Discussion of

1
Del Guercio-Hawkins (1999) Public Pension Fund
Activism

• Consider proposals submitted by the largest and
  most activist pension funds during 1987-1993
  CREF, CALPERS, CALSTRS, SWIB, NYC.
• Table 1
• Board issues becoming more common in the 1990s.
• Antitakeover issues becoming less common.
• Voting issues remain popular.

2
Del Guercio-Hawkins (1999) Public Pension Fund
Activism

• Table 2
• Total domestic equity portfolio value
• CREF 31.8 billion
• CALPERS 19 billion
• Average dollar holding in target firms
• CREF 67 million
• CALPERS 34 million
• Total dollar holding in target firms
• CREF 2.1 billion
• CALPERS 1.1 billion
• Average ownership in target firms
• CREF 1
• CALPERS 1

3
Del Guercio-Hawkins (1999) Public Pension Fund
Activism

• Table 4 Frequency of announced events in the
  target firm in the four years after the firm is
  targeted.
• Does pension fund activism have a significant
  impact on target company business policies,
  organization, and governance?
• Management and board turnover is significantly
  higher for targeted firms.
• Shareholder lawsuits and public no votes for
  directors are significantly higher for targeted
  firms.
• Asset sales/spin-offs/restructuring/layoffs are
  significantly higher for targeted firms.
• Table 6 Do pension funds choose targets that are
  (even without being targeted) likely to engage in
  above policy/organizational changes? No.

4
Del Guercio-Hawkins (1999) Public Pension Fund
Activism

• Impact of pension fund activism on long-term
  performance
• Pages 326-327 No long-term improvement in
  performance.
• Implication of above
• Pension fund activism has no long-term
  improvement in performance.
• Measurement techniques are not powerful enough to
  pick up small improvements in performance.

5
Measurement techniques are not powerful enough to
pick up small improvements in performance.

• Barber and Lyon (Journal of Financial Economics,
  July 1996)
• Accounting operating performance Return on
  assets (ROA) after controlling for industry
  performance
• Superior ROA performance of 1 Detected 2 times
  out of 10.
• Superior ROA performance of 2 Detected 7 times
  out of 10.
• Superior ROA performance of 3 Detected almost
  every time.

6
Measurement techniques are not powerful enough to
pick up small improvements in performance.

• Kothari and Warner (Journal of Finance, 2001)
• Using state-of-the-art techniques, can we detect
  superior mutual fund performance?
• 100 basis points annual superior performance
  Undetected.
• 500 basis points Detected once every three
  times.
• 1500 basis points Detected (almost) every time.
• Ability to detect superior performance improves
  if one tracks a mutual funds stock trades.