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CALIFORNIA CORPORATE & SECURITIES LAW

Is The SEC’s Universal Proxy Proposal A Product Of Agency Capture?

More than six decades ago, the late Professor Marver H. Bernstein published his theory of regulatory capture in Regulating Business By Independent Commission (Greenwood Press 1955).  According to his theory, agencies follow a life cycle of birth, maturity and old age.  As an agency enters senescence, it inevitably becomes captive to the groups that it regulates.…

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What Exactly Is “Constructive Engagement”?

Yesterday, I wrote about SB 185 (De León) which mandates that California’s two giant pension funds to liquidate their investments in thermal coal companies on or before July 1, 2017.  One aspect of the bill that I didn’t cover yesterday is the additional requirement that CalPERS and CalSTRS “constructively engage with a thermal coal company to…

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California’s New “Thermal Coal” Divestment Law Forces Fiduciary Duty Question

Public pension funds exist to provide retirement benefits to public employees.  Cal. Const. Art. XVI, § 17(a).  In 1992, the voters of California tried to eliminate political interference with the state’s retirement funds by enacting Proposition 162, the California Pension Protection Act of 1992.  One of the express purposes of the Pension Protection Act was to…

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Do Public Pension Funds Breach Their Fiduciary Duties By Pursuing Social Issue Proposals?

Yesterday, UCLA Law School Professor Stephen Bainbridge noted the publication of a recent study that reaches some devastating conclusions for public pension funds.  The study by Professor Tracie Woidtke at the University of Tennessee found that “public pension funds’ ownership is associated with lower firm value”.  To make matters even worse, Professor Woidtke found: Social-issue…

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The California Constitution, The FACA And The SEC’s New Investor Advisory Committee

Last month the Securities and Exchange Commission announced the formation of a new Investor Advisory Committee.  Section 911 of the Dodd-Frank Act created the committee to advise the SEC on: regulatory priorities, regulation of securities products, trading strategies, fee structures, the effectiveness of disclosure, and on initiatives to protect investor interests and to promote investor confidence…

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Pension Funds And Fund Sponsors Promote Agenda To SEC

In Wood v. General Motors Corp., 865 F.2d 395 (1st Cir. 1988), Judge Levin Campbell gave this definition of “agency capture” “Agency capture,” as explained by legal scholars, is the undesirable scenario where the regulated industry gains influence over the regulators, and the regulators end up serving the interests of the industry, rather than the general public.…

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California Retirement Systems/ISS United On Corporate Political Spending

On Tuesday, I wrote about  CalPERS‘ adoption of updated governance principles, including this new Principle 6.5: Robust board oversight and disclosure of corporate charitable and political activity is needed to ensure alignment with business strategy and to protect assets on behalf of shareowners. We recommend the following: a. Policy: The board should develop and disclose a…

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You Know It’s A Really Tough Regulatory Environment When . . .

In this letter sent last June, the writer commiserated:  ” . . . the financial markets are more volatile and challenging than ever before.  Couple all of that with the burden of new rules and regulations, and it is apparent that it’s getting harder and harder to simply do our jobs.” With the Securities and…

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CalPERS/CalSTRS Set To Launch Director Database

Watch the Video The California Public Employees Retirement System (CalPERS) and the California State Teachers Retirement System (CalSTRS) have teamed up on an initiative called the Diverse Director Database (3D Program). The United States Chamber of Commerce expressed its own concerns regarding the 3D program in this letter to the Securities and Exchange Commission. In…

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Diverse Director “DataSource” Announced, Dogged by Questions

Yesterday, CalPERS and CalSTRS issued this joint press release announcing that they have commissioned The Corporate Library, a private business that is part of GovernanceMetrics International, to develop the Diverse Director Database.  The Corporate Library will own and maintain the database, which is intended to be a resource for identifying board candidates. The database will…

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