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)

Donald'J.'Trump'and'Carl'Icahn,'his'“special' adviser”'for 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&

• versight&of&the&financial&industry&in&a&

way&that&does&not&harm&American& workers.”2 >Donald'Trump

The$New$York$Times1,$MSN2

Deregulation)Can)Lead)to)Problems

• Glass>Steagall1
• 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'Crisis2
• 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'Crisis3
• 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

NPR1,)Time2,)PBS3

Current)State)of)Affairs

• New'Jersey'and'Illinois’'public'retirement'systems'are'the'most'underfunded'in'the'

nation1

• 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

Bloomberg1

• 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

Current)State)of)Affairs

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'

• nes'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'invest1

• 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'workplace2

• 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'Review1,'Harvard'T.H.'Chan'School'of'Public'Health2

• 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'
• wn'the'same'amount'of'wealth'

as'the'poorest'half'of'the'world1

• Gini'Coefficient:'
• South'Africa:'62.5'(2013)
• South'Sudan:'46.0'(2010)
• United'States:'45.0'(2007)
• Ghana:'42.3'(2013)

Oxfam1

• 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'
• verall'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

Scott%Stringer%(NYC%Comptroller)

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

• Fiscal:'Corporate'directors'

should'release'basic' statements'of'their'

• rganization’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'wrote1,'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'

• ur'portfolio'companies'– through'dialogue,'shareholder'proposals,'and'occasional'

legal'action'– to'advocate'practices'that'will'protect'and'promote'shareholder' value.”''

United)Nations1

• The'California'State'Teachers’'Retirement'System'(CalSTRS)'and'the'California'Public'

Employees’'Retirement'System'(CalPERS)'divesting'from'tobacco'companies

• NYC’s'de'Blasio'and'Scott'Stringer'made'an'agreement'to'remove'pension'fund'

money'from'coal'companies'in'an'effort'to'encourage'more'sustainable'energy' production;'the'mayor’s'office'ensured'the'decision'have'little'risk

• California’s'legislature'passed'a'bill'requiring'divestment'of'all'government'pension'

assets'from'the'coal'industry

• Amalgamated'Housing'and'Bank
• Amalgamated'Clothing'Workers'of'America'founded'NYC’s'first'labor'bank,'designed'to'

spread'access'to'affordable'banking

• In'1924,'the'bank'started'to'give'out'unsecured'personal'loans'to'working'families
• In'1927,'the'bank'funded'the'Amalgamated'Housing'Cooperative
• The'Amalgamated'group'practices'active'investing,'in'order'to'empower'the'shareholders

and'their control'over'their investments

“Th There re,is, is,no,

• ,con
• ntra

tradic iction tion, be betwe ween, n,the he,fiduc duciar ary, re respo sponsi nsibi bility ty,of,a, a,pe pensi nsion, n,fund, und, ma manager er,a ,and,t ,the,s e,soci cial, re respo sponsi nsibi bility ty,of,a, a,publ public,of

• ffic

icia ial. l.”1 JFe Felix)Ro Rohatyn

Huffington)Post1

We)Have)the)Power

• In'April'1975,'New'York'City'was'approaching'

bankruptcy'

• Gov.'Carey'created'Municipal'Assistance'Corporation'

(MAC)'and'put'Felix'Rohatyn at'its'head

• MAC''sold'bonds'and'made'recommendations'

concerning'the'city'budget'to'help'NYC'raise'money'

• NYC'Teachers’'Retirement'System'initially'declined'

Rohatyn’s request''buy'more'bonds'from'MAC' because'it'did'not'want'to'put'members’'money'at' more'risk'(fiduciary'responsibility)'

• President'Ford'refused'to'give'the'city'a'bail>out,'so'

NYCTRS'was'the'city’s'last'hope

• Just'before'NYC’s'debts'were'due,'TRSNYC'reversed'

the'decision'and'allowed'the'city'to'borrow'against' $150M'of'member'pensions

• This'effectively'saved'the'city'from'immediate'failure'

because'it'could'pay'of'its'most'pressing'loans'and' proved'to'lenders'that'it'was'no'longer'in'danger'of' collapse

Former'Mayor'of'New'York'City,'Abraham'Beame

We)Have)the) Power

• This'is'our'money!
• We'have'access'to'$3.7'trillion
• We'are'bigger'than'Germany’s'

GDP

• We'support'21'million'public'

employees'and'retirees

• We'have'incredible'strength
• Strong'shareholder'activism
• Collaboration'for'common'

cause

• Combine'goal'of'maximizing'

profit'with'creating'a'better' country