The ouster of the president of California’s public pension fund has raised questions about whether pension funds, endowments and other big activist investors will be able to keep wielding influence in corporate governance campaigns.The change at the top of America’s largest pension fund also underscores a growing awareness of the political and economic power lying largely untapped in the nation’s retirement money — roughly $6 trillion — and an escalating dispute over how that power should be used.The fund President Sean Harrigan was removed on Wednesday from the $178 billion California Public Employees Retirement System, known as Calpers, America’s largest pension fund. He said his ouster was retaliation for the campaigns that he and others had been leading to change behaviour at companies like Disney, Safeway, the New York Stock Exchange and Kohlberg Kravis Roberts.Even when the initiatives failed they often pitted Harrigan, a union official, against business groups. Harrigan, who had expected to lose his job, remained defiant. “Removing one person will not reduce the strength, the commitment nor the resolve to fight for our members,” he said.But other activists saw a much broader effort underway to change the leadership of many pension funds, which in the last few years have struggled because of market losses and increasing obligations to retirees. Richard Ferlauto, Director of pension investment for the American Federation of State, County and Municipal Employees, said Harrigan’s ouster was an early success in a campaign to wrest control of pension money from a Calpers board now controlled by Democratic trustees and put it to work in projects more in keeping with Republican ideals. “Clearly, we’re seeing a Republican attack on public pension systems,” Ferlauto said. “And California has been targeted in a very strong way.”The 13-member Calpers board has been dominated by Democrats in recent years.Ferlauto said he thought that if Republicans could regain control, they would seek to make two fundamental changes: put an end to the corporate activism of Calpers and reshape the traditional defined-benefit pension fund as something more akin to a 401(k) plan. “There will be a legislative attempt this spring to mandate that all plans in California become defined-contribution plans,” he said. “This mirrors what’s happening nationally, around Social Security.” A spokesman for California’s governor, Arnold Schwarzenegger, declined to comment.Calpers has long sought ways to use the power of its holdings to influence corporate behaviour. Its trustees have argued that doing so is a crucial part of their fiduciary duty, because insisting on good corporate governance may bring about more valuable shares. — NYT
