Thursday, May 10, 2007

STRS-to divest or not to divest?

Akron Beacon Journal, May 10, 2007
Bill aims at firms with ties to Iran
Ohio pension funds face selling shares of Honda
By Dennis J. Willard
Beacon Journal Columbus Bureau
COLUMBUS - Ohio's pension funds would have to sell stocks
The Iran divestment bill being heard in the Ohio House would require the state's five pension funds to sell all their stock in companies that have invested millions of dollars in Ohio and employ thousands here, because those foreign companies have financial ties to Iran.
A list of companies with ties to Iran developed by a private research company for the State Teachers Retirement System includes some of Ohio's largest employers, such as Honda Manufacturing of America, DaimlerChrysler, Nestle and Siemens.
The companies on the STRS list of investments, compiled by Institutional Shareholders Services headquartered in Rockville, Md., include 140 that employ 51,740 in Ohio.
STRS and the four other state pension funds oppose House Bill 151, sponsored by Reps. Josh Mandel, R-Lyndhurst, and Shannon Jones, R-Springboro.
The bill prohibits any public investor from investing in a foreign company that has active business ties with or operations in Iran, and it mandates that existing investments in such companies be sold to protect the public investments of the state from losses related to global security risks.
Mandel said the Ohio Bureau of Workers' Compensation and the Ohio treasurer's office are included in the bill, but unlike the pension funds, they do not have investments in companies with ties to Iran.
Mandel said the pension funds have known they are investing in a country that sponsors terrorism. ``I think it's morally outrageous that they are taking retirement dollars and investing them in a country that wants to destroy America,'' Mandel said. ``They have chosen on their own to invest in Iran, and because of that, it is important that the legislature mandate that they stop doing this dangerous practice.''
Leaders of the pension funds outlined their reasons for opposing the bill at an Ohio Retirement Council Study meeting Wednesday after hearing a detailed analysis of the bill from the council's staff. The analysis included a recommendation to ask the Ohio General Assembly not to approve the legislation as introduced.
State Sen. J. Kirk Schuring, R-Jackson Township, who chairs the council, postponed a formal vote to oppose the measure because he said the sponsors are working with pension fund officials on a compromise bill.
Hearing set for today
The House continues to hold hearings; another is scheduled before the Financial Institutions, Real Estate & Securities Committee this morning.
Mandel said he was aware that major corporations doing business in Ohio are on the list of companies with ties to Iran, but he does not believe that poses an obstacle for his legislation. ``We have not heard any testimony from any company opposing the bill. We have not heard from any company whatsoever that's opposed to the bill,'' Mandel said.
He said he has heard from workers outraged about their employers investing in Iran. ``What does a blue-collar worker on the assembly line at Honda or DaimlerChrysler think about this? These are the moms and dads with kids serving over in Iraq. What do they think about their company investing in Iran, a country that wants to destroy their sons and daughters serving over there?'' Mandel said.
Jones said the bill is very much a work in progress, and she and Mandel are working to accomplish their divestment goals in a responsible way.
``We've also made huge investments in those companies as well. We're simply saying we want people to do business here, and we want to encourage job growth. We also just don't want people building up the terrorist regime of Iran that is trying to develop nuclear weapons that are targeted at us,'' Jones said.
Jeffrey Smith, assistant vice president for corporate affairs at American Honda, said his company has not taken a position on the bill.
Smith said the parent company, Honda Motor Co. Ltd. of Japan, has a minority ownership share in a motorcycle manufacturer, Tizro Mfg. Co., in Iran. Tizro assembles a small number of motorcycles in Iran; Tizro has about 2 percent of the market.
Smith said the operation is unrelated to Honda's operations in the United States.
State Rep. Chris Widener, R-Springfield, who chairs the committee holding hearings on the bill, said he has seen no company names.
``Honda is a foreign company, but they have a major presence in Ohio,'' Widener said. ``On the surface, it looks like a straightforward bill, but this is definitely a major question we need to address.''
The ISS list indicates Honda employs 17,350 in Ohio.
Damon Asbury, STRS executive director, told the retirement council that ISS used screens to develop the list that determined whether a company has direct investments, operations or other business in Iran. The resulting list shows ``companies that could fall under the definition of doing business with Iran,'' Asbury said.
A number of Mandel's legislative colleagues are concerned about the message Ohio's pension funds would be sending to international firms with large investments in the state, such as Toyota and BP.
State Rep. Michelle Schneider, R-Madeira, a member of the retirement council, suggested the state's laws would be in conflict with federal policies.
``The (U.S.) State Department allows these companies to do business in Iran, but by passing this bill, we are saying our pension funds cannot invest in these companies,'' Schneider said.
STRS paid ISS to come up with the list after a private, for-profit research firm in Washington, D.C. -- on behalf of Mandel and Jones -- matched companies that have investments in Iran with the companies in which the state's five pension funds have invested.
List deemed proprietary
Asbury said the Conflict Security Advisory Group refused to provide the pension funds with the names because it deems the information proprietary.
CSAG, established one month after the Sept. 11, 2001, terrorist attacks, specializes in assessing global security risks, which it defines as ``the risk associated with corporate ties to countries of security concern, terrorism or weapons proliferation,'' according to its Web site.
CSAG has a database that identifies and profiles more than 400 U.S. and foreign publicly traded companies with business ties to countries identified by the State Department as state sponsors of terrorism. The firm's Screening and Certification Service allows investors to develop a ``Terror-Free'' investment portfolio.
Adam M. Pener, chief operating officer, said his company does not take a position on how the data it provides to clients should be used, and he could not disclose whether Honda, DaimlerChrysler, Nestle or Siemens was on the CSAG list.
Pener said CSAG lets companies on the list challenge or clarify the research firm's findings.
In an April 10 letter to Jones and Mandel, CSAG outlined estimated investments by the five pension funds in companies with active, nonhumanitarian ties to Iran. The five pension plans would have to sell investments in 568 companies totaling $8.9 billion of the funds' combined portfolios of $132 billion.
Dennis J. Willard can be reached at 614-224-1613 or
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