Learning to See Pensions as a Public Good

To discover that you have say in how they invest. We all do.

“ This isn’t about tearing down the existing financial system, but rather evolving it ”

Ian Edwards , A treatment for carcinormalism,

https://bankofnature.substack.com/p/a-treatment-for-carcinormalism

The evolution Ian Edwards is calling for in the above-cited Substack begins with the fiduciary duty of pension trust fiduciaries to exercise the care, skill, prudence and diligence, under the circumstances then prevailing, of the prudent person familiar with such matters, acting in like capacity, of like character, with like aims (see ERISA).

Wait, what? Pensions? Nooooo.....

Politicians, yes. 
Corporations, yes. 
The Capital Markets, yes. 

But Pensions? Aren't they just part of the problem, participants in the Capital Markets, profiting alongside Corporations, complicit in capturing Politicians?

Yes. They are. But no, they do to have to be.

They have an untapped power to negotiate. They do not have to speculate.

Who can and should they be negotiating with?
 What can and should they be negotiating for?

What do you think?        

There is a lot to unpack in the above-stated densely concise rule of law, but we can start with capacity. What powers do pension trustees derive from the character of the trust over which they exercise plenary authority, constrained only by fiduciary duties of: 1. care according to the standard of the prudent person familiar with such matters (see above); and 2. undivided (and indivisible) loyalty to the aims of the trust over which they exercise sole and exclusive control?

A back-to-the-text restatement of the pension promise, and how that promise is provisioned by a social trust as a public good for a private benefit that is also a public good, is in order. But not now.        

Let’s look at the increasingly popular innovation coming out of the Asset Ownership view of the capacity of a pension fiduciary: Private Equity.

Private Equity uses financial engineering for value creation.

Financial engineering is when you use the technologies of spreadsheet math, desktop publishing and digital communication to negotiate the design of an enterprise: it’s core technology (suitability to the times); it’s social contract with popular choice (longevity over time); the protocols for how the business will do business (fairness all the time).

The value created through this exercise of financial engineering is highest possible purely pecuniary profit extraction maximization, through:

1. leverage (borrowing to pay fees and dividends, paid for by cutting/externalizating costs: squeezing suppliers, running roughshod over communities; disregarding future consequences on Nature and Society; oppressing workers; dealing sharply with customers and competitors; and prioritizing their own profits at the expense of the savers whose savings are the original and ultimate source of the money supplied to enterprise by its financier, fiduciary and otherwise), and
2. gain on sale to a buyer in the capital markets (the ultimate exit that shifts the risk onto some else), solely in the financial best interests of Private Equity.

Value creation by Private Equity is also sometimes pejoratively described by its social critics as: slice-and-dice before we pump-and-dump.        

Value creation through financial engineering for extraction maximization by Private Equity is only possible because of pensions. Without access to the vast sums of money aggregated into social trusts for workforce pensions, Private Equity would not be able to muster the money they use to engineer their extractions. (see Peter Drucker, Harvard Business Review 1991).

This indicates that the capacity of a pension fiduciary includes the power of financial engineering through negotiated agreements with enterprise, directly.

Why can't pension fiduciaries exercise that capacity directly, rather than only by delegating it to Private Equity?

Private Equity has a different aim - to maximize their own profits, through extraction - than a pension trust  fiduciary - to assure security and dignity to workers, directly, and to us all, consequently, through interaction.        

This is the transformational innovation in social choosing that we need for being human in society, through economy, using money on a planetary scale in the 21st Century, and beyond: where Private Equity engineers to maximize its own fees and profits through extraction, pension fiduciaries have the duty to engineer for their chartered aims, which are to invest money for income as well as safety to assure income security in a dignified retirement for evergreen populations of current and future retired workers, which they can only do through interaction (see the California Constitution, the common law of Harvard v Amory, and the United States Senate HELP Committee).

When pension fiduciaries do their duty to assure security and dignity to workers, as a private benefit, directly, they also, of necessity, deliver security and dignity to us all, as a public good, consequently.

This is because the sums of money aggregated for the benefit of so many workers, collectively, worldwide, are so large, that it is not possible to deliver security and dignity to so many, at such scale, directly, without also delivering security and dignity to us all, consequently.

Pensions are, de facto, a proxy for the public good.

As a stewards of a social trust for a private benefit that is also a public good, pension fiduciaries have to be accountable to the public’s sense of what makes sense as a prudent person.

Are you a prudent person?

If so, you have a say.

Which do you choose?

The status quo of extraction?

Or, the 21st Century modern innovation of interaction?