Columbus Dispatch: Ohio pension systems divestment bill a "bad idea!"

A bad idea

House should kill bill forcing pension funds to divest Iran-linked holdings
Columbus Dispatch, May 31, 2007

Although states have substantial powers in many areas of government, the Constitution makes clear that exercising foreign policy is not one of them. U.S. relations with other nations should be directed by the president and Congress, not 50 governors and state legislatures.

That's the principal reason why House Bill 151, which yesterday was passed by an Ohio House committee, is such a bad idea.

The proposal would mandate that Ohio's five public pension systems divest their portfolios of investments linked to Iran.

Federal policy already forbids U.S. companies from doing business in Iran, but a number of U.S. corporations have some commercial link to the Islamic republic because of overseas partners and subsidiaries that do business in Iran.

Stripping Iran-connected companies from investment funds is complicated and senseless. If House Bill 151 were to become law, the systems would be required to review billions of dollars of investments to purge some of their holdings, generating significant transaction costs.

And to what end? Freeing Ohio's pension funds of links to Iran will make proponents feel good, but there's no guarantee it will have any influence on the hard-line Islamists running Iran.

However, there's a real chance this measure could cost the pension systems money by forcing investment decisions that aren't in the best interests of Ohio retirees.

House Bill 151 proponents detailed in committee hearings the wrongdoing by Iran, such as support for terrorists, threats to annihilate Israel and other examples of extremism. But there are a number of rogue nations with lawless leaders and vast human-rights violations. Pension funds should not be expected to manage portfolios based on behavior of foreign governments.

The purpose of pension-plan investments is to generate growth in assets, not to manage foreign policy.