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The New Colossus

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Building on the Past

About the Author

William Greider
William Greider
William Greider, a prominent political journalist and author, has been a reporter for more than 35 years for newspapers...

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Doug Hughes is not a dangerous fruitcake. In fact, he is a small-d democratic idealist who went out of his way to alert the authorities in advance of his so-called “Freedom Flight.”

The thought leaders of the Next System Project want to move past the narrow debate about policy and toward a conversation about the deeper structural change required of the political system itself.

The current wave of pension-fund reformers is building upon shareholder activism pioneered thirty years ago by churches and other social activists, most famously in the campaign to end apartheid in South Africa. The shareholder-petition movement continues to grow and exert influence, but has always suffered from an essential weakness: Under existing rules, CEOs and boards of directors are free to ignore the dissidents, even when their policy proposals draw overwhelming support from other shareholders. Many managements do decide to be responsive, if only for good public relations. But the vision of pension-fund power has never been fully realized. These new activists might conceivably be different.

For one thing, the state funds have grown enormously in financial girth. Fiduciary institutions in general (including mutual funds, corporate pension funds and some others) are now the majority owners of the 1,000 largest US companies and collectively Wall Street's largest customer. The new strategies also seem more systematically focused because the public pension funds are not distant critics promoting broad principles of "socially responsible" behavior but major owners asking boards of directors tough and precise balance-sheet questions. Organized labor's active engagement also promises a much stronger base of popular support for reform ideas. So far, the collaborations among the progressive funds have brought together as much as $700 billion to support a corporate-governance issue, with a prospect of far greater firepower if other state pension funds join the cause (nationwide, public funds hold about $2.7 trillion and union-managed funds have another $400 billion).

The coalescence of labor and environmental activism is visible on an issue stalemated in regular politics--global warming. The overseers of around $800 billion in investor wealth have endorsed the Investor Network on Climate Risk, a coalition of pension funds with church-based, environmentalist and other like-minded shareholder activists led by Connecticut Treasurer Denise Nappier. The coalition is methodically engaging major corporations in the oil, auto and electric-utility sectors, which are the leading US sources of carbon emissions--that is, global warming. The strategy is beginning to win some meaningful admissions of corporate exposure to financial risks (more about this later).

Other initiatives have led to swift and bloody conflicts. New York State Comptroller Alan Hevesi, a gray, subdued figure alongside Angelides, brings another $121 billion to the table as the single manager of the New York State Common Retirement Fund, third-largest in the nation. Other regulars include William Thompson Jr., who runs the New York City pension funds (more than $80 billion), and North Carolina Treasurer Richard Moore ($63 billion). Last fall Hevesi scored against Sinclair Broadcasting, which intended to televise a nasty propaganda film attacking John Kerry in the guise of "news." As a substantial shareholder, Hevesi objected; Sinclair backed down. Hevesi recently won an important corporate-accountability precedent in his fund's investor lawsuit against fraud-riddled WorldCom. Ten former directors of the collapsed telecom company agreed to pay $18 million out of their own pockets rather than risk further exposure to fraud accusations. A year ago Angelides scored a bull's-eye when he demanded the resignation of Richard Grasso, the grossly overpaid president of the New York Stock Exchange. Other pension leaders jumped aboard. Grasso was gone the next day.

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