Long before the corporate abuses of Enron, the Central Pension Fund had been an active participant in the move to require greater corporate responsibility. That activism continued throughout the just completed round of annual corporate shareholder meetings.

The vast majority of corporations conduct their annual meetings in the Spring of each year. It is at these meetings that shareholders have the opportunity to offer resolutions for changes in corporate governance practices. The resolutions are then submitted to a vote of all of the shareholders. While, generally, the votes on these resolutions are not binding on corporate management, they are viewed as strong signals that management may disregard --- but at its own peril.

Only a dozen years ago very few resolutions were ever advanced by shareholders. Most shareholders, including institutional shareholders like pension plans, paid little attention to whether the governance practices of the corporations whose stock they held had any impact on the stock's value.

Since then, however, there have been a variety of academic studies that have established a direct correlation between good corporate governance and enhanced shareholder value. Many of the largest pension funds in the country, including the Central Pension Fund, joined together in an organization known as the Council of Institutional Investors, to form a unified voice on issues of corporate governance and shareholder value. And slowly Wall Street began to take notice. Grudgingly, investment managers began to acknowledge that good governance could enhance the value of the portfolios they managed for pension plans and, thereby, enhance retirement security for plan participants.

But until Enron the real downside of bad corporate governance was largely hypothetical. It was only in the collapse of Enron that the public could see clearly that poor governance practices, unchecked by shareholder activism, could directly cause financial ruin for tens of thousands of employees, shareholders and pensioners.

Enron's collapse was directly tied to the fact that its Board of Directors was largely populated by either cronies of the Company's management, those with direct financial interests in going along with management, or those who were just along for the ride. There was not a majority of truly independent directors watching out for the shareholders' interests. Likewise, the audit committee of the Board of Directors acted as a rubber stamp for the reckless accounting practices of the corporation. And corporate management was rewarded for cooking the books through outrageous bonuses and stock options that escalated in value whenever the stock price was boosted by the phony accounting practices. Neither the bonuses nor stock options were subject to shareholder approval.

All of the governance practices that contributed to the ruin of Enron have long been the subject of shareholder resolutions put forward by the Central Pension Fund and other institutional investors throughout the country. Indeed, in Spring 2002 the Central Pension Fund once again sponsored shareholder resolutions to improve governance at a variety of major corporations including Apple Computer, Inc., Starbucks Corporation, Loews Corporation and Calpine Corporation.

In the wake of the Enron calamity, and with continued pressure from institutional investors like the Central Pension Fund, there is reason to hope that corporate America will finally understand that our system of corporate laws that shelter and encourage the conduct of their businesses are intended to benefit shareholders first and enrich management second --- not the other way around.