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in a recent bit of Special Olympics style old-fashioned Internet debate, I had to make this point about how most of the stock market is not controlled by billionaires like Warren Buffet or George Soros, but by institutional investors running pension plans and 401(k)'s. It seems funny to think of it, that the janitors, court clerks and bus drivers of California might be one of the most influential entities in the stock market because their collective retirement savings represent $134 billion in assets, but it's true.
When was the last time you looked at your 401(k) or your IRA? I mean really look? Look at the funds you had elected at some foggy point in time when you were first hired and some bored HR drone passed along a sheet of paper asking where you wanted your money to go? You probably saw some arcane numbers about year-to-date returns and administration fees, probably picked ones with interesting names like Pacific Emerging Growth or Millenium Sector Technology. You probably never realized that Pacific Emerging Growth might be investing in a clothing sweatshop in China, or that Millenium Sector Technology was heavily invested in Enron, and probably rubber stamped that sweet golden parachute that Ken Lay got. You probably never realized that all of this stuff was being done with your money.
We all talk about our rights as taxpayers, and how we might oppose defence spending or welfare because we don't want our tax dollars going to waste. But we don't care about what's being done with our retirement savings, since we get it all back when we hit 65; and we never notice how, in the meantime, a small cadre of equity managers are using those funds to invest in everything from Brazilian deforestation to petty Asian dictatorships. Of course, it's difficult to really know -- the laws forcing funds to disclose their holdings and their voting records in corporate stockholder meetings are weak to non-existent. Mutual funds are simply judged on one factor, their rate of return and annual financial performance through any means necessary.
Yet, slowly but surely, this has started to change. Enron and Worldcom have highlighted the need for stricter corporate governance, and the SEC is considering new rules widening mutual fund disclosure. Under these rules mutual funds would have to inform you of the stocks that they invest in and their voting records. These initiatives are worth paying attention to and supporting. The concept of "socially responsible investing" is also starting to gain currency and there are new mutual funds that follow in this spirit. Corporations may bend because of activist pressure, but the folks that they really listen to are the shareholders, who have the power to hire and fire CEOs and enact real change in a company. Look at your retirement savings and count the dollars. Each of those dollars is a vote that sits in a company's outstanding shares of stock -- votes that sit in passive idleness because a fund manager couldn't be bothered to 'interfere' with a company's performance. It's about time that they did more than that.
oh, and apologies to all students and freelancers who are living without retirement savings and think that this post doesn't apply to them. In an effort to provide a diverse array of content that may appeal to the most number of people, let me just say: 40 Days and 40 Nights is a surprisingly decent movie.
When was the last time you looked at your 401(k) or your IRA? I mean really look? Look at the funds you had elected at some foggy point in time when you were first hired and some bored HR drone passed along a sheet of paper asking where you wanted your money to go? You probably saw some arcane numbers about year-to-date returns and administration fees, probably picked ones with interesting names like Pacific Emerging Growth or Millenium Sector Technology. You probably never realized that Pacific Emerging Growth might be investing in a clothing sweatshop in China, or that Millenium Sector Technology was heavily invested in Enron, and probably rubber stamped that sweet golden parachute that Ken Lay got. You probably never realized that all of this stuff was being done with your money.
We all talk about our rights as taxpayers, and how we might oppose defence spending or welfare because we don't want our tax dollars going to waste. But we don't care about what's being done with our retirement savings, since we get it all back when we hit 65; and we never notice how, in the meantime, a small cadre of equity managers are using those funds to invest in everything from Brazilian deforestation to petty Asian dictatorships. Of course, it's difficult to really know -- the laws forcing funds to disclose their holdings and their voting records in corporate stockholder meetings are weak to non-existent. Mutual funds are simply judged on one factor, their rate of return and annual financial performance through any means necessary.
Yet, slowly but surely, this has started to change. Enron and Worldcom have highlighted the need for stricter corporate governance, and the SEC is considering new rules widening mutual fund disclosure. Under these rules mutual funds would have to inform you of the stocks that they invest in and their voting records. These initiatives are worth paying attention to and supporting. The concept of "socially responsible investing" is also starting to gain currency and there are new mutual funds that follow in this spirit. Corporations may bend because of activist pressure, but the folks that they really listen to are the shareholders, who have the power to hire and fire CEOs and enact real change in a company. Look at your retirement savings and count the dollars. Each of those dollars is a vote that sits in a company's outstanding shares of stock -- votes that sit in passive idleness because a fund manager couldn't be bothered to 'interfere' with a company's performance. It's about time that they did more than that.
oh, and apologies to all students and freelancers who are living without retirement savings and think that this post doesn't apply to them. In an effort to provide a diverse array of content that may appeal to the most number of people, let me just say: 40 Days and 40 Nights is a surprisingly decent movie.
