Politically Correct Pensions

August 02, 1994

What is the purpose of a pension fund? Is it to advance a social or political agenda? Or is the purpose to safeguard retirement money for workers?

These questions arise out of a story in The Sun noting that Maryland and Baltimore have invested pension money in companies that sell tobacco products at a time when some officials are trying to ban smoking for health reasons. But the amount of the investments is small -- less than 1 percent of the two governments' overall pension accounts -- and the impact on the tobacco companies of any divestiture would be non-existent.

Joseph Adler, the state's personnel secretary, correctly notes that the obligation of pension trustees is "to make sure the assets of the system are there to pay off current and future retirees." That is the trustees' legal fiduciary responsibility. They aren't supposed to engage in social or political crusades. Their job is to see that workers' retirement money is invested in safe, secure stocks and bonds that will earn a sound return. Sometimes, that may mean investing in companies that manufacture tobacco, among other products.

Attorney General J. Joseph Curran says the state should consider selling these tobacco stocks because such investments are "ill-advised and arguably hypocritical and just plain wrong." Yet it is Mr. Curran's comments that appear ill-advised -- and fraught with election-year pandering.

His suggestion would lead the state down a slippery slope. Once you start imposing nonfiduciary imperatives on pension funds, there's no turning back. What's next for the blacklisters? Companies engaged in lab-testing of animals? Firms that do business in states that fly the Confederate flag?

There is no consensus in state government on the tobacco issue. While the health and regulatory secretaries want to ban smoking in public buildings, the secretary of agriculture is a proponent of fostering the tobacco industry in Southern Maryland. While the governor desires to stamp out smoking, the General Assembly has resisted such blanket efforts. Perhaps the next governor will take a different approach. Should the pension boards do a 180-degree turn after every election?

Some governments, including Baltimore City's, imposed politically correct restrictions in the 1980s on their pension funds to pressure South Africa to end apartheid. That was a unique human-rights issue, one that isn't comparable to other divestment efforts. But it was also controversial.

Officials must remember pension funds are not play toys to be manipulated for political or social purposes. The pensions of public sector employees should not be subjected to greater restrictions than retirement funds in the private sector. This money must be preserved and protected. That is the only purpose for setting up a retirement program.

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