The inevitability of getting involved.

• Position: Participation of pension trust companies in management of funds invested in various companies - Who Owns Corporate America

Who Owns Corporate America

"I am pleased to say that 1990 appears to be the year in which corporate governance has come into its own," stated David G. Ball, Assistant Secretary of the Pension and Welfare Benefits Administration, at the annual meeting of the United Shareholders Association in September. But Ball, whose office is responsible for regulating corporate pension funds under the Employee Retirement Income Security Act (ERISA), advised that the PWBA will continue pressing for an improved governance process. Excerpts from his remarks follow.

More active shareholder involvement in corporate governance as a way to create value is, in my view, inevitable. Quite aside from the fact that ERISA requires plan fiduciaries to knowledgeably cast their corporate proxy ballot, it stands to reason that active institutional investors do not invest in corporations that they believe are fully valued against future expectations. Rather, they invest in corporations, that they believe are undervalued against future expectations.

Therefore, as fiduciaries on behalf of their participants and beneficiaries, pension fund managers should examine proxy proposals to determine whether they will add to the value of the corporation over the time frame of the investment or whether they will detract from it, and vote accordingly.

I believe that actions designed to insulate corporate management from the discipline of the marketplace are, as a general matter, unhealthy for the corporation, its workers, and the economy at large. Corporate management that is insulated from the discipline of the marketplace is likely to become inefficient and fail to maximize value for shareholders; nor is it likely to provide stable employment for its workers over the long term.

This is not to say that I advocate an adversary relationship between pension plans and corporate management. I believe that pension plans, which generally are accumulating funds for benefit payments in the future, are in a particularly good position to be long-term, patient investors.

Just as I believe that plans do not necessarily gain by selling shares of stock every time they disagree with management, I believe that, in general, it is preferable for plans that are large shareholders in companies to share their concerns with management and try to work them out before they get involved in tender offers or proxy contests to unseat management.

I think it would be a mistake to focus solely on proxy contests won...