CalSTERS, the California pension fund whose underperformance has saddled the state's taxpayers with higher and higher pension bills, has made news in recent days by announcing it would vote all of its shares against Wal-Mart's current board of directors in the wake of the Mexican bribery scandal. The reason, CalSTRS avows, is that the Wal-Mart board members 'breached their fiduciary responsibility" to shareholders by failing to respond to indications of problems in the Mexican division. This is a strange claim if you look at how Wal-Mart's stock has performed over these last five difficult years, and in recent weeks, and compare that both to the stock market in general, and to CalSTRs own investment performance. Considering all of those things, you'd have to conclude it is CalSTRs that has violated its fiduciary responsibility to the state's taxpayers.
Wal-Mart's share price continues to climb based on its rebounding financials. Though it sunk below $40 a share back in late 2007, as the first signs of the economic collapse emerged, it is now at near $65. Take a look by contrast at the S&P over the last five years, in the chart below.
Then compare Wal-Mart with the way that CalSTRs has performed for the state's taxpayers. Former gubernatorial adviser David Crane, now a Bloomberg columnist, said it best recently, when writing about how CalSTRs' underfunding would mean that any new tax increases would wind up having to bail out the pension fund:
Then compare Wal-Mart with the way that CalSTRs has performed for the state's taxpayers. Former gubernatorial adviser David Crane, now a Bloomberg columnist, said it best recently, when writing about how CalSTRs' underfunding would mean that any new tax increases would wind up having to bail out the pension fund:
Because Calstrs has earned only 60 percent of its forecasted investment return since 1999, it needs school districts to boost contributions by more than $100 billion. Worse, Calstrs waited so long to seek more contributions that its request is now for an extra $4.5 billion a year, almost double the $5 billion a year it already receives in contributions.Public sector pension funds, especially those in New York and California, have long grandstanded on corporate governance issues even as their own lousy performance forced taxpayers to bail them out. Still, you would think that the terrible performance of these funds in the face of their unrealistically optimistic forecasts of investment returns would teach them a little humility, to say nothing of a little more investment savvy. But wanting to throw out the managers at Wal-Mart, whose shares have probably been among the few winners in CalSTRS portfolio in the last few years, shows that these folks will really never learn, as long as they have the taxpayer to pay for their mistakes.
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