Public employee pension funds had corporate America on the run for most of 2002 and 2003. As leading activist investors, the funds were among the most vocal large shareholders demanding that business clean up its act in the post-Enron world.
But this year, it's the pension funds that increasingly find themselves on the defensive. Corporate lobbying groups are pushing aggressively to halt what they consider to be unwarranted meddling by the funds in business affairs.
More worrisome to the pension giants is a legislative movement that threatens their very existence in the long run, by proposing to bar new workers from enrolling in public funds.
The funds, critics say, are unlikely to generate the investment earnings they'll need to cover the benefits promised to public workers. That could leave taxpayers on the hook, big-time.
A number of states have moved to address this risk in recent years by offering workers the option to manage their own pension money rather than participate in a state-run fund.
The debate now moves to California: On Monday, Assemblyman Keith Richman (R-Northridge) is expected to introduce a constitutional amendment that would shut the door on the state's public pension funds beginning in 2007. Starting then, new workers could enroll only in so-called defined-contribution plans, similar to company 401(k) savings programs.
Richman's amendment is hardly a slam-dunk. But the pension-fund community is taking it very seriously: On Friday a number of public employee groups, including state firefighters and sheriffs, held an hourlong conference call with the media to offer what their news release termed "perspective on the California pension debate."
The call capped a week in which Sean Harrigan, president of the $177-billion California Public Employees' Retirement System, was unseated in a mysterious rebuke by the agency that sent him as its representative to the CalPERS board in 1999.
As the leader of the nation's biggest public pension fund, Harrigan had carved out a role for himself as a champion of shareholder rights and one of the loudest critics of what he considered to be anti-investor conduct by corporate managers.
His business critics viewed Harrigan, a union officer, as out of control, and said he epitomized what they saw as a growing abuse of power by many pension officials in their efforts to mold corporate behavior.
