Preparing)for)deregulation What)we)can)do)to)protect)our)members - PowerPoint PPT Presentation

Preparing)for)deregulation What)we)can)do)to)protect)our)members

Deregulation) “This&is&going&to&be&a&president&who&will& be&the&biggest&regulatory&reformer& since&Ronald&Reagan.&There&are&just&so& many&regulations&that&could&be& eased.” 1 >Stephen'Moore,'an'economic' adviser'for'Trump “We&need&to&undo&many&regulations& which&have&stifled&investment&in& American&businesses,&and&restore& oversight&of&the&financial&industry&in&a& way&that&does&not&harm&American& workers.” 2 >Donald'Trump Donald'J.'Trump'and'Carl'Icahn,'his'“special' adviser”'for deregulation The$New$York$Times 1 ,$MSN 2

Deregulation)Can)Lead)to)Problems Glass>Steagall 1 • ◦ Regulatory'Law'created'in'1933,'Clinton'stripped'it'of'its'power'in'the'1990s ◦ Banks'were'then'allowed'to'create'fraudulent'loans'and'sell'them'to'customers'as' securities Housing'Crisis 2 • ◦ Investment banks'combined'loans'and'sold'them'on'Wall'Street,'unregulated,'promising'a' steady'stream'of'income' ◦ The'loans'were'made'to'people'who'couldn’t'pay'them'back ◦ Eventually'the'whole'system'crashed'housing'prices'plummeted,'resulting'in'the'2008' recession • The'California'Electricity'Crisis 3 ◦ 4'Utilities'Companies'spent'$4.3M'on'lobbying'to'pass'deregulations ◦ California'electricity'market'opened'up'to'competition ◦ Over'a'four'year'period,'electricity'rates'tripled. ◦ Rolling'blackouts'throughout'the'year'2000'in'order'to'prevent'a'statewide'blackout ◦ This'resulted'in'a'California'bailout'of'the'electricity'companies NPR 1 ,)Time 2 ,)PBS 3

Current)State)of)Affairs New'Jersey'and'Illinois’'public'retirement'systems'are'the'most'underfunded'in'the' • nation 1 ◦ Investment'returns'were'significantly'smaller'than'expected'due'to'small'stock'market' profits'and'low'bond'yields ◦ Illinois'workers'are'paying'into'nearly'bankrupt'funds'that'might'not'be'able'to'support' them'during'retirement,'and'giving'aid'to'funds'causes'other'financial'issues.'' ◦ Illinois'needs'$119.1B'in'aid'to'pay'the'entirety'of'member'benefits'and'New'Jersey'has'a' $135.7B'funding'gap Many'pension'funds'have'more'retirees'than'employees,'which'puts'pressure'on'the' • whole'system Bloomberg 1

Current)State)of)Affairs Multiemployer'Pension'Reform'Act'of'2014:'Allows'failing'pension'funds'that' • cover'employees'from'various'corporations'to'reduce'member'benefits'if'doing' so'will'prevent'the'funds'from'going'bankrupt' Keep'Our'Pensions'Promise'Act:'Takes'the'money'raised'by'closing'estate'and' • gift'tax'loopholes'used'by'the'wealthiest'Americans'and'federally'supports' failing'pension'funds,'and'prevents'these'retirement'systems'from'cutting' retirees’'income ◦ Proposed'but'not'accepted'by'the'Senate'Budget'Committee

What)We)Should)Ask)the) Government to)Do The'federal'government'should'pass'laws'in'support'of'the'pension'funds • • We'need'to'ask'our'state'and'local'governments'to'begin'fully'funding'the' pension'funds'so'we'can'have'our'money'and'receive'returns'at'the'rates'we'are' promised

What) We Need)to)Do Scott'Stringer'(NYC'Comptroller)'provides'a'framework'for'what'investors'and' • shareholders'can'do'to'influence'corporate'activity' NCPERS'Code'of'Conduct'is'a'baseline'for'how'pension'funds'should'behave' • towards'each'other'and'in'the'public'sphere

Five)Point)Plan

Companies'with'diverse'board'memberships'have'greater'financial'success'than'the' ones'with'little'to'no'diversity'

Investment'and'pension'funds'like'PAX'World'and'CalPERS'are'leading'the' • way—they'use'the'extent'of'gender'diversity'to'help'decide'which' companies'in'which'to'invest 1 Operational'performance'and'share'prices'increased'for'corporations' • where'women'were'at'least'20%'of'the'entire'board The'percentage'of'women'with'board'placements'is'much'smaller'than'the' • total'percentage'of'women'in'the'workplace 2 Many'studies'have'shown'that'having'a'more'diverse'board'is'good'for' • business ◦ More'than'55%'of'inactive'companies'had'one'or'zero'women'on'their'boards ◦ Fortune>500'companies'with'the'highest'amount'of'female'directors'in'2009' achieved'a'53%'higher'return'on'equity'and'42%'greater'return'on'sales'(HBR) Harvard'Business'Review 1 ,'Harvard'T.H.'Chan'School'of'Public'Health 2

Carl'Icahn'uses'the'press'and'board'seats'as'leverage'to'get'companies'to'do'what' • he'wants:'to'make'billions Icahn'uses'his'influence'and'goes'to'the'press'in'order'to'pressure'a'company'into' • making'decisions'that'Icahn'knows'will'win'him'lots'of'money Icahn'typically'begins'by'buying'at'least'1%'of'a'company'then'secures'a'few' • board'seats'since'he'owns'a'significant'stake ◦ He'uses'this'power'to'then'coerce'businesses'into'making'decisions'that'will'profit'him He'bought'about'1%'of'Apple'shares'and'wrote'in'an'open'letter'to'CEO'Tim'Cook' • to'expand'his'buyback'program ◦ Apple'eventually'followed'his'advice,'resulting'in'a'total'of'$200B'to'be'returned'to'its' shareholders'by'March'2017 He'owned'$70B'in'shares'in'Ebay,'and'a'few'board'seats'so'he'had'the'influence'to' • make'Ebay split'with'PayPal'into'two'companies ◦ This'whole'affair'was'made'public'as'well ◦ As'a'result'of'Icahn’s'presence'within'the'company,'Ebay’s shares'increased'by'14%'that' year

"I'should'point'out'that'in'many'of'the'situations'just'over'the'last'few'years,' • where'we'accepted'only'small'minority'positions,'shareholder'value'has'been' greatly'enhanced."'> Carl'Icahn Just'as'Icahn'uses'his'influence'in'the'financial'sector'to'create'profits'for'himself,' • we'can'use'our'pension'funds’'assets'to'leverage'businesses'into'doing'what'we' need'them'to'do

Excessive'buyouts'for'CEOs'who' • presented'poor'shareowner' returns'and'disregarded' mounting'investor'concerns.' ◦ Rob'Marcus'(Time'Warner'ex> CEO):'$92M ◦ Robert'Nardelli (Home'Depot'ex> CEO):'$223M ◦ Steven'Temares (Bed'Bath'&' Beyond)'$19M The'world’s'eight'richest'men' • own'the'same'amount'of'wealth' as'the'poorest'half'of'the'world 1 Gini'Coefficient:' • ◦ South'Africa:'62.5'(2013) ◦ South'Sudan:'46.0'(2010) ◦ United'States:'45.0'(2007) ◦ Ghana:'42.3'(2013) Oxfam 1

Scott%Stringer%(NYC%Comptroller) Negotiate'with'boards,'empowering'them'to'increase'recoupment'policy'to'claw' • back'excessive'pays'from'senior'executives'with'egregious'conduct'that'causes' financial'or'reputational'harm. ◦ Asked''Wells'Fargo'board'to'reduce'substantial'incentive'compensation'from'senior' executives,'due'to'the'unauthorized'opening'of'bank'accounts.'The'bank'clawed'back' $60M'in'total'the'from'CEO'and'Senior'VP. Ensuring'that'executive'compensation'for'CEOs'is'indicative'of'their'success'and' • overall'performance'in'the'corporation ◦ NYC'Funds'spearheading'“vote'no”'initiatives'against'“say'on'pay”'board'votes'that'would' determine'the'possibility'and'extent'of'executive'compensation

J.'Scott'Armstrong'(Wharton' Robert'Reich'(University'of'California at' School)'and'Philippe'Jacquart Berkeley'): “Today’s'CEOs'don’t'rake'in' (France’s'EMLYON):'“CEOs'aren’t' 300'times'the'pay'of'average'workers' worth'what'they'receive'and' because'they’re'worth'it.'They'get'these' conclude'that'large'compensation' humongous'pay'packages'because'they' packages'can'reduce'performance' appoint'the'compensation'committees'on' and'cloud'their'judgment” their'boards'that'decide'executive'pay.”

Fiscal:'Corporate'directors' • should'release'basic' statements'of'their' organization’s'revenue'for'the' year Political'spending:'Boards' • should'supervise'any' company'income'that'is' diverted'towards'any'political' causes' Human'rights:'Being'aware'of' • corporations’'relationships' with'other'companies'that' abuse'workers

The'UN'devised'a'plan'to'promote'Responsible'Investing • They'wrote 1 ,'in'order'for'success,'it'is'necessary'that: • ◦ “There'is'pressure'from'competitors'seeking'to'differentiate'themselves'by'offering' responsible'investment'services'as'a'competitive'advantage; ◦ Beneficiaries'are'becoming'ever>more'active'and'demanding'transparency'about'where' and'how'their'money'is'being'invested. ◦ We'eliminate'value>destroying'reputational'risk'from'issues'such'as'climate'change,' pollution,'working'conditions,'employee'diversity,'corruption'and'aggressive'tax'strategies' in'a'world'of'globalised and'social'media.“' “We'vote'proxies'of'our'portfolio'holdings'according'to'rigorous'standards'of'good' • governance.'However,'our'engagement'with'companies'goes'beyond'passively' casting'votes'on'corporate'proxies.'When'we'see'underperforming'companies'or' detect'practices'that'may'place'our'investments'at'risk,'we'take'action.'We'engage' our'portfolio'companies'– through'dialogue,'shareholder'proposals,'and'occasional' legal'action'– to'advocate'practices'that'will'protect'and'promote'shareholder' value.”'' United)Nations 1