This paper aims to conduct an empirical analysis of subnational laws of the USA that require public pension funds to divest from companies that are in business with Cuba, Iran…
Abstract
Purpose
This paper aims to conduct an empirical analysis of subnational laws of the USA that require public pension funds to divest from companies that are in business with Cuba, Iran, Syria, and Sudan and explores whether public fund officials may be in violation of their fiduciary duty responsibilities toward pension system beneficiaries as they execute state-mandated divestment schemes.
Design/methodology/approach
A database search was conducted for specific federal laws, presidential executive orders, and departments, offices, and terminology relevant to the topic of the research to explore the extent by which states employ public pension divestment regimes inspired by the federal governments designation of the four countries labeled as state sponsors of terrorism. Quantitative and financial calculations were used to conduct the cost analysis of divestment laws.
Findings
Divestment laws are costly for the beneficiaries. In the majority of the states that have divestment laws, the public funds, rather than the states, must cover the losses associated with divestment, resulting in pension fund trustees and managers having to take action that are in violation of their fiduciary duty responsibilities.
Research limitations/implications
The study recommends a major overhaul of the current divestment laws.
Practical implications
Divestment legislations must be revised as they cause a divergence of interests between state-driven political gestures, the fiduciary responsibilities of pension system trustees, and the financial interests of the beneficiaries.
Originality/value
This is the first study that recommends specific legislative action that would resolve the divergence of interests between state-driven political gestures, the fiduciary responsibilities of pension system trustees, and the financial interests of the beneficiaries.
Details
Keywords
The purpose of this paper is to examine the propensity of sovereign wealth funds (SWFs) for shareholder activism and their potential impact on corporate governance.
Abstract
Purpose
The purpose of this paper is to examine the propensity of sovereign wealth funds (SWFs) for shareholder activism and their potential impact on corporate governance.
Design/methodology/approach
The study highlights the relationships between SWFs and corporate governance and also applies eight antecedents/determinants of institutional activism to analyze whether SWFs have a predisposition for shareholder activism.
Findings
The study only finds two instances of SWF activism. Additionally, it finds that despite their mostly passive investments, SWFs possess a natural tendency toward shareholder activism. Some are more likely to engage in activism than others, however. SWFs with a higher proportion of their assets invested in equities, those with portfolios fully or partially constructed to emulate the broader financial markets through indexing, and those that depend less on external fund managers are the likeliest candidates for activism. The study also finds that the regulatory environment can curb the natural SWF inclination for activist behavior.
Research limitations/implications
Due to the lack of transparency within the SWF universe, this study largely depends on the limited data available for sovereign wealth funds.
Practical implications
Given the growing importance of SWFs, managers, directors, and policymakers must assess SWF activism, its influence on corporate governance, and its implications for public policy deliberations.
Originality/value
This project, to the best of the author's knowledge, is the first study that applies tested financial models to SWFs in order to determine if they have inherent activist tendencies.