Public Pension Funds as Shareholder Activists: A Comment on Choi and Fisch

Abstract

In an important paper recently appearing in the Vanderbilt Law Review, Professors Stephen Choi and Jill Fisch generate survey evidence from public pension fund respondents that documents the low cost activism practiced by public pension funds.1 The results of their survey show, among other things, that public pension funds do a limited amount of non-litigation oriented activism mostly centered on supporting other types of activist investors. For example, these funds follow advice from their proxy voting advisors in withhold the vote campaigns or similar low cost voting initiatives. Furthermore, larger public funds demonstrate higher levels of non-litigation forms of activism than smaller sized public funds. However, the survey responses show that many public funds act as lead plaintiffs in securities fraud class actions and that the level of participation in litigation-oriented activism does not appear to vary by fund size. These are important and very interesting results that shed light on a number of key issues but also raise a number of important questions about shareholder activism and the SEC's regulatory approach to it. For that reason, it is important to examine critically the survey evidence provided as well as the authors' interpretation of their results.