George Michael Gerstein

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.

Potential effect of this week’s shareholder engagement Executive Order

What the new Executive Order on proxy voting may mean for fiduciaries

The White House announced on April 10 that the President had signed an Executive Order on “Promoting Energy Infrastructure and Economic Growth.” Section 5 of the Executive Order imposes two requirements on the Department of Labor (DOL), each of which must be completed within 6 months:

  1. “[C]omplete a review of available data filed with the Department of Labor by retirement plans subject to the Employee Retirement Income Security Act of 1974 (ERISA) in order to identify whether there are discernible trends with respect to such plans’ investments in the energy sector,” and “provide an update to the Assistant to the President for Economic Policy on any discernable trends in energy investments by such plans;” and,
  2. “complete 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of Labor guidance on the fiduciary responsibilities for proxy voting to determine whether any such guidance should be rescinded, replaced, or modified to ensure consistency with current law and policies that promote long-term growth and maximize return on ERISA plan assets.”

Less than one year ago, the DOL released Field Assistance Bulletin 2018-1, in which the DOL clarified its views on how shareholder engagement could be conducted in a manner consistent with ERISA’s fiduciary duties. Proxy voting and other forms of engagement are fiduciary functions under ERISA. The application of ERISA’s fiduciary duties in this context is ultimately a function of materiality and cost, each positively related to the other, so that as the perceived materiality of an issue on investment performance that is the subject of engagement increases, a fiduciary has more rope to incur costs on its meetings with the board, etc. The converse is also true. A possible result of a narrower interpretation by the DOL and/or the courts of what (ESG) risks are material to a company’s performance: less engagement on those risks broadly. A more probable result, however, is that fiduciaries already evaluating ESG risks will continue parsing whatever ad hoc disclosures are volunteered by the companies, and may point to statements made by prominent individuals and institutions on the materiality of these risks.

Crapo wants scrutiny of how ESG is affecting proxy voting

Fund managers embracing engagement

Stradley’s Fiduciary Governance Group Celebrates First Anniversary

Clayton seeks to augment Reg BI’s cost/benefit analysis to forestall legal challenges

George Michael Gerstein interviewed on fiduciary duty evolution

I was interviewed by 401(k) Specialist Magazine on the latest re. DOL Fiduciary Rule, Reg BI and state attempts at imposing uniform fiduciary standards of care.

Retirement legislation advances

George Michael Gerstein’s “Investing According to Environmental, Social, and Governance Mandates” published today by Bloomberg Law

The piece examines the interplay of ERISA’s fiduciary duties and ESG, and is published in the Compensation Planning Journal.

Key retirement legislation introduced in House and Senate