Divesting in Iran Could Prove a Problem for Public Pensions
Wednesday, January 23, 2008 at 10:39 am
First Sudan and now Iran.
The road to stripping public pensions of immoral investments will require significant detours. Colorado has mapped out two. On Tuesday, the state’s retirement program announced a moratorium on new investments in companies doing significant amounts of business in the Iranian energy industry. This follows legislation last year that decreed divestiture of Sudanese-related investments.Colorado’s move puts it among the leaders of a nascent national movement to strip all public pensions of Iran-related investments.
However, until the concept of fiduciary responsibility changes, buying stocks and bonds that generate enough return to fund the retirement checks of former state employees begins and ends with an amoral commitment to making money.
Meredith Williams, who directs the Colorado Public Employees’ Retirement Association known as PERA, acknowledged as much after the hoopla of a press conference in the governor’s office announcing the agreement on Iran.
“PERA employees are part of a trust,” Williams explained. “By law, they have a fiduciary responsibility to do what is in the best interest of (retired) employees.”
That means that for all the talk of punishing Iran financially for its contributions to terrorism and the distribution of improvised explosive devices (IEDs) used to take American lives in Iraq and Afghanistan, the law may not allow PERA to dump hundreds of millions of dollars worth of stock in companies doing business in Iran.
“That’s possible,” Williams agreed in an impromptu press conference in the halls of the Capitol.
The legislature set the legal standard for automatic divestiture at genocide. There is no genocide in Iran – at least none that has been reported and confirmed as is the case in Sudan. The upshot is that Colorado’s retirees could be living partly on blood money for years to come.
The moratorium on future investments in Iran-linked companies is a start. It avoided legislative action that is hard to adjust to meet changing circumstances. It received the blessings of Republicans and Democrats, as well as the Jewish Community Relations Council.
State Treasurer Cary Kennedy, a Democrat, called the Iranian divestiture resolution an “example of success achieved when everyone works together without partisan bickering.”
“America’s public pensions should not aid and abet regimes that build IEDs or call for the destruction of Israel,” added Republican state Sen. Josh Penry. “This policy is rooted in the best interest of those who invested in PERA. This agreement is a model to be emulated by other pensions …”
It is also a model without deadlines. The Iran divestiture resolution that the PERA board unanimously endorsed includes no certain dates for taking specific actions.
“The biggest change is in gathering information (about companies’ Iranian connections),” Williams said. “We’ll go more in depth and engage the companies (in discussions of their Iranian ties) – what portion of their operations are in Iran. There is not a time frame. It will vary from firm to firm. Some may blow us off. Some may bury us in information.”
PERA will file quarterly reports of its progress in Iranian divestiture. But right now, it has not even developed a list of companies that will be excluded from future investments, nor has it decided which, if any, of its current holdings ought to be shed.
The standard will be if a company has invested more than $20 million in the Iranian energy industry in any one of a specified 10 years, Williams explained.
Once again, no time frame exists for PERA establishing a list of those who have done that.
The promise of action hinges on untangling often complex trails of ownership that wind their way back to Iran. Or as Williams put it: “Companies owning companies owning companies.”
Even that does not guarantee the sale of existing holdings if PERA can’t find non-Iran-linked companies that offer a comparable value and return.
Gov. Bill Ritter was right when he said that divestiture by public pensions helped bring an end to apartheid in South Africa.
But as long as the road to what’s morally right runs through the intersection of what’s fiscally sound, the citizens can expect gridlock.