Trustee Resources

Recent Updates

Aug. 2015 letter from Mary Kay Henry to SEIU trustees

Letter from Mary Kay Henry to SEIU trustees on suggestions for pension fund best practices, including the importance of increasing diversity as part of a trustee’s fiduciary responsibilities to pension fund participants and beneficiaries.

SEIU letter to trustees

Human Capital Management (HCM)

HCM is gaining increasing recognition as a significant risk for long-term investors.  CtW Investment Group recently released a report analyzing the negative relationship between pay inequality within publicly traded companies and long-term shareholder returns.  Below is a summary of the reports major findings as well as a list of additional resources on the subject of HCM.

CtW IG on HCM Risks and Opportunities

Major Findings:

  • In the wake of the financial crisis and long recession, shareholders are acting to ensure companies manage long-term risks and opportunities.
  • Human Capital Management is one of the key emerging areas with the Conference Board calling it the top challenge for CEO’s in 2014.
  • There is growing concern about income inequality across many industries.  E.g. McDonald’s for the first time disclosed that concerns over income inequality and its human capital management practices poses a potential risk to its business.
  • Research indicates that pay inequality within a publicly traded company has a materially negative, and statistically significant effect on long-term shareholder returns, specifically:
  • There is an overall negative correlation between the ratio of CEO pay to our estimate of median pay for companies in the S&P500 from 2007-2012.
  • When grouped by performance, high performing deciles of the S&P500 have much lower CEO Pay Ratios than low performing companies.
  • When grouped CEO Pay Ratio, low pay ratio companies have much better performance than high pay ratio companies.
  • Overall, and controlling for other relevant variables, there is a statistically significant, negative relationship between the CEO Pay Ratio and future long-term performance, such that an increase in the CEO Pay Ratio of 10 (from 200 to 210) will reduce long-term performance by 80 – 110 basis points.

Additional HCM resources

David Card, Alexandre Mas, Enrico Moretti, and Emmanuel Saez, “Inequality At Work: The Effect Of Peer Salaries On Job Satisfaction” NBER Working Paper 16396, September 2010.

Jeffrey Pfeffer, “Human Resources from an Organizational Behavior Perspective: Some Paradoxes Explained” Journal of Economic Perspectives, vol. 21, no. 4, Fall 2007.

Charles A. O’Reilly, James Wade, and Tim Pollack, “Overpaid CEOs and Underpaid Managers: Equity and Executive Compensation” Stanford Business Library Research Paper #1410.

Roger J. Best, “Employee Satisfaction, Firm Value, and Firm Productivity” Working Paper University of Central Missouri Spring 2008.

Jeffrey Pfeffer, “Building Sustainable Organizations: The Human Factor” Academy of Management Perspectives, February 2010.

Zeynep Ton, “Why Good Jobs Are Good for Retailers” Harvard Business Review, January 2012.

Clara Xiaoling Chen and Tatiana Sandino, “Can Wages Buy Honesty? The Relationship Between Relative Wages and Employee Theft” Journal of Accounting Research, vol. 50, no. 4, 2012.

Alex Edmans, “Does the Stock Market Fully Value Intangibles? Employee Satisfaction and Equity Prices” Journal of Financial Economics, vol. 101, no. 3, 2011.

Alex Edmans, “The Link Between Job Satisfaction and Firm Value, With Implications for Corporate Social Responsibility” Academy of Management Perspectives, November 2012.

James B. Wade, Timothy G. Pollack, Joseph F. Porac, and Scott D. Graffin, “Star CEOs Benefit or Burden?” Organizational Dynamics, vol. 37, no. 2, 2008.

Rakesh Khurana, “The Curse of the Superstar CEO” Harvard Business Review, September 2002.

Responsible Investment

Below is an abbreviated list of resources to support systematic thinking about responsible investment by trustees, and to identify the core issues they face in developing strategies for long-term sustainable wealth creation and responsible investment.

ESG Related Fund Policies Classification

Trustee Leadership Forum for Retirement Security (TLF) at Harvard University
The Trustee Leadership Forum for Retirement Security (TLF) is an applied research collaboration with labor-affiliated trustees of public and Taft-Hartley pension funds.  The TLF’s goal is to support systematic thinking about responsible investment by trustees in the service of long-term pension fund sustainability.

CalPERS Investment Beliefs In September 2013, the CalPERS Board of Administration adopted a set of ten Investment Beliefs intended to provide a basis for strategic management of the investment portfolio, inform organizational priorities, and ensure alignment between the board and CalPERS staff.

CalPERS Sustainable Investment Research Initiative
CalPERS Sustainable Investment Research Initiative (SIRI) seeks to drive innovative thought leadership that will inform and advance understanding of sustainability factors and the impact they may have on companies, markets, and investment intermediaries from the perspective of a large, global, long-term, and multi-class institutional asset owner.

The Committee on Workers’ Capital (CWC) is an international labor union network for dialogue and action on the responsible investment of workers’ capital.  With over 200 members from 25 different countries, the CWC connects labor union organizations around the world to advance the responsible investment agenda on the global stage.

The International Corporate Governance Network (ICGN) is an investor-led organization of governance professionals.  ICGN’s mission is to inspire and promote effective standards of corporate governance to advance efficient markets and economies world-wide.

The Local Authority Pension Fund Forum (LAPFF) is the UK’s leading collaborative shareholder engagement group.  Formed in 1990, LAPFF brings together 59 local authority pension funds from across the country with combined assets of over £120 billion.

United Nations Principles for Responsible Investment (UNPRI) is an international network of investors working together to put six Principles for Responsible Investment into practice.