Many of the nation’s largest public pension funds — managing
trillions of dollars on behalf of police and fire departments, teachers and
others — have major stakes in American companies that are seeking to renounce
their corporate citizenship in order to lower their tax bill.
While politicians have criticized these types of deals —
President Obama has called them “wrong” and he is examining ways to end the
practice — public pension funds don’t appear to be using their influence as
major shareholders to encourage corporations to stay put.
In the past six months, some of the nation’s largest
companies have announced plans to move abroad. The California Public
Employees’ Retirement System, the nation’s largest public pension fund and
typically one of the most vocal, has remained silent.
Public pension funds may be so meek on the issue of
inversions because they are conflicted. On one side, the funds say they care
about the long term and the implications for their state. Calpers’s “Investment
Beliefs” policy states that the pension system should “consider the impact of
its actions on future generations of members and taxpayers,” yet most pension
funds are underfunded and desperate to show investment returns. Mergers for tax
inversion can prop up share prices of the acquirers and clearly help pension
funds, at least in the short term, show improved performance. Some pension
managers say that their job is strictly about generating cash for pensioners
and that they shouldn’t take other issues into consideration.
Last month, Shirley K. Turner, a Democratic New Jersey state
senator, introduced a novel piece of legislation in an effort to make inversion
deals less attractive. She proposed that the state’s pension board be forbidden
to invest in companies that are involved in inversion deals.
It is unclear how such legislation would work. For example,
would the state immediately be forced to sell its holdings in a company
involved an inversion? Not all officials who oversee pension funds are focused
only on the immediate bottom line.
Walgreen Company, which had been considering a tax inversion
transaction with Alliance Boots of Britain, voted against changing its
corporate citizenship because the American pharmacy chain’s board and
management worried about an outcry from customers and were concerned that
pressure from customers could spill over to the government.
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