Investor rights United States corporate law

most state corporate laws require shareholders have governance rights against boards of directors, fewer states guarantee governance rights real investors of capital. investment managers control voting rights in economy using other people s money . investment management firms, such vanguard, fidelity, morgan stanley or blackrock, delegated task of trading fund assets 3 main types of institutional investors: pension funds, life insurance companies, , mutual funds. these substitutes save retirement. pensions important kind, can organized through different legal forms. investment managers, subject employee retirement income security act of 1974, delegated task of investment management. on time, investment managers have vote on corporate shares, assisted proxy advice firm such iss or glass lewis. under erisa 1974 §1102(a), plan must merely have named fiduciaries have authority control , manage operation , administration of plan , selected employer or employee organization or both jointly. these fiduciaries or trustees, delegate management professional firm, particularly because under §1105(d), if so, not liable investment manager s breaches of duty. these investment managers buy range of assets (e.g. government bonds, corporate bonds, commodities, real estate or derivatives) particularly corporate stocks have voting rights.

the largest form of retirement fund has become 401(k) defined contribution scheme. individual account employer sets up, named after internal revenue code §401(k), allows employers , employees defer tax on money saved in fund until employee retires. individual invariably loses voice on how shareholder voting rights money buys exercised. investment management firms, regulated investment company act of 1940, investment advisers act of 1940 , erisa 1974, take shareholder voting rights. contrast, larger , collective pension funds, many still defined benefit schemes such calpers or tiaa, organize take voting in house, or instruct investment managers. 2 main types of pension fund labor union organized taft-hartley plans, , state public pension plans. major example of mixture tiaa, established on initiative of andrew carnegie in 1918, requires participants have voting rights plan trustees. under amended national labor relations act of 1935 §302(c)(5)(b) union organized plan has jointly managed representatives of employers , employees. many local pension funds not consolidated , have had critical funding notices department of labor. more funds beneficiary representation ensure corporate voting rights cast according preferences of members. state public pensions larger, , have greater bargaining power use on members behalf. state pension schemes disclose way trustees selected. in 2005, on average more third of trustees elected employees or beneficiaries. example, california government code §20090 requires public employee pension fund, calpers has 13 members on board, 6 elected employees , beneficiaries. however, pension funds of sufficient size have acted replace investment manager voting. no federal law requires voting rights employees in pension funds, despite several proposals. example, joint trusteeship bill of 1989, sponsored peter visclosky in house of representatives, have required single employer pension plans have trustees appointed equally employers , employee representatives. there no legislation stop investment managers voting other people s money, in way securities exchange act of 1934 §78f(b)(10) bans broker-dealers voting on significant issues without instructions.