Pension Fund Politics
The Dangers of Socially Responsible Investing

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Public employee retirement funds collectively hold almost $2 trillion in assets. Should the government and union officials entrusted with managing this money make investment decisions guided by their political views? Should personal morality and ideology, which vary dramatically across the country, influence public investments, including Social Security?

Traditionally, public investments have been managed according to strict fiduciary principles designed to protect the retirement security of America’s teachers, fire fighters, police officers, and other public workers. That tradition is now under assault. In some state and local governments, politicians responsible for overseeing these funds are embracing highly controversial and potentially risky investment criteria known as “socially responsible investing.” Pension Fund Politics examines this controversial trend. An ideologically diverse group of scholars address the legal, political, and fiduciary consequences of injecting social and ethical criteria into the management of pension funds.

Certainly, as part of their fiduciary mandate to maximize investment returns for their beneficiaries, pension-fund trustees have a duty to press for changes in corporate behavior that could result in better returns for their pension holders. But judging by the actions of many activists now running multi-billion dollar pension funds, using social investing under the guise of increasing “shareholder value” threatens to undermine the financial security of retirees who have no say in these highly politicized investment decisions. The authors argue that social investing, by both the political left and right, frequently ends up hurting the very people—particularly the economically disadvantaged—that it is supposed to help. Pension funds are being dragged into treacherous waters where political grandstanding or moral righteousness threatens clear financial mandates. In many instances, social investing amounts to little more than ideologically driven gambling with other people’s money.

Jon H. Entine is a scholar in residence at Miami University (Ohio) and an adjunct fellow at the American Enterprise Institute.

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About the Author

 

Jon
Entine
  • Jon Entine, a former Emmy-winning producer for NBC News and ABC News, researches and writes about corporate responsibility and science and society. His books include No Crime But Prejudice: Fischer Homes, the Immigration Fiasco, and Extra-Judicial Prosecution (TFG Books, May 2009), about prosecutorial excesses; Abraham's Children: Race, Identity, and the DNA of the Chosen People (Grand Central Publishing, 2007), which focuses on the genetics of race; Let Them Eat Precaution: How Politics Is Undermining the Genetic Revolution in Agriculture (AEI Press, 2006), about the genetic modification of food and farming; Pension Fund Politics: The Dangers of Socially Responsible Investing (AEI Press, 2005), which reveals the effects of social investing on pension funds; and the best-selling Taboo: Why Black Athletes Dominate Sports and Why We're Afraid to Talk about It (Public Affairs, 2000), based on an award-winning NBC News documentary. Currently, Mr. Entine is an adviser to Global Governance Watch (GGW), a project that examines transparency and accountability issues at the United Nations (UN), in nongovernmental organizations (NGOs), and in related international organizations. GGW also analyzes the impact of UN agencies and NGOs on government and corporations. He is also working on a book exploring the revolutionary impact of genomic research on medical treatments and traditional perceptions of human limits and capabilities.


    Follow Jon Entine on Twitter.
  • Phone: 513-319-8388
    Email: jentine@aei.org

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