That’s what the Bush Labor Department suggests in a recent bulletin published in the Federal Register this month.

On October 17, 2008, the U.S. Department of Labor issued and Interpretive Bulletin Relating to Exercise of Shareholder Rights for pension funds regulated by ERISA, the federal pension law. The crux of the ruling was that U.S. pension funds subject to ERISA may no longer vote their proxies if they want to avoid the risk of investigation and possible prosecution by the federal government.

In its closing paragraphs, the Department of Labor staff made it very clear:

Plan fiduciaries risk violating the exclusive purpose rule [of ERISA] when they exercise their fiduciary authority in an attempt to further legislative, regulatory or public policy issues through the proxy process. In such cases, the Department would expect fiduciaries to be able to demonstrate in enforcement actions their compliance with the requirements of section 404(a)(1)(A) and (B). The mere fact that plans are shareholders in the corporations in which they invest does not itself provide a rationale for a fiduciary to spend plan assets to pursue, support, or oppose such proxy proposals.

Federal Register, Interpretive Bulletin Relating to Exercise of Shareholder Rights, October 17, 2008

The chilling effect here is obvious. Avoid voting your ballots at public company meetings or face possible liability and prosecution.

For readers unfamiliar with the proxy voting process, a little background is in order.

Proxy Voting is a Right of Ownership

Like citizenship and its attached right, voting, stock ownership extends a right of proxy voting to shareholders. If you have ever held shares in a public company, you have received a pink and white ballot in the mail along with a proxy statement and a pretty annual report. While most shareholders give the papers a quick once over and throw the whole thing away, institutional shareholders, including pension funds, take their voting responsibilities very seriously.

For more than 20 years, pension funds have lead the way among shareholders in using the power of the proxy ballot to hold corporations and the directors and executives accountable. In today’s financial crisis, it is shareholders who will be demanding that corporate executives stand up and be accountable for their crimes, rein in gross overcompensation and vote out directors who allowed corporate misdeeds to occur. This regulation change reverses the Labor Department’s 1994 position that shareholders had a duty to vote their proxies in companies held in their portfolios.

Save Executives, Deny Voting Rights

While it is likely that the Obama administration will immediately reverse this partisan attack on voting rights, it is useful to view this small attack on voting rights in the larger picture: Democracy undermines the Bush agenda of supporting corrupt businesses to the exclusion of ordinary Americans.

The chilling effect from this Interpretative Bulletin will force pension funds to rethink their voting of proxies and will also dampen all but the most courageous fund trustees from challenging management of companies using the shareholder proposal process.

• Demanding the company executives pay back their ill-gotten salaries when a company goes into the toilet – Not allowed.
• Raising the red flag when outside auditors get massive consulting contracts in addition to their auditing work – No can do.
• Force companies to expense their stock options – Sorry, that’s a no no.
• Force executives to be paid for their real performance – Gone.

While common sense suggests that this move by the Department of Labor is a cheap trick in the last days of the Bush Administration to appease the U.S. Chamber of Commerce (a strong proponent for this rule change) and big business, there is a real risk that it will remain in effect if John McCain were to win this election.

The lesson here? Vote now, you may never get the chance to do so again.

World Bank report suggests Israel sets the stage for further conflict

About ten years ago, I had the opportunity to visit Israel and the West Bank. It was a fascinating and sometimes depressing experience, particularly while visiting the West Bank. While I admire what the Israeli people have done in building their country from virtually nothing, I was shocked at the level of social and economic discrimination that they have inflicted in the Palestinians and how it seemed obvious that herein lay the foundation for much of the conflict in the region.

Israel and the West Bank are small in geographic area by American standards. Tel Aviv and Jerusalem are about 30 miles apart. Jerusalem sits on the edge of the West Bank and a short drive by car places you in this vastly different and dangerous world inhabited by Palestinians and Israeli settlers.

What I remember distinctly about the area was the vast distinction between established Israeli settlements that resembled developments in Southern California and the bedraggled Palestinian towns just a few miles away. I was reminded of the segregationist south and the “Separate But Equal” Doctrine that plagued black Americans and set the stage for the continuing discrimination today. The parallels to the Israeli-Palestinian conflict could not have been more obvious.

The World Bank Report

A report issued by the World Bank this Thursday reminds me again of this disparity in treatment that continues to be inflicted upon the Palestinian people and sets the stage for Hamas, whose ideology feeds the despair of the local population. The report asserts that the continuing economic crisis brought about by Israel’s continued stranglehold on the territory is setting the stage for further disaster. “It may not revolve around sub-prime mortgages, but land, or the lack of it, lies at the heart of many of the Palestinians’ problems,” the Bank says.

Since the start of a Palestinian uprising in 2000, when jobs were already scarce and housing was at a premium, the West Bank’s economy shrank rapidly. “The situation has become untenable,” says the report, which tracks economic damage inflicted by decades of restricted access to land, whether for farming, industry or housing.

The West Bank Area C – The Palestinian “No Fly” Zone

Area C, an area comprising nearly 60 percent of the West Bank, is under the control of the Israeli military. Palestinian access to nearly 38 percent of the West Bank is limited by Jewish settlements and Israeli security.

The allocation of land in the 1995 Oslo Accords, which laid the path for a peace accord that was to lead to an eventual Palestinian state, was meant to be transitory, the report says. “However, little territory has been transferred to Palestinian Authority control since the signing … and this process has been completely frozen since 2000,” it added.

But the Palestinian population has continued to grow and its ability to meet its own development needs through economic activity is severely constrained by the land restrictions imposed by the Israeli government.

In the increasingly cramped and fragmented space beyond Area C, land use decisions have become irrational and environmental management unsound.

“Today, only a fraction of the Palestinian population resides in Area C . . . While this may have been acceptable under an interim scenario … after 13 years with minimal Israeli redeployments from Area C, the situation has now become untenable,” it continues.

“This territorial division distorts land markets by creating land shortages,” which creates pressures on housing and business development.

The World Bank forecast that “the investment climate will remain unfavourable and business opportunities much below potential” as long as most of the West Bank remains inaccessible for Palestinian economic investments. Through its segregationist policies, Israel plays into the hands of Hamas and other terrorist organizations laying the continued foundation for conflict into the foreseeable future.