July 15, 2021

By Luke Bierman

As the United States slowly but steadily returns from the depths of the pandemic, many practices that became usual over the last year remain uncertain in the continuation. Will we continue to work from home? Will we continue to meet online? Will we continue to dress casually or, in some notorious cases, at all? Will we live, work and play in cities, in high rises, in proximity? Will the incidence of retirement skyrocket? Will birth rates remain low? Will we invest in online technologies and divest from REITS with shopping malls? What will the future hold for the many aspects of administering and investing a pension fund?

Certainly these and many other questions will take time to sort out, with their answers offering significant fodder for discussion around trustee and senior staff tables, if not Zoom screens. The fiduciary responsibility that guides these kinds of considerations, however, remains the same. Focusing on the exclusive obligation to serve beneficiaries’ interests is the standard that guides trustees and senior staff, whether within or outside a pandemic. While the calculus may adjust due to changing circumstances tied to the impact of a global pandemic, the process for considering any social, political, cultural, and economic evolutions is unchanged. Fiduciary destiny requires being well informed on those circumstances and fully focused on the fund’s beneficiaries. When in doubt, go back to basics.

Despite these many adjustments and their possible accommodations due to the shared global experiences over the past year and a half, there are many considerations that seem very familiar: everything old may just be new again. For example, recent reporting indicates that the U.S. Department of Labor is again reconsidering whether changes to the standards for environmental, social, and governance (“ESG”) investing are warranted. We all are well aware of the long history of yo-yoing regulatory adjustments the attention to ESG has inspired. Here we go again.

Likewise, disparities in opportunity in investing, corner offices and board rooms are receiving renewed and enhanced attention after a year of clear and often tragic evidence of racism, sexism and other bias in many aspects of American life. The 9th Circuit recently permitted a lawsuit challenging California’s statutory requirement for greater gender representation on boards of local corporations to go forward, which will likely impact the viability of a lawsuit challenging a similar California statute mandating racial and ethnic representation. Here we go again.

And issues related to climate change remain prominent. For example, Exxon must accommodate new board directors who would not be characterized as fossil fuel apologists and were elected with help from pension funds that increasingly are finding their voices on these important issues. Here we go again.

As the world returns to some semblance of the familiar, pension fund trustees and senior staff must likewise find their ways through both knowns and unknowns. There will be plenty of each to navigate but the guiding principles of fiduciary responsibility remain the same regardless of the issue, old or new, familiar or novel. Back to basics with pinpoint focus on the exclusive benefit rule is a safe approach with the virtue of providing helpful guidance. Everything old is indeed new again—including the fiduciary responsibilities shared by the trustees and senior staff of America’s public pension funds.