Robert A.G. Monks, who is synonymous with shareholder rights in this country, believes ERISA doesn't go far enough to ensure fiduciaries do indeed act solely in the interest of workers and shareholders, as they are supposed to.
The potential for conflict of interest exists, he says, because corporate managers, not participants, hire and fire the people entrusted with managing pension fund assets. Consequently, participants get shortchanged because trustees tend to act in concert with managements' directives, he says. Trustees' "relationship with managements is more important."
As assistant Labor Department secretary in the early 1980s, and the first head of the department's Pension and Welfare Benefits Administration, Mr. Monks issued a ruling that catalyzed the fledgling shareholder activism movement by blocking managements from controlling the way investment advisers vote shares of companies in which their pension fund clients invest. Now, as co-owner of LENS Inc., a Washington-based relationship investing fund, Mr. Monks has experienced the divided loyalties of Chase Manhattan officials appointed by company management as trustees of Stone & Webster Inc.'s employee stock ownership plan.
One way of eliminating the problem would be the creation of separate financial institutions to manage pension fund money exclusively.
Under Mr. Monks' plan, banks, investment banking firms and other money management institutions would be told by pension fund executives: "*'You can handle ERISA funds, but you can't handle any other funds,' so participants would have trustees literally devoted exclusively to their best interests," he noted.
Mr. Monks believes that if a handful of the large, influential public pension funds - such as the California Public Employees' Retirement System and the Florida State Board of Administration - begin imposing this exclusivity on money managers, corporate pension funds will follow in making a similar request.
Mr. Monks anticipates few institutions would reject this directive because of the trillions of dollars pension funds control.