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Employees’ Retirement System of Rhode Island (ERSRI)

Type:

State Pension Fund for Public Employees in Rhode Island
Rhode Island Treasurer:

Seth Magaziner

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The Employees’ Retirement System of Rhode Island, also known as ERSRI, is the $8 billion retirement system that covers Rhode Island state employees, teachers, and municipal employees that include police, fire, corrections officers, public health nurses, state police and judges. 1

The Employees’ Retirement System of Rhode Island pays out more in benefits than it receives each year. 2

Rhode Island State Treasurer Seth Magaziner (D) runs the pension fund as chairman of the State Investment Commission. The pension also has a 15-member board that meets quarterly to vote on disability pensions, vote on target investment rate of return and other assumptions, certify employer contribution rates. 3

Investments

In September 2016, the State Investment commission voted to adopt an asset allocation policy to improve performance of portfolios and reduce risks, calling it a “Back to Basics” approach. 4

The pension fund returned 0.80 percent at the end of the third quarter of 2019, which was above the benchmark of 0.79 for the month of similar funds. The annual return for the previous three years has been 8 percent, above the benchmark of 7.8 percent. Also, the state says the five-year annual return of 6 percent has outperformed the 5.8 percent national benchmark. 5

About 40 percent of the pension fund is invested in what’s known as defensive assets, such as low-risk bonds and cash to provide a buffer from a potentially shaky stock market. 6

Manipulating Corporate Board Membership

In October 2019, Rhode Island State Treasurer Seth Magaziner (D) along with other institutional investors from other states announced the Northeast Investors’ Diversity Initiative. The initiative aims to increase corporate board diversity based on gender, race, and ethnicity for corporations based in the northeast. The investor coalition plans to use their muscle of more than $238 billion in assets to force the appointment of new board members. 7

In 2016, the pension fund adopted a policy that it will vote “no” in shareholder meetings for any nominees to corporate boards that would mean fewer than 30 percent of board members are women or racial minorities. Magaziner said at the time some of the companies the fund would target for diversity were ConocoPhillips, Phillips 66, Hess Corp., EMC Corp. and Hershey Co. It opposed the election to boards of more than 200 companies that lacked what state officials considered adequate diversity on the board. 8

Shareholder Activism

The Rhode Island pension fund pressured pharmaceutical companies to strengthen board oversight, update compensation metrics, and address the opioid crisis. 9

The Rhode Island pension fund also pushed Archer Daniels Midland to publish a report on the feasibility of adopting company-wide goals for reducing its greenhouse gas emissions and increasing use of environmentalist-approved energy. 10

The Employees’ Retirement System of Rhode Island was the lead plaintiff in a class action lawsuit against Google’s parent company Alphabet, Inc. after the tech company failed to disclose a security breach that compromised the personal information of what the company first said was 500,000 users, but later admitted was more than 52.5 million. The suit alleges the company tried to hide the extent of the exposure. The Rhode Island pension fund owns 37,000 shares in Alphabet valued at about $40 million. 11

The pension fund filed a shareholder proposal with Navient Corp. calling for help to stop student loan problems. It has filed proposals opposing executive compensation at IBM, Aflac, American Express, and other firms. 12

The Rhode Island pension fund secured agreements from energy companies ExxonMobil, ConocoPhillips, and Devon Energy to disclose more information on the use of shareholder money for lobbying. 13

In 2013, the pension fund divested from companies that manufacture or sell firearms in the United States. 14

References

  1. Employees’ Retirement System of Rhode Island. Accessed December 21, 2019. http://www.ersri.org/#gsc.tab=0
  2. State Investment Information Center. Accessed December 21, 2019. http://investments.treasury.ri.gov/
  3. Employees’ Retirement System of Rhode Island. Accessed December 21, 2019. http://www.ersri.org/#gsc.tab=0
  4. State Investment Information Center. Accessed December 21, 2019. http://investments.treasury.ri.gov/
  5. Employees’ Retirement System of Rhode Island. Accessed December 21, 2019. http://www.ersri.org/#gsc.tab=0
  6. Employees’ Retirement System of Rhode Island. Accessed December 21, 2019. http://www.ersri.org/#gsc.tab=0
  7. Employees’ Retirement System of Rhode Island. Accessed December 21, 2019. http://www.ersri.org/#gsc.tab=0
  8. O’Brien, Matt. “Rhode Island Pension Fund to Push for Corporate Diversity.” Seattle Times. April 20, 2016. Accessed December 21, 2019. https://www.seattletimes.com/business/rhode-island-pension-fund-to-push-for-corporate-diversity/
  9. Shareholder Engagement and Proxy Voting. Accessed December 21, 2019. http://investments.treasury.ri.gov/meetings-reports/proxy-voting/
  10. Shareholder Engagement and Proxy Voting. Accessed December 21, 2019. http://investments.treasury.ri.gov/meetings-reports/proxy-voting/
  11. Naylor, Donita. “Accused of Failing to Disclose Security Breach, Google Sued by Rhode Island.” Governing. December 13, 2018. Accessed December 21, 2019. https://www.governing.com/topics/finance/tns-rhode-island-security-breach-google.html
  12. Press Release. “Rhode Island Pension Fund Issues Report on 2018 Actions to Strengthen Corporate Accountability.” Market Watch. September 29, 2018. https://www.marketwatch.com/press-release/united-states-rhode-island-pension-fund-issues-report-on-2018-actions-to-strengthen-corporate-accountability-2018-09-29
  13. Naylor, Donita. “Accused of Failing to Disclose Security Breach, Google Sued by Rhode Island.” Governing. December 13, 2018. Accessed December 21, 2019. https://www.governing.com/topics/finance/tns-rhode-island-security-breach-google.html
  14. Edgar, Randal. “Rhode Island Moves to Have Pension Fund Cut Ties With Companies That Distribute Guns.” The Providence Journal. October 23, 2013. Accessed December 21, 2019. https://www.providencejournal.com/article/20131023/News/310239870
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