Who should cast the pension proxy?

• Position: Special Report: Pension Fund Management - Panel discussion

Who should cast the pension proxy?

The question is beyond nagging. Today, it's a major issue facing corporations. Should companies, as pension plan sponsors, exercise the right to vote their pension proxies or elinquish it to their investment managers? Who is better qualified to take on he voter role, if the company decides it indeed wishes to cast votes on the issues?

A panel of authorities on pension proxy voting--from corporations, the legal realm, and the Council of Institutional Investors--assembled at FEI's Treasurers Conference in February to discuss the controversy surrounding proxy voting and how companies are reacting. David E. Kelby, senior vice president and treasurer at General Mills, Inc., served as panel moderator.

PHILIP R. O'CONNELL Senior Vice President & Corporate Secretary Champion International Corporation

When ERISA was adopted in 1974, private pension fund assets were about $295 billion. These assets are now approaching $2 trillion. Pension fund assets both private and public are about $2.75 trillion now, and they represent a substantial portion of the nation's capital resources, particularly the capital available for long-term investment.

Pension funds are no longer mere pools of moneys, as they were in the early days of ERISA. They've become an economic institution, one that plays a key role in the allocation of capital in our economy. These funds have the potential to affect the economy significantly and therefore have a major impact on the well-being of our nation.

So it seems to me that pension plan sponsors must recognize this responsibility and give pension funds the kind of attention they give other major areas of corporate responsibility.

What does this mean? It means boards of directors adopt a statement of policy for the pension fund that defines its reason for being and the role it should play in the corporation. It also means a company adopts a proxy voting policy that reflects the corporate policies adopted for the pension plan by the board of directors. It doesn't make any sense for the proxy voting program of the pension fund to be at odds with the general principles of the pension fund itself.

So this involves exercising power and control over the proxy voting process by bringing all the proxies in-house to be voted. Or bringing proxies in-house on a selectives basis.

What do I mean by that? One company, for example, uses the so-called 10-day rule of the New York Stock Exchange. It helps determine when brokers can vote street name shares. There's a line drawn between those issues that are considered substantive and nonroutine and those that are considered routine. If they're nonroutine, the broker can't vote the shares for the owners.

This division in voting is an attempt to relieve what some perceive as a significant administrative burden, when each spring you get from the master trustee an...