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  • authored by licatsplit
  • published Thu, Oct 24, 2002

Where Has Our Retirement Gone?

As the working people continue to watch their retirement investments dwindle away in the hands of the investment community, they have to stop and think "Who is watching out for my interest?" The answer to this question is usually "Absolutely Nobody!" Once your money is placed into an investors hands, there is usually no accountability pertaining to their investment practices. These investment corporations can be top shareholders of companies such as Enron, WorldCom, and other corporate wrongdoers. As shareholders, these investors take part in the responsibility for governance of these companies. Within these companies, the investors will use their client's share voting power in support of overpaid corporate executives, entrenched boards of directors, and questionable audit committeess. As long as these investors do not have to disclose their stock holding votes, the people who have trusted them with their money cannot monitor the investor's decisions.

Each public corporation holds a shareholder meeting once a year to determine important company governance decisions. These decisions include entitlements of the CEO, who serves on the board of directors, and shareholders' recommended policies. The shareholders vote through a ballot system known as proxies which are provided by the companies. Are these investors taking into consideration what is best for their clients? In the United States, the Employee Retirement Income Security Act ensures the voting rights attached to the company stock must be considered (plan assets) and be managed in such a way as to keep the pension plan beneficiaries interests a priority. Are these investment advisors worried about the worker's future or are they merely concerned about their business ties within these companies and vote in a way to maintain these ties? Yes, I agree with you! We know how the majority of these contemptible buzzards do business!

The many mutual funds who have the responsibility to manage money for investors, including retirement plan participants, should vote in the best interest of their clients. As we've seen in the past, the investors' interest do not reflect the interests of their clients, when it comes to proxy voting.

The Security Exchange Commission has proposed some rule amendments that would require registered management investment companies to file certified shareholder reports with the Commission, and would designate these certified reports as reports that are required under Sections 13(a) and 15(d) of the Securities Exchange Act of 1934. This rule change is designed to provide clients with information concerning the voting policies of their investors for more accountability.

This month the AFL-CIO began an initiative aimed at one of the top investment companies known as Fidelity Investments The AFL-CIO site states "As a top shareholder of companies such as Enron, WorldCom, and other alleged corporate wrongdoers, Fidelity Investments Inc helps shape these companies' corporate governance. It appears that Fidelity used its clients' share voting power to support captive boards of directors, to overpay corporate executives and to vote for conflicted audit committees at these troubled companies. Fidelity must disclose how it votes its equity holdings to allow its clients to monitor whether it supports corporate responsibility." This site offers an active link to fax your views to the Security Exchange Commission.

The AFL-CIO is part of a coalition, including Pax World Funds, and Fund Democracy, in support of the SEC Rule Proposal on Mutual Fund Vote Disclosures.
Pax World Fund has also launched an investor activism web site where participants can send a message to the secretary of the SEC.

According to an article published by PR Newswire "The deadline for public comments on the SEC rule is December 6, 2002. Major mutual fund companies have rallied against the proposal, casting doubt on the rule's chances of becoming a final SEC rule. The rule's survival will likely turn on the depth and intensity of individual investor support. It is imperative that individuals speak out in support of the rule to protect their rights as investors and corporate citizens."

  • posted by remote viewer
  • Fri, Oct 25, 2002 12:58pm

I think that everybody who is concerned about how working people's investments are being handled needs to get after the government regulators, the investment firms and other organizations that are responsible for these investments. If these monies belonged to the wealthy, alarm bells would be going off all over. It's time that working people and their money stopped being treated like doormats.

  • posted by <yankeebythewater>
  • Fri, Oct 25, 2002 2:14pm

The money that working people invested, does now, in fact, provide trips and much more to CEO's and presidents. It is evident that the working class has laced their pockets. The rich would only institute a tax law change, by lining the pockets of politicians, both in the USA and Canada to accomodate them even more. This, brothers and sisters will only change, with a strong vote or a total revolt!

  • posted by licatsplit
  • Sun, Oct 27, 2002 10:15pm

Yet another sign the workers' pensions are facing a rough time ahead. I think we will see more and more companies try to find legal ways of getting around their obligations to workers' retirement funds. More deals which don't take the workers into consideration but only an altruistic view of the company. You can only push the workers for so long and eventually, once cornered, they will come out; and they will be fighting!

In this news article , we see another example of how even the most secure type of pension funds are not as secure as they should be. Kaiser Aluminum Corporation spreads fear into the Steelworkers who now wonder if their pensions are secure. When Kaiser filed for Chapter 11 bankruptcy protection Feb. 12, its pension plan was 90 percent funded. The defined-benefit plan as of this month stands at 73% funded. So, faced with rising pension costs and falling funds in the pension plans, cash-strapped Kaiser faces a problem if it must make up the difference. It's a scenario becoming more common among companies with defined benefit plans as interest rates fall and financial markets hemorrhage.

From the Houston Chronicle we see how Kaiser Aluminum is exploring it's options to reduce or mitigate the pension funding obligations" to help it emerge from Chapter 11 bankruptcy protection. The Houston-based aluminum maker plans to meet with the Pension Benefit Guaranty Corp. to discuss its options with the federal agency that insures pension benefits.

  • posted by licatsplit
  • Tue, Oct 29, 2002 2:45am

Each day we see more and more news showing up concerning the sad state our workers' pensions are in. More and more corporations are considering reducing pensions after they have made a killing off the funds in the markets. Reform is absolutely necessary for the working people but it may be too late for many already reaching the time in their life they were expecting to relax. This is one picked up through Yahoo News!

quote:


US pensions train risks running out of gravy
Sun Oct 27, 3:10 PM ET
By Andrew Hill in New York

Underfunded pension plans are a slow-moving freight train that has been bearing down on corporate America for months.

Many companies still feel able to ignore the risk of a collision because the size and speed of the advancing threat depends on a number of variables, some determined by companies themselves.

But during this month's third-quarter earnings season, many companies will show they have recognised a growing gap between what they have promised to pay pensioners and the value of the assets with which they are supposed to pay them.

Many will take avoiding action by adjusting their assumptions about future returns or pumping cash into schemes. Among those explaining how they will cope with underfunding are carmakers Ford Motor Company and General Motors; Yum Brands, the restaurant company; International Business Machines the computer group; and industrial giants Honeywell and United Technologies.

Underfunding arises mainly at well-established companies that set up pension plans decades ago. Due to quirks in US pension accounting, those companies' earnings have benefited from gains on pension assets for most of the bull market. The rules allow those gains to feed into the bottom line even after markets turn bearish. Standard & Poor's calculated that, in the year to June 30, the blue-chip components of the S&P500 index realised adjusted net pension income of $6.54 a share - equivalent to a quarter of their reported earnings for the period - with telecommunications and industrial companies the main beneficiaries.

But the delayed recovery in markets and the economy has exposed companies with underfunded plans.

First, the 2-1/2 year decline in stock markets has made companies' assumptions for rates of return - they tend to be between 8 per cent and 10 per cent - seem increasingly detached from reality. Since the long-term accounting benefit from pension plans is partly based on this assumed return, critics point out that pension gains hide companies' "real" earnings performance.

Second, declining interest rates have put pressure on companies to reduce the assumed discount rate they apply to pension plan obligations. If the discount rate declines, the present value of the projected pay-out to pensioners increases. Fitch, the rating agency, calculates that a 1 per cent decrease in GM's assumed discount rate would add $7bn to its pension obligation.

IBM, UTC and Xerox, the copier group, are among those saying they are considering reducing return assumptions.

Third, falling markets have put an end to the long pension contributions holiday that companies enjoyed. That is not a problem for companies with plenty of free cash flow. Indeed, some, like UTC and Honeywell, have tried to make a virtue of the fact that they are making voluntary payments into underfunded plans.

But cash flow is under greater pressure in other sectors. Chris Struve, an analyst at Fitch, believes half the big US airlines are probably having to make contributions to their pension plans.

Companies in a tight financial position cannot afford to be blasť about non-cash charges to balance sheets, either, because an erosion of capital may breach debt-to-capital limits on their loans. The problem for shareholders is that accounting rules make it difficult to assess the pensions outlook for their companies.

David Blitzer, S&P's chief investment strategist, believes the confessional mood among companies may speed pension accounting reform.

As it is, many investors may have to wait for companies annual financial statements next year. Mr Struve says: "Even if markets are relatively OK and the discount rate doesn't move, a lot of companies will join the ranks of the underfunded."


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