updated 12/5/2004 4:17:00 PM ET 2004-12-05T21:17:00

On issues from global warming to corporate reform, public pension funds controlled by union officials and Democrats in states carried by Democratic presidential candidate John Kerry increasingly see themselves as counterweights to Republican control of the nation’s political agenda.

As Bush plans a second term, multibillion-dollar investment funds — especially in so-called “blue states” such as California, New York, Connecticut and Illinois — have already forged alternate agendas on clean energy, the environment, executive pay, even gay marriage rights that can run counter to “red state” values.

They also view themselves as an increasingly important check on corporate power under a Republican-dominated government that typically promotes fewer regulations on business and financial markets. Their muscle comes in the billions of dollars invested in corporate America.

“We’ve had no choice but to step up,” said California’s Democratic state Treasurer Phil Angelides, a director of the nation’s largest and third-largest pension funds with combined values of nearly $300 billion. “This administration has turned its back on ordinary investors, or on issues of substantial concern to our economy.”

Partisan overtones
While the primary mission of enormous Democrat-controlled pension funds such as California’s $177 billion Public Employees Retirement System, also known as CalPERS, and New York State’s $118 billion Common Retirement Fund is to produce income for their millions of public sector retirees, how they do it often has fierce partisan overtones.

Unlike major institutional investors, such as private pension funds and insurance companies, public pension funds led by union officials and activist treasurers and comptrollers often aggressively rattle U.S. corporate cages, use news conferences to embarrass or shame rival causes and companies and wield their riches to push alternate economic or political visions. For example:

  • As the White House and Republican congressional majorities tread cautiously on global warming, Connecticut’s pension funds led by Democrat State Treasurer Denise Nappier have launched an eight-state investor assault on corporate policies she said contribute to climate change.
  • As former oil industry executives Bush and Vice President Dick Cheney press for drilling rights in the Alaska National Wildlife Refuge, California’s pension funds have agreed to invest nearly $1 billion in “clean” energy.
  • While the White House officially supports a constitutional amendment against gay marriage, New York City pension funds run by union leaders and Democrats are successfully pressing companies in which they invest to add sexual orientation to nondiscrimination policies.

Bottom-line concerns
Fund leaders say it’s about the bottom line.

“We do not want to see a sudden devaluation in those stocks,” said California Controller Steve Westly, a former executive of the online auction house eBay, who’s pushing automakers in which CalPERS has invested $836 million to embrace cleaner-burning cars.

Westly and others at CalPERS, citing the U.S. auto industry’s resistance to California’s moves to curb carbon dioxide emissions from vehicle tailpipes, said Detroit could lose market share as Honda and Toyota lock up a growing market for hybrids.

Connecticut and New York City pension fund leaders cited similar reasons for attacking Halliburton, alleging the oil exploration and construction giant headed by Cheney from 1995 to 2000 does business through subsidiaries with terrorist nations.

CalPERS has likewise pressed for a full-blown investigation into CACI International, Inc., alleging behavior of company employees at Abu Ghraib prison in Iraq damaged America’s standing in the world — and threatened the company’s stock values. After an initial plunge in May, CACI’s stock values have thrived since August.

A voice for reform
Big blue-state pension funds have also become leading voices for U.S. corporate reforms that include letting big shareholders such as themselves nominate company directors — a movement not embraced by Washington.

“Institutional investors came through a period where they had these lousy returns for three years and a lot of trustees were mad as hell, and they weren’t going to take it anymore,” said William Atwood, director of the Illinois Board of Investments. The $10.5 billion retirement fund jumped headlong into corporate reform issues after the 2002 election of Democratic Gov. Rod R. Blagojevich and new Democratic appointments to the board.

Prodded by funds in such Democrat-friendly states, public pension funds throughout the U.S. have since pushed to curb corporate salaries and reform practices of investment banks, mutual funds and the New York Stock Exchange. Among their champions: New York Attorney General Eliot Spitzer, a Democrat, whose lawsuits against U.S. businesses have overshadowed federal regulators under a Republican administration.

Republicans and their corporate allies frequently criticize Spitzer and California’s Angelides as publicity hounds aiming to further their own gubernatorial ambitions. The California Republican Party has suggested that CalPERS’ 13-member board of Democrats and union leaders be fired for putting social agendas ahead of profits.

Although the value of CalPERS investments has jumped this year from $161 billion to $177 billion, party officials cite $2.6 billion in pension costs assumed this year by state taxpayers as proof. Fund officials blame it on losses during an economic downturn after the Sept. 11, 2001, terrorist attacks.

Likewise, the Business Roundtable, a Washington, D.C.-based group of 150 corporate chief executive officers, many of whom contributed to Bush’s re-election, has opposed pension fund campaigns to nominate their own corporate directors. Their leaders said the practice could become a tool for labor unions and environmentalists to disrupt U.S. corporations.

For some, good governance not political
Still, many experts downplay an overt partisan nature to corporate reform issues, saying in the wake of corporate meltdowns like Enron and Worldcom, Republicans and Democrats equally favor making business more accountable to investors.

“You can’t really characterize it as a Democratic or Republican issue,” said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. Elson said Bush’s re-election is likely to have little impact “one way or the other” on the issue’s growing visibility.

Likewise, Nell Minow, a corporate watchdog and editor of the Maine-based Corporate Library, said public pension funds are reacting more to their financial losses than which party runs Washington. But she acknowledged that institutional investors may see Bush’s re-election as an “additional risk, that we may be getting less oversight from government. That’s all the more reason for the investor community to pay more attention.”

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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