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Raising Their Voices, Treasurers Gain Critics

The state officials are taking more prominent stances on financial and social issues. But are they going too far afield?

November 28, 2003|Thomas S. Mulligan | Times Staff Writer

NEW YORK — When money talks, Wall Street usually listens. And lately, some of the loudest moneyed voices are those of state treasurers.

Quite apart from their traditional roles of poring over bond prospectuses and chasing down lost-property owners, more treasurers have been taking high-profile, public stances on issues including New York Stock Exchange reforms, the mutual fund scandal and even global warming.

They're wielding the power of substantial purses: Treasurers typically function as their states' chief financial officers and as such have input, if not direct authority, over huge state pension fund investments in stocks and bonds, and the hefty money management fees and brokerage commissions that go with them.

A tough public statement from some state finance officials was widely viewed as the final push that toppled Richard Grasso from his post as NYSE chairman two months ago, amid outrage over his massive pay package.

Last month, California and other states yanked billions of pension dollars from Putnam Investments after the Boston mutual fund giant was accused of letting employees engage in market-timing trades at the expense of fund investors.

But as treasurers seek to spread their influence, some critics have questioned where prudent financial stewardship ends and self-serving politicking begins.

Last week, California Treasurer Phil Angelides, New York State Comptroller Alan Hevesi and counterparts from five other states appeared at the United Nations to demand more comprehensive disclosure of the risks that companies, and their investors, face from climate change.

They said the Securities and Exchange Commission wasn't doing enough to enforce regulations requiring disclosure of factors that could have a "material impact" on companies' financial results and thus the performance of their stocks. Global warming is one such factor, the group said.

The U.N. meeting came in the midst of a busy few days in New York for treasurers, with Angelides and others lobbing more criticism at the NYSE, and a delegation from the National Assn. of State Treasurers touring the Nasdaq Stock Market and ringing the opening bell at the Big Board.

"There's a saying that if you speak once in a meeting everyone listens to you, but if you speak three or four times people start to tune you out," said corporate governance expert Charles M. Elson.

"The treasurers have made a good difference so far, but the further afield they wander, the more they risk diluting their message," added Elson, director of the University of Delaware's John L. Weinberg Center for Corporate Governance.

Nevada State Treasurer Brian K. Krolicki, who as head of the treasurers association rang the NYSE bell, said in an interview this week that treasurers don't often find themselves in a position where the public is interested in their opinions.

When it happens, he said, it makes sense to take advantage of the "bully pulpit," especially where the integrity of the markets is concerned.

"It's appropriate and wholesome that we've gotten the attention of the Securities and Exchange Commission and the NYSE," he said.

Krolicki acknowledged, however, that he sometimes differs with fellow treasurers over which issues are most appropriate for public comment. He offered no opinion on global warming, and the treasurers' association didn't formally join the U.N. meeting.

Activism on the part of state finance officials is hardly a new phenomenon. Some observers date the trend to the 1980s when then-California Treasurer Jesse M. Unruh on the West Coast and New York State Comptroller Ned Regan on the East Coast pushed for reforms that would give shareholders a greater voice in corporate affairs.

Regan, in an interview this week, recalled a phone call in which Unruh told him: "If we put CalPERS [the California Public Employees' Retirement System] and the New York state pension funds together, we'd really have some clout."

The big issue at the time was "greenmail" and the tendency of company managers to pay off corporate raiders -- with shareholders' money -- to save their jobs.

Soon, however, state finance officials moved on to other hot-button issues, such as whether to fight apartheid by divesting the shares of firms doing business with South Africa. Divestiture has since become a popular means of putting pressure on, for example, tobacco firms or companies perceived to have ethical problems.

In most states, the treasurer is one of a handful of statewide elected officials. The narrow scope of the job hasn't kept officeholders from trying to use it as a political springboard -- unsuccessfully, in the cases of two recent California treasurers. Democrat Kathleen Brown lost her 1994 bid for governor, and Republican Matt Fong failed in his 1998 attempt to unseat U.S. Sen. Barbara Boxer. Hevesi was defeated in his 2001 race for mayor of New York.

Angelides, a Democrat, is widely assumed to be interested in running for governor of California in 2006.

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