Dayton Daily News: Pension funds shouldn't finance evil

Other views: Retirees can't afford to fight Irans and Sudans

Our view: Pension funds shouldn't finance evil

Dayton Daily News, Wednesday, June 06, 2007

These are excerpts from Damon Asbury, executive director of the State Teachers Retirement System of Ohio, who testified May 24 against House Bill 151. The bill would require Ohio's state pension funds, among other government agencies, to divest of any investments in companies doing business with Iran and Sudan: The sponsors have indicated that the bill will only involve some 22 companies involved in oil production.
We currently hold $700 million in those companies.
Our analysis of the cost for divesting of these 22 companies is a one-time cost of $5 million in transaction fees and an estimated loss of $75 million annually in investment returns.
It is not possible to make mandated divestment cost-neutral.
Those costs will be borne by the beneficiaries of the trust fund. Reduced investment income will impact our ability to deliver benefits, especially health care.
We continue to have serious concerns that House Bill 151 supersedes the retirement board and staff fiduciary duty to the membership.
The bill continues to include language that makes that duty to the membership secondary to a new foreign-policy duty on Iran and Sudan.
The system cannot accept any language that puts the best interest of the beneficiaries below political agendas, no matter how noble the intent.
We believe the passage of House Bill 151 will establish a dangerous precedent. Already we have seen the original bill expanded to another country — Sudan.
Since every proponent of tapping into trust funds believes theirs is a noble cause, once the door is opened it will never be closed. There will always be global conflict somewhere in the world. There will always be differing views among intelligent human beings on what is socially right and moral.
For precisely this reason, trust funds are set up to be removed from the political fray and to require the trustees to discharge their duties solely in the interest of the participants.
Your predecessors saw the value of protecting these pension plan assets from outside influences and persuasion. This was appropriate, this was reasonable, and this was prudent.
While individual investors are free to manage their own assets as they see fit, we believe attempting to achieve social or political objectives with other people's money violates trust laws and intercedes in the fiduciary responsibilities of the board members and staff who are responsible for overseeing these assets.