Funds and Urban Revitalization initiative (PFURI), led by researchers associated with Oxford University’s School of Geography at the Center for the Environment, is now affiliated with the Project. This effort seeks to advance U.S. public sector pension funds’ engagement in urban revitalization through research and promotion of best practice.
The Project also collaborates with the Pensions at Work research program of the Ontario Institute for Studies in Education at the University of Toronto. Pensions at Work links unions and universities in an international research project exploring the socially responsible investment of union pension funds.

Recent, Current, and Future Work

The Project work convened working meetings in February and March 2007 which focused on private equity investment for market-based returns and labor friendly outcomes and collaboration among labor, pension, SRI, faith-based, foundation, and other shareholder activists, respectively. On July 26-27 2007, in partnership with the National Conference on Public Employee Retirement Systems, the Project offered the first seminar in its Program of Advanced Trustee Studies for a group composed of primarily experienced public sector trustees. Next year’s seminar is tentatively scheduled for July 22-24, 2008.

Project-related research – through PFURI – and convenings on pension fund targeted investment for economic and community development will continue. Among the meetings are possible ones in Cleveland and Los Angeles. The former may be in collaboration with the Federal Reserve Bank of that region. These are a follow on, among others, to ones held in Hartford, Boston, Baltimore, and Pittsburgh with co-sponsorship or in collaboration with state officials, regional Federal Reserve Banks, and others. A small conference in December 2007 will critically assess the research. A larger conference with a wide range of stakeholders to consider the Initiative’s final report and its implications for further research and practical action is tentatively scheduled for June 2008.

The Project is engaged in research for the Society of Actuaries relating to the benefits and costs of defined benefit and defined contribution plans and other, related research for the Council of Institutional Investors relating to various impacts of defined benefit and defined contribution plans is in process. Research has been done in connection with the March 2007 meeting and related efforts to assess labor-friendly private equity investments.

The Pensions and Capital Stewardship Project anticipates engaging in research – and related convenings – on a number of other topics. These include: legal issues regarding fiduciary responsibility for public as well as private pension fund trustees and other aspects of pension fund activity; the impact of pension fund and other activism on the quality of corporate governance and behavior; trustee decision-making; and whether and how, consistent with the rules for fiduciary duty, pension plans that involve the establishment of individual accounts may spur activism analogous to that engaged in within the framework of defined benefit plans.

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