The Wall Street Journal published the following letter today:

Shouldn't Owners Control?

In his op-ed "The New Labor Activism" (Jan. 23), it is clear that Eugene Scalia does not like shareholder activists. He calls on the Labor Department to investigate activism by unions and to look specifically into their efforts to "monitor or influence management." He concludes that union efforts to gain greater access for shareholders to the director nomination process would "advance a cherished union goal," but it is not something "retirement funds should bankroll."

Mr. Scalia is wrong to suggest that beneficiaries of retirement plans will not benefit from access. The only meaningful way a director can be removed is when the nominating committee of the board decides not to renominate. Renomination depends not upon promoting the interests of shareholders but upon maintaining good relations with management.

Mr. Scalia picks on union retirement plans, but his analysis applies to all pension and retirement plans. He is essentially taking the position that pension plans should not be actively involved in monitoring management. Pension plans, in other words, should be seen and not heard.

In the end, Mr. Scalia asks entirely the wrong question. Pension plans have fiduciary obligations, under Erisa, on behalf of their plan beneficiaries. It is not hard to understand why this duty would compel pension plans "to monitor and influence" management. What he ought to be asking, if he is truly concerned about fiduciary obligations, is why more pension plans do not follow the path of unions and fight even harder for shareholder access? In other words, there is a role for the Labor Department here, but it is the examination of pension plans that still take a largely passive approach to managerial oversight. How can that be in the best interests of beneficiaries?

J. Robert Brown, Jr.
Professor
Sturm College of Law
University of Denver
Denver