[9-25-04]

With all the discussion of the PC(USA) action to divest stock holdings in companies doing business supportive of Israel's occupation of Palestinian territory, Gene TeSelle offers some thoughts and questions about pension funds, which have become a part of the debate.

For a report on discussions of divestment at the recent meeting of the General Assembly Council, see Leslie Scanlon's article in The Presbyterian Outlook.

We invite your comments and reflections on this complex issue.
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One of the important questions raised during the controversy over selective disinvestment from Israel has to do with the relation between Mission Responsibility Through Investment (MRTI) and the agencies that administer investments for the PC(USA).

First the Board of Pensions and then the Presbyterian Foundation declared that they must follow the Prudent Man or Prudent Investor rule to make the maximum profit. If divestment from Caterpillar or any other major corporation doing business with Israel were to be at a financial disadvantage, they claim, they could not do it.

The first response that needs to be made is that the Presbyterian Church has engaged in many kinds of divestment -- South Africa, tobacco companies, munitions makers, etc. The list can be found at www.pcusa.org/mrti/divestment.htm.

Then there is the interesting question to what extent the General Assembly can tell the Board of Pensions and the Foundation how to invest money. Conservative Jim Berkley, who was critical of the divestment decision, still reacted with indignation (Berkley Blog, September 8, 2004) that these two agencies could claim independence from the General Assembly. It should not have been a surprise. Both of these agencies are indeed bound by federal and state laws concerning the management of funds. In the past they have often told the General Assembly that they are working under special rules, though they also see it to be their responsibility to follow General Assembly directives as closely as possible.

The basic question is to what extent secular laws about the management of funds can negate the policies of a religious body that wants to make responsible investments. At the extreme, these laws function like NAFTA and WTO, overriding and negating decisions made on grounds of justice and demanding that investment be made solely to maximize gain. Bernard Mandeville's "Fable of the Bees" would be enacted all over again.

It is time for a thorough analysis, not only in the church but in the society, of laws regulating pension funds in order to identify areas needing change. ERISA (the Employee Retirement Income Security Act) has offered much-needed regulation of pension funds. But it is insufficient. We know from the recent news that corporations often use their pension funds to back risky investments; that pension funds can be raided to pay off creditors in the event of bankruptcy; and that pension agreements might not be carried over when a corporation is sold unless there is an explicit "succession agreement."

The federal Pension Benefit Guaranty Corporation bails out failed pension plans. But it is reaching its limit, and if one or two airline companies collapse we could be faced with another crisis like the Savings and Loan scandal of the 1980s.

One solution offered by pension expert Robin Blackburn (The Nation, February 17, 2003) is to require every corporation to issue new stock or bonds each year, equivalent to 10 percent of profits, which would be owned by the relevant pension fund (the union's, the corporation's, or a third party trust fund) to guarantee its solvency.

What can those who are better acquainted with the world of pension funds and socially responsible investing tell us about the current situation -- and about ways it could be improved?