ERISA, the 1974 law that governs pension funds, recognizes that the third parties who manage those funds might be tempted to make decisions that were more in their interests than the interests of the people who were depending on them to make good decisions about their investments. And so the law makes it clear that all decisions are to be made “for the exclusive benefit of plan participants.” But it was not until the “Avon letter” of February 23, 1988 that the Labor Department made it clear that the “exclusive benefit” standard applied not just to buy/sell/hold decisions about stock, but about proxy voting as well.

Until the takeover era of the 80’s promoted abuses of shareholders by both corporate raiders and entrenched management, proxy issues had been routine votes to re-elect board members and approve auditors. But once more complex and controversial issues were turning up on proxy cards, and a study by the Investor Responsibility Research Center showed that fund managers were voting with an eye toward getting business from corporate clients and not “for the exclusive benefit” of the plan participants, DOL had to make it clear that all actions with regard to a security were covered by that standard.

That issue was raised again in an Executive Order on Energy Infrastructure issued on April 10, 2019 by President Trump. It calls on the Department of Labor to consider the role that funds governed by ERISA play in this critical element of our economy and national security. The Executive Order states in part:

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