Response to Jewish Policy Center
Reader comment on: Let States Divest From Iran
in response to reader comment: Why divestment is a lousy deal for the retirees who are funding it.
Submitted by Jeffrey L. Glasgow (United States), Sep 1, 2007 20:44
First of all, I would like to see your statistics and sources to demonstrate your assumption and assertion that "patriotic" Americans would rush to divest from Iran. If they were "rushing" to divest, we wouldn't need to pass laws forcing pension systems to divest, would we. Or are you assuming that the millions of Amreicans are unpatriotic in expecting a decent return for their pensions. For an expert view of the effects of divestment, I would call your attention to and article titiled, "Divestment is the Wrong Answer" in the August 6, 2007 article of Pensions and Investments. It is an article from a true expert. (CV at http://people.virginia.edu/~etb6d/bio.htm ) He concludes that: "For every complex problem there is a simple, easy to understand, wrong answer — divesting is a prime example."
It is part of the fiduciary duty to divest of stocks when they lose their value, for whatever reason. To divest on the assumption that "patriotic" Americans are divesting and that stocks will lose their value, without objective verification of loss of value, would be a breach of fiduciary duty. If, in the normal course of stock analysis, the stocks that are being divested are a bad investment, they should be divested. What you posit in your position is that pension funds should lead so as to cause the Iran stocks to lose their value. That is a breach of fiduciary duty.
Even if this may be a small list of stocks, this is the classic "slippery slope" since to divest for any other reason than the objective reasons required by fiduciary duty is a breach of that duty. A de minimus argument does not work here.
You have still not answered, or even addressed, my question as to why each of these bills eliminates the fiduciary duty of fund managers to their beneficiaries. That still remains an admission that divestment is going to be a detriment for the beneficiaries of the trust. If, as you say, divestment will not negatively affect retirees' returns, why is it necessary to immunize and indemnify fund managers from losses from divestment?
You have also failed to respond to the obvious conflict of interest by the people you cite as support for your theory that divestment is a good deal. When I first commented to you, I asked you not to repeat the party line. You have struck out so far.
I'll be awaiting your answer.
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Jewish Policy Center replies:
Again, Jeff, you fail to realize that a small list of less than 50 stocks will not limit your options among more than 4,000 viable equities (and countless other penny stocks, options and other investment vehicles). I guarantee you that if you have an above average pension fund manager, he or she will still get a strong return on investment if he/she cannot invest in a few companies that deal with Iran.
Have you personally counted the number of stocks in your pension fund, based upon that SEC list I provided, that divestment could touch? I'll be willing to bet that only a handful will be effected. After you do that, take a look at all of the other equities out there that have been performing as well or better than the ones that may be divested. I guarantee you that you will not be without choices.
Now, let me turn the tables on you for a moment: Do you want the Islamic Republic of Iran to go nuclear or to continue funding the insurgency in Iran? If you could make small changes in your pension portfolio that would not effect your return on investment, and that would also prevent a terrorist state from furthering its nefarious goals, why would you not make those small changes?
Is there one company you want to invest in that is targeted for divestment? Go buy some on the open market.
Your financial is not a risk because of divestment, Jeff. With that knowledge, let's turn the screws on Iran.
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