Public pension funds, as some of the world’s largest institutional investors, can command substantial ownership and influence over corporate governance and strategy. This influence can extend to shareholder activism, and can be at odds with other corporate owners. This study analyses the role of the largest public pension systems in corporate activism in North America, Western Europe and Asia. The paper compares formal fund guidelines for socially responsible investing and ownership, along with shareholder actions such as proxy proposals, class action lawsuits and communication with corporate management. In addition, the study considers possible contradictions between public pension activism and the retirement funds’ dependence from the government sponsor. Implications for India’s civil service pension funds are considered.

Government pension systems around the world own assets worth over US$4 tn and cover millions of retirees and public employees.1 Through 2008, public pension plans owned almost a tenth of the European managed market share.2 US state and local government pension funds own between 10-20% of the US equity market.3 As large investors with significant assets, these pension plans have the power to exercise considerable influence over equity markets. As important shareholders, public pension funds both shape and are impacted by corporate governance structures and their ability to use their ownership to monitor corporate management.

While much has been written about government pension systems themselves, including their independence from legislative bodies, protection of promised benefits and internal governance structures, less has been said about their comparative activism across countries and in corporate boardrooms. There are a number of studies that look at individual public pension systems and their relationship to firm performance or corporate social responsibility, but very few that examine these relationships at a global scale. This paper intends to fill this gap by examining the investment strategies and shareholder activities of the largest international public pension funds. In particular, the study will compare public pension plans’ investment goals, their shareholder voting policies, and engagement with corporate executives. Divestment activities, along with “exclusion lists” detaining industries or companies that the funds will not invest in for socially responsible reasons are also detailed.

The results of these comparisons show that public pension fund activism or engagement ranges from explicit missions that broaden investing goals beyond financial returns to subtle shareholder requests that correspond with long-term investment horizons. It is clear from the seven pension funds reviewed here that the institutional environment surrounding the pension scheme, including its coverage base, political dependence and the country’s corporate governance legal environment impact the shareholder engagement policies of the retirement systems. It is also clear that the pension systems are not static, as the number of new “ethical guidelines” or policies crafted over the past five years highlights.

Governance And Public Policy Journal, National Rural Employment Guarantee Scheme, Swarnajayanti Gram Swarojgar Yojana, Government Policy, Microfinance Programme, Social Exclusion, Microfinance System, Commercial Banks, Development Projects, Econometric Analysis, Decision-Making Processes, Infrastructure Development.