Be a faithful fiduciary — keep politics out of your decisions when investing other people’s money

This recent op-ed originally appeared in The Washington Examiner on May 21, 2019.

Amid growing calls for divestment from several industries, Milton Friedman’s view on the role of business in politics bears repeating. Friedman explained that corporate executives are agents of the companies to which they are employed, acting on behalf of the company’s owners and tasked with the responsibility of increasing earnings.

Whereas principal actors make decisions about how to spend their own time or money, agents are entrusted with the resources of others. As an agent, executives accept a fiduciary responsibility to the company’s shareholders. Directing investments strategically in an effort to enforce or oppose a political agenda distorts what should be a data-driven decision geared towards maximizing returns.

Furthermore, politically motivated investments erode the integrity of our democratic system by utilizing private entities to carry out processes that traditionally have to earn popular support through the legislative system.

We are seeing a worrying trend of fiduciaries giving in to activist pressure instead of prioritizing fiduciary responsibility. For example, vocal opponents of current immigration policies, which are not new to this administration, have advocated for divestment from private prison companies. This is regardless of the fact that private companies don’t dictate public policy. The California Public Employees’ Retirement System (CalPERS) felt this pressure as it faced a pending bill to divest its holdings from these companies, which total over $10 million in stocks. The transaction costs alone associated with such a move would reach an estimated $175,000.

Breaking from its public pension peers like the California State Teachers Retirement System (CalSTRS) and the New York City Employees’ Retirement System, CalPERS recently voted to oppose the pending bill which would mandate divestment. CalPERS’ decision to uphold its fiduciary responsibility to its plan members, the millions of retirees who have contributed to the fund to guarantee a stable income after dedicating their careers to public service, reminds us what’s at stake.

The private sector should follow CalPERS’ lead and prioritize its fiduciary responsibility over that of political expediency.

In a statement, JPMorgan spokesman Andrew Gray attributed the decision to no longer provide credit to private prisons to “a robust and well established process to evaluate the sectors that we serve.” Nonetheless, the pivot cannot be disentangled from the enormous political pressure that the company faced.

Following this decision, Senate Banking Committee Chairman Mike Crapo sent a letter to the CEOs of eight of the largest banks, stating that they “should not seek to replace legislators and policymakers.” Instead, these executives must focus on the vital role that banks serve in strengthening the economy and creating jobs. Hence, lending decisions ought to be based on creditworthiness, not politics. When politics become a factor in lending, banks run the risk of punishing companies that operate in full compliance with state and federal law while also providing necessary services.

Beyond the authoritarian implications of weaponizing private asset management dealings against politically disfavored industries, the decision to divest from companies with reliable returns harms both the shareholders as well as the local economies that are enriched through employment opportunities.

But the question now is where does it stop? In a subsequent House Financial Services Committee hearing, JPMorgan received criticism for lending to the gun industry. For public pensions, it started with calls to divest from tobacco in the ‘90s; today, it’s everything from fossil fuels to gun manufacturers. Considering the negative health effects of sugar, will soda companies be next?

Friedman’s championing of fiduciary responsibility doesn’t need to be at odds with social justice values. In keeping politics out of investment strategy, fund managers help facilitate economic growth that benefits communities across the socioeconomic spectrum. While it is prudent to mitigate perceived reputational risks, investors cannot allow the political causes of the day to compromise their fiduciary responsibility to secure long-term returns. This is true across the public sector, but we must also remind our private sector counterparts that adhering to their fiduciary responsibility is not an option, it’s an obligation.

Ken Blackwell is a board member of the Institute for Pension Fund Integrity and a senior fellow at the Family Research Council. He is the former Ohio State Treasurer from 1994-1999 and is a former member of the Board of Directors of Fifth-Third Bank and the Fifth-Third Bank holding company.

PRESS RELEASE: Pension Funds Should Not be Used as Leverage for Social Movements


May 8, 2019           

Pension Funds Should Not be Used as Leverage for Social Movements


The Institute for Pension Fund Integrity hosted a morning breakfast discussion on public pensions, proxy advisory firms, and the ESG investing with all participants ultimately agreeing that “pension funds should not be used as leverage for social movements.”

WASHINGTON, D.C. – This morning at the National Press Club, a panel of experts joined the Institute for Pension Fund Integrity (IPFI) to discuss the relationship between public pensions, proxy advisory firms, and Environmental, Social, and Governance (ESG) principles. The rise in ESG investing and popular scrutiny around what types of industries public pensions profit from has sparked much debate. The tendency of proxy advisory firms to favor proposals with strong ESG components despite their pattern for lower returns raises concerns. IPFI welcomed Congressman Sean Duffy (R-WI-8) as keynote speaker and a panel of experts including Jason Perez (CalPERS), Jeff Mahoney (Council of Institutional Investors), and Dr. Wayne Winegarden (Pacific Research Institute).

Setting the scene, IPFI President Christopher Burnham emphasized the need for a strict adherence to fiduciary responsibility for all investors and those providing investment advice, including proxy advisory firms. Underfunded public pensions cannot afford to sacrifice potential earnings in favor of advancing a political agenda, and the proxy advisory firms that public pensions rely on for proxy voting guidance are actively pushing factors that may ultimately harm company performance, and therefore returns.

Congressman Sean Duffy was then welcomed to the podium to frame the issue from a legislative standpoint. Rep. Duffy had previously sponsored the Corporate Governance Reform and Transparency Act and has been engaging in a bipartisan effort to pass this bill. This legislation, while not as interesting as healthcare or tax reform, is necessary to “bring about more responsibility, accountability and transparency for proxy advisory firms,” said the Congressman.

The panel discussion then followed, discussing everything from the impact of ESG investing to the role of proxy advisory firms. When asked the impact of divestment movements in California, California Public Employees’ Retirement System (CalPERS) board member Jason Perez cited external influences as the primary driving force for divestment from companies with proven substantial returns. He asserted that “public pensions should not be a lever” to further social movements, which all panelists strongly agreed with.

While there was some disagreement regarding the question of applying fiduciary responsibility to proxy advisory firms, the panelists agreed that greater disclosures and transparency would benefit all parties involved. Dr. Wayne Winegarden, Senior Fellow in Business and Economics at the Pacific Research Institute, also argued that it might not be necessary to always vote the proxy, which would be a stark change from today’s understanding of SEC guidelines. This was just one of the lively discussion topics that the panelists covered with all panelists presenting unique view points.

For more on IPFI, proxy advisory firms, and other issues facing public pensions, check out our website at A recording of the discussion is also available at


The Institute for Pension Fund Integrity seeks to ensure that local, state and federal leaders are held responsible for their choices in investment, led not by political ideation and opinion but instead by fiduciary responsibility. IPFI is a non-partisan, non-profit organization based out of Arlington, Virginia, and spearheaded by former Connecticut State Treasurer and former Undersecretary General of the United Nations, Christopher B. Burnham.

Public Pensions, Proxy Advisory Firms, And ESG Investing: Join IPFI for a breakfast discussion – May 8, 2019

You’re invited! Join IPFI for a breakfast discussion on Wednesday, May 8, 2019 at 8:15 am. RSVP Required.

America’s public pensions are faced with increasing pressure from outside stakeholders to influence their investment strategies. This pressure includes everything from urging pensions to divest from various holdings, to the outsized influence that proxy advisory firms leverage to push environment, social and governance (ESG) initiatives. Join experts from across the public, academic, and nonprofit sectors to discuss these issues and the latest in public pension policy.

Featured Speakers:

  • Congressman Sean Duffy – Sponsor of the Corporate Governance Reform and Transparency Act
  • Jason Perez – CalPERS Board Member
  • Dr. Wayne Winegarden – Sr. Fellow in Business & Economics, Pacific Research Institute
  • Christopher Burnham – Former Connecticut State Treasurer, IPFI President

Wednesday, May 8, 2019, 8:15 am – 10:15 am

National Press Club – First Amendment Lounge

529 14th St NW, Washington, DC 20045


Please RSVP by Friday, May 3, 2019


A recording of this event is available here:

IPFI Issue Brief: ESG and the Proxy Process – What Does the Research Say?

With environmental, social, and governance (ESG) investing on the rise and calls for public pensions to divest from fossil fuels, private prisons, gun manufacturers, and others, IPFI compiled the latest research to determine the efficacy of ESG investing for public pensions.

Public pensions across the country are facing almost $6 trillion in unfunded liabilities. Any strategy that adds value to pension fund investments is worth examining. However, if the strategy doesn’t produce stronger returns, it should be dropped. In fact, evidence shows that ESG funds fall short of traditional fund performance, prioritizing ethical, social, or even political concerns ahead of optimizing returns for investors.

Beyond the challenges of ESG investing, the issue brief details the role that proxy advisory firms are now playing in the ESG investment ecosystem, which is relevant especially in light of the Securities and Exchange Commission’s review of the proxy process. The issue brief summarizes four key points:

  • Years of experience show ESG funds fall short
  • Frictional costs and values screens limit fund performance
  • Exclusions and divestments are particularly harmful to returns
  • The role of proxy advisors in the ESG ecosystem deserves scrutiny

Read the full Issue Brief: ESG and the Proxy Process – What Does The Research Say

IPFI Opposes NY Fossil Fuel Divestment Act

Institute for Pension Fund Integrity Opposes New York Senate Bill 2126, the Fossil Fuel Divestment Act


The Institute for Pension Fund Integrity has authored a letter of opposition to New York State Senator Liz Krueger and New York Assembly Assistant Speaker Felix Ortiz to express the organization’s position against the proposed Fossil Fuel Divestment Act. IPFI’s opposition supports New York Comptroller Thomas DiNapoli who, in an unprecedented action, sent a letter to the legislature opposing the proposed divestment. IPFI stands firmly against politically motivated divestment, and urges public pension funds to adhere strictly to their fiduciary responsibility to maximize returns for plan beneficiaries.

Read the full letter here.

Download: IPFI Opposes NY Fossil Fuel Divestment Act


CalPERS Chooses Prudent Management Over Politics Earning Praise From Pension Warriors


March 19, 2019

CalPERS Chooses Prudent Management Over Politics Earning Praise From Pension Warriors

During the monthly CalPERS Investment Committee meeting, the board members voted to support the staff recommendation to oppose AB 33, which would require the divestment of funds from private prisons.  

WASHINGTON, D.C. – In part driven by one of the newest board members Jason Perez, the California Public Employees’ Retirement System (CalPERS) voted to oppose pending state legislation to require the divestment of funds from private prison companies. The Institute for Pension Fund Integrity (IPFI) stands with Perez and his fellow board members, commending them for choosing prudent management of the fund over following political whims.

CalPERS yesterday chose to focus on its fiduciary responsibility to “make money” for the millions of retirees who have earned a secure retirement after dedicating their lives to public service. Beyond the estimated $175,000 in transaction costs associated with a potential divestment, the proposed divestment would negatively impact the fund’s investment strategy, exposing the fund to unnecessary risk and reducing returns.

The Institute for Pension Fund Integrity firmly believes that politically-motivated divestment does not belong in the management of our public pensions. Beyond the financial repercussion to the funds, divestment as a means of creating change is ineffective. For instance, advocates in favor of divesting from private prisons want to do so in opposition to current immigration policy. However, private companies don’t set the public policy that that has determined today’s immigration strategies. Divestment advocates are directly infusing politics into the financial management of one of the country’s largest public retirement funds. Therefore, IPFI supports the decision by CalPERS to prioritize fiduciary responsibility, and to oppose allowing politics into the management of the fund.

IPFI President Christopher Burnham reacted to the vote saying, “It’s clear that new board member Jason Perez is bringing a much-needed focus on fiduciary responsibility to CalPERS, and that the board is moving in the right direction.” He continued, “the politically motivated divestment movement across the country has proven to hurt pension performance and funding levels. This threatens all current employees, and retirees such as me.”

IPFI supports CalPERS for choosing to oppose California Assembly Bill 33 to mandate the ineffective and costly divestment from private prisons.

For more on IPFI, divestment, and other issues facing public pensions, check out our website at


The Institute for Pension Fund Integrity seeks to ensure that local, state and federal leaders are held responsible for their choices in investment, led not by political ideation and opinion but instead by fiduciary responsibility. IPFI is a non-partisan, non-profit organization based out of Arlington, Virginia, and spearheaded by former Connecticut State Treasurer Christopher B. Burnham.

IPFI Applauds CalPERS for Choosing Fiduciary Responsibility Over Political Pressure


March, 14, 2019

IPFI Applauds CalPERS for Choosing Fiduciary Responsibility Over Political Pressure

Instead of caving to fringe political movements, IPFI commends CalPERS for prioritizing its members and opposing legislation forcing it to divest from private prison companies.

WASHINGTON, D.C. – As California faces the possibility of another forced divestment, the Institute for Pension Fund Integrity (IPFI) supports California Public Employees’ Retirement System (CalPERS) for prioritizing California’s public retirees and focusing on their fiduciary responsibility. CalPERS’s opposition to California bill AB 33, introduced by State Assemblyman Rob Bonta (D-Alameda), comes ahead of the March 18 investment committee meeting. AB 33 would require CalPERS to divest stocks or bonds in private prison companies on or before July 1, 2020, despite the stable and profitable returns those investments provide.

In agenda materials released ahead of the investment committee meeting next week, CalPERS argues against any divestment from private prison companies for two primary reasons. The first, is that their “primary duty and obligation” is to their members, and that divestment would result in worse investment performance by compromising current strategies and incurring unnecessary transaction costs. The second reason that CalPERS explains is that divestment rarely achieves the political or social agendas it tries to address. This further highlights that the divestment would be purely political, inherently harming the retirees who depend on CalPERS to provide the retirement they have worked so hard for. IPFI is in full agreement with CalPERS and urges other public pension funds to continue prioritizing their fiduciary responsibility over political movements.

Beyond the principles opposing divestment, there are real costs associated with the potential requirement. CalPERS estimates that if it sold the private prison companies’ stock, it would lose $175,000. This would be on top of the 0.7% loss already incurred based on other divestments like from tobacco or thermal coal companies. “CalPERS simply cannot gamble away the money of its retirees based on political preference,” said IPFI President Christopher Burnham. He continued, saying “As financial professionals, we hold no higher responsibility than that of our fiduciary duty, and CalPERS is making the right decision to oppose the mandatory divestment, and I congratulate them.”

As the fight for fiduciary responsibility continues, California public retirees have a strong leader in CalPERS Chief Investment Officer Ben Meng. Unlike his counterparts at CalSTRS, who voted in November to divest from private prisons, Meng has steadfastly prioritized the fiscal health of the fund over political whims. IPFI stands with Meng as he continues this pattern of leadership at the March 18 investment committee meeting. IPFI supports CalPERS for choosing its fiduciary responsibility over politics.

For more on IPFI’s positions regarding divestment and fiduciary responsibility, see IPFI’s latest research available on and follow us on twitter @SecurePensions 

IPFI Board Members Submit Commentary to the SEC

IPFI Board Members Brower and O’Connor Submit Commentary to the SEC

The recent op-ed  in Investors Business Daily by IPFI Board Members Richard Brower and Kevin O’Connor was submitted to the Securities and Exchange Commission (SEC) as formal commentary regarding the proxy process. 

Re: [File No. 4-725]

Dear Mr. Fields,

As retired firefighters, we know as well as anyone the importance of duty and obligation. That’s why we are deeply concerned that those tasked with safeguarding the retirement funds of my fellow firefighters and other public pensioners are making decisions based on political agendas rather than on their obligation to do what’s best for our retirement.

As our Investor’s Business Daily opinion piece enclosed with this letter states in greater detail, pension fund managers have already made decisions based on political agendas that have adversely affected public workers. The largest U.S. pension fund, CalPERS, in 2002 saw its board divest its holdings in tobacco companies, a moral decision as opposed to an investment decision. That single move cost state pensioners $3 billion, with the full damage still not entirely known.

Meanwhile, another pension fund, the San Francisco Employees Retirement System (SFERS), has considered divesting its holdings of energy stocks. According to a study conducted last year, the fund would have experienced lower returns and taken a financial hit between $5.8 million and $23.1 million. Needless to say, the fund’s consulting firm NEPC advised against this unnecessary divestment.

Unfortunately, CalPERS and SFERS are not the only funds facing this dilemma. The people managing America’s $3.4 trillion in retirement assets for America’s teachers, firefighters, police, and other government employees are increasingly being asked to place political considerations over financial decisions. This has dangerous implications for two reasons.

First, funds are consistently turning to stocks rather than bonds. This means that pension funds have more influence over corporate policies through proxy votes. Second, guidance over how funds should vote on proxies is now dominated by two firms: Institutional Shareholder Services (ISS) and Glass Lewis (GL). These two firms control 97% of the proxy advisory market, but also have a bias toward political and social causes over investment returns. Unfortunately, decisions made by the Securities & Exchange Commission have allowed the firms to grow even more powerful when it comes to corporate governance.

The conflicts of interest for these two firms are clear. ISS sells advisory services to corporations at the same time it makes recommendations to funds on how to vote on proxies. Glass Lewis says clearly in its published guidelines that if the SEC denies a vote on a proxy question that is “detrimental to shareholders,” the firm will tell funds to vote against members of the company’s governance committee. The firms are not accountable to pensioners, but only to their political whims and agendas, including agendas that push environmental, social, and governance (ESG) investing.

The job of public pension fund managers is to ensure that retirees, including retired firefighters like us, have sufficient funds to live comfortably after years of dedicated service. Their job is not to impose their own political beliefs using other people’s money.

The SEC has a leading role to play in addressing issues with the proxy advisory system, especially when it comes to how the agendas of ISS and Glass Lewis could affect pensioners. Americans deserve to know that their pension managers are making financial decisions, not political ones, and that the SEC is doing everything possible to provide the appropriate oversight and regulation of proxy advisors. We appreciate you considering these concerns and taking an active role in addressing the challenges before us.


Richard Brower, Former Vice Chairman of the New York City Fire Department Pension Fund

Kevin O’Connor, Former assistant to the general president of the International Association of Fire Fighters and former chair of the Baltimore County Employees Retirement System.

Please click here for the full submission. For additional details and other public comments to the SEC regarding the proxy process, please visit

PRESS RELEASE: IPFI Commends CalSTRS for Prioritizing Fiduciary Responsibility


February 13, 2019

IPFI Commends CalSTRS for Prioritizing Fiduciary Responsibility 

IPFI commends CalSTRS for opposing a California state bill that would require divesting investments in private prison companies. 

Washington, DCThe Institute for Pension Fund Integrity (IPFI) would like to commend the California State Teachers’ Retirement System (CalSTRS) for voting to oppose a state bill that would require CalSTRS and CalPERS to divest investments in private prison companies by July 1, 2020. CalSTRS decided to oppose AB 33 (2018) because they felt it would be an abdication of their authority to allow another entity to dictate investment decisions, according to Harry M. Keiley, Chairman of the CalSTRS Investment committee.

IPFI applauds CalSTRS for prioritizing their fiduciary responsibility and refusing to abdicate any investment decision making authority. The fiduciary responsibility held by CalSTRS managers must be at the forefront of any decision making process. IPFI believes that the fiduciary responsibility held by public pension funds should be strictly adhered to, and agrees with CalSTRS that they should not abdicate that authority. It is our hope at IPFI that CalSTRS will use the same judgement across any investment decision, including regarding the use of proxy advisory firms to influence proxy voting decisions.

In addition, IPFI remains strongly against politically motivated divestment, including CalSTRS’s plan to divest from private prisons. Investment decisions should be made solely on the basis of financial performance and risk, and should never be made for political reasons. Politically motivated acts of divestment are a violation of fiduciary duty and have led to the loss of billions of dollars of income in the past.

IPFI would like to congratulate CalSTRS for choosing to maintain its fiduciary responsibility. For more on IPFI’s positions regarding divestment and fiduciary responsibility, see the research available on

Brower, O’Connor Op-Ed in Investors Business Daily: A Pension Fund Should Focus On Financial Returns, Not Social Policy

Both of us were trained as firefighters. Along with many other first responders across the country, we chose public service to help citizens in our communities. We knew our career choice would not make us rich, but like millions of public servants in this country, we count on our pensions for a secure retirement.

We’re alarmed because our fellow firefighters’ future is now at risk because of other people’s political and ideological preferences. For example in 2002, the board of CalPERS, the largest U.S. pension fund, divested its holdings in tobacco companies. Smoking is legal for adults and tightly controlled by regulation, but the board believed that owning tobacco stocks was, well, just wrong. It was a moral decision, not an investment decision.

It also turned out to be a costly decision for California’s state workers, who depend on CalPERS for their retirement security. An analysis in 2015 found that this divestment cost the fund $3 billion, and later calculations by Wilshire Associates show the “amount of foregone performance has continued to grow.” Despite the losses, the CalPERS board rejected the advice of its staff in 2016 to reinstate tobacco stocks.

CalPERS is not alone. More and more, the people who run public pension funds — which last year managed $3.4 trillion in retirement assets for America’s teachers, firefighters, police, and other government employees — are making investment decisions based on considerations other than achieving the best potential financial returns.

Read the full opinion piece here.