There is widespread recognition and growing empirical evidence that poor corporate governance can substantially decrease shareholder value, and that shareholder activism can therefore enhance the assets of long-term investors.
Moreover, the Department of Labor has recognized that activities intended to monitor or influence the management of portfolio companies – such as communications with management and exercise of shareholders’ rights – are consistent with a fiduciary’s obligations under ERISA, so long as there is a reasonable expectation that such activities will enhance the value of the plan’s investments.
The CtW Investment Group works with pension funds sponsored by Change to Win affiliates – as well as public pension funds in which members of CtW affiliates participate, and other funds and interested groups – on active ownership programs aiming to ensure, for example, independent and accountable directors, reasonable executive compensation, and sound environmental, human resource and other business policies.
The materials linked below should help further describe the need for active ownership:
Initiative for Responsible Investment, Hauser Center for Nonprofit Organizations, “Reason, Rationality and Fiduciary Duty”