In just a few days, the Department of Labor will be set to satisfy its obligations under the President’s April Executive Order by “complet[ing] a review of existing Department of Labor guidance on the fiduciary responsibilities for proxy voting to determine whether any such guidance should be rescinded, replaced, or modified to ensure consistency with current law and policies that promote long-term growth and maximize return on ERISA plan assets.” In an op-ed I wrote for Pensions & Investments, I put the EO into context and highlighted some possible paths the DOL could take. As we await any guidance, I would like to highlight this point that I made several months ago:
“…it is possible the DOL could adhere to the executive order by issuing new guidance that raises the perceived costs of proxy voting and other forms of shareholder engagement and/or demands a more rigorous analysis on the part of fiduciaries that such engagement is “clearly connected to” shareholder value. Any new test could not be so onerous as to make divestment preferable to engagement, as that would seem to undermine the executive order’s very purpose.”
We will, of course, conduct a full analysis of new DOL guidance, which we will post to this blog.
George Michael Gerstein advises financial institutions on the fiduciary and prohibited transaction provisions of ERISA. As co-chair of the fiduciary governance group, he assists clients with tracking, and understanding, the numerous fiduciary developments at the federal and state levels, including the rules and regulations of governmental plans. He also advises clients with respect to the fiduciary duty implications of ESG investing.