Last year, the New York City Police and Fire Department Pension Funds, which are part of New York City system, sponsored shareholder resolutions at General Electric Co., Halliburton Co. and ConocoPhillips, asking those companies to review their operations in terrorist-linked countries through offshore entities. New York City officials did not respond to requests for interviews.
Elsewhere, the Arizona Legislature is close to approving a bill backed by state Treasurer David Petersen requiring government agencies that run state money — including the $21 billion Arizona State Retirement System, Phoenix — to report annually on their holdings. Officials of the state system have reportedly resisted doing so.
On the other side are public pension fund officials who think the job of deciding which companies are supporting terrorist activities is beyond their ken. Those funds include the $164 billion California Public Employees' Retirement System, Sacramento; the $6 billion Missouri State Employees' Retirement System, Jefferson City; and the $16 billion Iowa Public Employees' Retirement System, Des Moines.
"IPERS and other public pension funds need the assistance of the U.S. government to accurately determine which companies are harming the security interests of the United States and its citizens," Iowa system officials wrote in a statement on the pension fund's website.
Explained MOSERS' rationale for an anti-terrorism investment policy, adopted April 1: "Quite simply, factual information that MOSERS needs to prudently divest from these companies is not available."
Officials at other state pension systems, including those of Connecticut and Colorado, are still weighing the issue.
"I think it's a fertile issue for public funds, particularly ones that are run by elected officials, because no one wants to get caught in headlines showing that funds are unwittingly abetting terrorism," said Stephen Davis, president of Davis Global Advisors, Newton, Mass., a corporate-governance consultant.
A few pension officials are lobbing their own grenades.
Last month, Gary Findlay, MOSERS' executive director and then-chairman of the Council of Institutional Investors, placed an unsigned editorial in a CII newsletter favoring a policy of seeking federal guidance.
The editorial, which branded the "60 Minutes" broadcast as sensationalism, warned that U.S. agencies have developed multi-layered policies and that pension funds could undermine U.S. anti-terrorist initiatives by trying to go it alone.
In fact, the government's position on doing business in different countries varies. "For example, it is legal for U.S. companies to do business in North Korea and Syria" because they further U.S. policy goals, while it is illegal for U.S. companies to do business in four other nations, the editorial said.
Nor is it possible for U.S. investors to get information on companies doing business in U.S.-sanctioned states, it added. Compiling such data could be costly, it warned.
Instead, the editorial said a fund could adopt "a policy that calls upon the State Department to provide guidance, not just on which countries are deemed to support international terrorism, but which companies have connections to terrorism." (The italics are in the original.)
That editorial "outraged" Mr. Thompson and NYCERS trustees, Mr. Thompson wrote in a March 8 letter to Council members.
"We are offended by its malicious implications that our efforts are more about sensationalism than facts, and the ridiculous assertion that our efforts may needlessly hurt U.S. companies and their employees," he wrote.
Mr. Thompson also rejected the editorial's view that trustees should turn to the State Department for guidance. "We believe it is the duty of the fiduciary to obtain and assess such information and make appropriate investment decisions."
In a March 10 response to Mr. Thompson, Mr. Findlay apologized for any perceived disparagement of the New York City funds' actions. But, he added, "The implications of your letter is that trustees and administrators who are not moving in lockstep with the New York City funds may be acting irresponsibly." He cited lack of clear government guidance or information.
Meanwhile, a monitoring service jointly offered by the Investor Responsibility Research Center and the Conflict Securities Advisory Group, both in Washington, may have muddied the waters.