California pensions may target firms' political outlays

Reuters News
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Posted: Jun 01, 2011 3:24 PM
California pensions may target firms' political outlays

By Jim Christie

SAN FRANCISCO (Reuters) - California's treasurer on Wednesday urged state pension funds to back shareholders pressing companies to disclose political spending, which many of his fellow Democrats expect to rise and be used against them in the 2012 election cycle.

The effort by State Treasurer Bill Lockyer comes as Democrats in Washington push back against the Supreme Court's "Citizens United" decision last year. It allowed unlimited spending on political campaigns by corporations, labor unions and other groups.

Democrats say they were bombarded with millions of dollars worth of attack ads in congressional elections after the ruling. They fear more of the same, along with a fund-raising disadvantage to Republicans, who are traditionally allied with business interests.

In California, Democrats, who control the legislature and hold all constitutional offices, are concerned corporate money could fuel statewide initiatives, including ones aimed at reining in the political power of their union allies.

One such campaign aims to qualify a measure for next year's ballot that would bar unions from automatically deducting funds from their members' paychecks to use for political purposes.

Lockyer in a letter to the chair of the investment committee of the California Public Employees' Retirement System said the Citizens United ruling had "opened the floodgates to unlimited corporate spending in political campaigns."

Lockyer, who serves on the boards of the public employees' pension fund and the California State Teachers' Retirement System, said corporations could now use trade and nonprofit groups to "cloak massive political spending."

The spending could be made "in secrecy through 'independent expenditure' campaigns, many of which are notorious for making unfair and unfounded personal attacks with which no company or its investors would want to be publicly associated," he said.

FIDUCIARY CONCERNS

Separately, Lockyer in a statement cited concerns regarding links between corporate management and political contributions, noting that studies have shown a "negative link between a company's political spending the resulting value of the firm."

"As fiduciaries, it's our duty to ensure investors have the information they need to accurately evaluate a firm's profitability and long-term sustainability," Lockyer said.

Shareholders "should be able to count on a company's board of directors to diligently oversee campaign spending policies and practices to make sure they serve the best interests of the company and investors," Lockyer said.

Lockyer wants the boards of the two pension funds to craft formal policies supporting shareholder initiatives requiring full disclosure of corporations' political spending and oversight of the spending by boards of directors.

With a combined $390 billion in assets, California's pensions funds have considerable clout, which they already use to back a variety of shareholder initiatives.

A spokesman for the state employees' pension fund said Lockyer's request would be taken up by the fund's board, a process that could take several months.

A spokesman for the state teachers' retirement system, best known as Calstrs, said its corporate governance committee would discuss political spending by corporations on Thursday. No action is expected.

"In principle and practice, Calstrs has long supported the disclosure of political spending by corporations," the spokesman added in an email to Reuters.

(Reporting by Jim Christie; Editing by Neil Stempleman)