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In the Bangladesh clothing industry we have seen fires and building collapses kill 1500 and injure at least a 1000 more. The working conditions in third work factories across the world are deplorable as giant multinational corporations pursue constant increases in profits in a race to the bottom. We have heard that a garment made in Bangladesh costs about $6.50. We also read here that a living wage, safe work sites and fair labor practices would add 25 cents to that garment.
Over a dozen of these corporations say they are trying hard to monitor working conditions in some way but they are not able to do a better job, or they are not responsible for conduct of private companies in these countries at the end of the day. The result is 14 multinational corporations refusing to pay for a strict nationwide inspection program.
However 123 investors and stakeholders organizations, representing over $1.2 trillion in assets under management, issued a statement calling on industry leaders to implement systemic reforms that will ensure worker safety and welfare, and to adopt zero tolerance policies on global supply chain abuses.
INDIGENOUS Fair Trade + Organic, a Social(k) client, and friend from way back, is offering to make their proprietary Fair Trade Tool available to ANY brand that publically accepts the CHALLENGE that they will produce clothing in a way that is safe, ethical and honors people and planet.
Scott and Matt understand the pressures these corporations are under, but you buy the products, or decide not to buy the products at the end of this chain. With that in mind they ask you, the consumer to join Indigenous, other brands, retailers and a growing number of consumers who are insisting on consciously produced fashion.
Take the PLEDGE: “I will find out where the garment I am about to purchase came from and who made it. I will not wear anything that people are suffering and dying to produce.” It’s that simple. When you take steps to learn about your clothes, and spend in a way that demonstrates your values you are changing the fashion industry.
This story brought to you by a Social(k) plan sponsor.
Here’s an important downloadable paper titled “Why You Should Avoid Using Your Payroll Provider as Your 401(k) Provider” or you can read the entire article from the continue reading link.
In the business world, it is often common that corporations add different product lines or a brand extension as a natural outgrowth of their business. Pepsico added Frito-Lay, Tropicana, Quaker Oats, and YUM Brands (since sold off) to their business lineup since they saw it as a fit with the soda business. Amazon.com, the Internet superstore started out selling books, then added music and video, and then added everything under the sun because they thought that they could handle the fulfillment of all these product lines at a better selection and price than a brick and mortar store. However, there are times when adding different product lines or industries or brand extensions to an existing business isn’t a good idea because it either offers no synergy or because the business making the addition is ill equipped to handle it. Ben-Gay Aspirin, Smith and Wesson mountain bikes, and Lifesavers Soda are some business and brand extensions that might have looked good on paper, but fizzled out. Another idea that looks good on paper to retirement plan sponsors (but not to retirement plan experts) is third party administration of retirement plans being handled by payroll providers Many third party administration (TPA) firms add different lines of business that are connected with retirement plan administration such as offering investment advisory services, insurance, and legal document services. While we can debate whether what is known as producing TPAs are a good idea, there is a natural nexus between these services and the administration of retirement plans. Like Smith and Wesson bikes and guns, there is no connection between payroll services and retirement plan administration. While the two top payroll providers in the country advertise their TPA services as being seamless because it is integrated with their payroll services, the only thing that payroll has to do with 401(k) administration is the fact that the salary deferral contributions are deducted from employees’ paychecks. There is more to 401(k) plan administration than payroll deductions.
The top payroll providers have been successful in the amount of plans that they administer as a TPA and they will gladly tell potential clients that they are a couple of the top TPA firms in the country. As we know in life, just because something is popular doesn’t mean that it’s any good. A little look behind the numbers suggest that while payroll provider TPAs have many clients, they have a high churn rate which means that they gain as many plans as they lose.
Payroll provider TPAs have a lot of 401(k) plans to administer because most plan sponsors don’t understand what a TPA does. Retirement plans must abide by highly technical rules set forth by the Internal Revenue Code and ERISA. They must go through complicated testing for participation and contributions to avoid discrimination in favor of highly compensated employees. In addition they have reporting requirements such as Form 5500 and Form 1099 for plan distributions to participants. They must have up to date plan documents and they must be administered according to its terms. In addition if the retirement plan is a participant directed 401(k) plan, there are deposits made from payroll to the plan’s trust through electronic transfer (or by check) as well as daily trades of mutual funds or exchange traded funds. After the trades are made, assets must be distributed to participant accounts which also must be updated with any gains, losses, dividends, and capital gains. Since retirement plans have so many moving parts, plan sponsors need to find good TPAs who make very few errors in plan administration. Errors in the administration of their retirement plan can lead to penalties on an audit by the Internal Revenue Service or Department of Labor or in extreme circumstances, plan disqualification. This is why plan sponsors should carefully select who their TPA is and not just pick their payroll provider because it’s the easy thing to do.
As discussed before, the deduction of employee salary deferral contributions from payroll is such a tiny part of 401(k) plan administration. While errors in the processing of payroll for 401(k) salary deferral contributions can occur, they are less likely to happen because payroll is computerized and automated. Plan discrimination testing is not automated. While it does require payroll reports that are computerized, it is heavily dependent on data collected from the plan sponsor. After the end of the plan year (for most 401(k) plans, it’s the calendar year), the TPA will send a data request form to the plan sponsor. The data request form will ask for the census of all of the plan sponsor’s employees, their date of hire, their date of birth, hours of service, and date of termination (if they have left employment). In addition, the data request form will also ask the plan sponsor on what its ownership is, whether they are related to any other entities (through ownership or affiliated service) as well as identifying who the officers are. Since plan administration is so dependent on the data request form, the information in that form must be correct in order for the discrimination testing to be correct. Since many of the questions asked on a data request form can be highly technical and above the heads of many plan sponsors, a good TPA will do a lot of hand holding with their clients in order to make sure that the data that they received from them is correct. Payroll providers do no hand holding and expect plan sponsors to fill out a data request form whether they know what is being asked of them or not. The problem is that if the plan sponsor does fill in the data incorrectly, many times the payroll provider TPA will run the test using the faulty data, which leads to faulty testing results. Proficient TPAs will look at the faulty data and contact the plan sponsor to verify the data.
To illustrate the point of the lack of hand holding for payroll provider TPA data requests, I once reviewed a plan that was using one of these payroll providers. One of the most important discrimination tests for a 401(k) plan is the top heavy test. A plan is top-heavy if at the end of the year, the total account value of key employees exceeds 60% of the total account value of all employees in the plan. A key employee is either an officer making over $160,000, or a 5% owner (with no salary requirement), or a 1% owner making over $160,000. So this TPA asked their client to identify their key employees. This plan sponsor had no idea of what a key employee was for qualified plan purposes, they thought it meant an employee that was key to the running of the business. So the plan sponsor selected all of their employees as key employees including those non-owner employees making $30,000. Of course, the plan failed that top heavy test (which was an error) since everyone was selected as a key employee. A good TPA would have spotted the error and asked the plan sponsor to verify who was really a key employee and who was not after reviewing it next to the ownership and corporate information that they provided. When it comes to payroll provider TPA, there is too much garbage data collected that lead to garbage results. A TPA that is more focused on administration would correct garbage data, leading to correct results.
Most TPAs offer plan sponsors a dedicated administrative representative that a plan sponsor can directly talk to, to get information. For payroll provider TPAs, only their larger plans gets a dedicated representative, so they offer the team approach to most of their plans. From experience with clients with payroll provider TPAs, it is very difficult to track someone who actually physically worked on that plan. It is far easier to work with one plan contact than multiple because from experience, the team approach leads to a lot of dropped balls.
The payroll provider TPAs also tend to be unsophisticated for plan design, as well as not being pro-active when a 401(k) plan has testing issues. One major component of setting up a retirement plan is to maximize retirement plan savings for the plan participants. This can be done through a proper choice of among many different plan types and plan designs. Payroll providers tend to only administer straight vanilla 401(k) plans, so they will not likely discuss the merits of new comparability, floor-offset arrangements, or cash balance plans. I have has clients that would fail their discrimination tests for years before being approached by their payroll provider TPA in considering adding a safe harbor contribution to avoid testing.
The payroll provider TPAs also tend to be unsophisticated for plan design, as well as not being pro-active when a 401(k) plan has testing issues. One major component of setting up a retirement plan is to maximize retirement plan savings for the plan participants. This can be done through a proper choice of among many different plan types and plan designs. Payroll providers tend to only administer straight vanilla 401(k) plans, so they will not likely discuss the merits of new comparability, floor-offset arrangements, or cash balance plans. I have has clients that would fail their discrimination tests for years before being approached by their payroll provider TPA in considering adding a safe harbor contribution to avoid testing.
Too many plan sponsors that utilize the payroll provider TPAs tend not to have a financial advisor, which is dangerous for any 401(k) plan that is participant directed. While payroll provider TPAs are more than happy to offer a choice of investment options on their mutual fund menus that they offer to their clients, they are not fiduciaries and so they are not liable for any losses suffered by plan participants nor are they responsible for picking mutual funds that pay a lot of revenue sharing back to themselves. In 2010, in the case of Zhang v. Paychex in Federal Court in Western New York, the court threw out a class action case against Paychex that claimed they breached their fiduciary duty because their agreements with plan sponsors specifically stated that Paychex was not a fiduciary. So while a financial representative from a payroll provider TPA may suggest what mutual funds to select, they are not considered as giving advice, they are not a fiduciary, so they are not legally culpable for their fund lineup suggestions. This leaves the plan sponsor and the other fiduciaries being exposed to liability.
they offer to their clients, they are not fiduciaries and so they are not liable for any losses suffered by plan participants nor are they responsible for picking mutual funds that pay a lot of revenue sharing back to themselves. In 2010, in the case of Zhang v. Paychex in Federal Court in Western New York, the court threw out a class action case against Paychex that claimed they breached their fiduciary duty because their agreements with plan sponsors specifically stated that Paychex was not a fiduciary. So while a financial representative from a payroll provider TPA may suggest what mutual funds to select, they are not considered as giving advice, they are not a fiduciary, so they are not legally culpable for their fund lineup suggestions. This leaves the plan sponsor and the other fiduciaries being exposed to liability.
Copyright, 2011 The Rosenbaum Law Firm P.C. All rights reserved.
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Video: Social(k) Smarts: Keeping Score 
Some people watch baseball and do line scoring. Others keep score with box scores. Line score is similar to single bottom line accounting. Box score is like triple bottom line accounting. How do you keep score of your financial returns? How do you keep score of the way the game was played?
Keeping score using line score, or single line accounting, measures returns only. $100 goes in and $125 comes out. Financial wizards can measure financial returns with great precision. They can even measure the amount of risk taken for the return. But at the end of the game it is a line score. What is harder to measure is how the game was played, how the returns were made. If you want to really understand the dynamics of a specific game you use box scores. This brings much more depth to the story of the game, or the investment.
We know Portfolio 21, a mutual fund, returned 2.99% annually, over the last five years as of Dec 31, 2010. We know The Vice Fund, also a mutual fund, returned 2.43% annually, for the same time frame. Very similar returns as seen from the line scores.
Let’s look at the box scores. What companies do they look at to invest in?
“The Vice Fund invests in companies, both domestic and foreign, engaged in the aerospace and defense industries, owners and operators, gaming facilities as well as manufacturers of gaming equipment, manufactures of tobacco products and producers of alcoholic beverages.” www.usamutuals.com/vicefund
“Portfolio 21 invests in companies designing ecologically superior products, using renewable energy, and developing efficient production methods. Portfolio 21 companies seek to prosper in the 21st Century by recognizing environmental sustainability as a fundamental human challenge and a tremendous business opportunity.” www.portfolio21.com/
The box scores add a deeper understanding of the game. Triple bottom line accounting adds a deeper understanding of the investment.
How are you keeping score of your investments? Are you measuring success by dollars only? Isn’t wealth more than cash in the bank? Returns at any cost, certainly not. We can each use our own values and beliefs to decide what is important to measure, but we should be measuring more than the simple return.
BOSTON, MA–Marketwire – 10/07/09 – The Eventide Gilead Fund NASDAQ:ETGLX – News, a mutual fund practicing values-based and socially responsible investing, was named as a Category King by the Wall Street Journal for the one-year period ending September 30, 2009 for its no-load retail class shares. This is the fifth time in 2009 the Fund has been named Category King by the Wall Street Journal, in recognition of ranking within the top ten funds in its category for fund performance. The Eventide Gilead fund was ranked #2 out of 380 midcap-core funds for the period based upon its investment return. During this period, the Fund generated a return of 15.67% compared with the S&P 500 Index return of 6.91%, an out-performance of 22.58%.
via Eventide Funds | A Values-Based Approach to Investing.
Dutch pension funds are increasingly looking to integrate environmental, social and governance (ESG) factors beyond the developed market equity asset class, according to a new study from the VBDO, the Dutch Association of Investors for Sustainable Development.
The study Benchmark Responsible Investment by Pension Funds in the Netherlands 2010 found that the investors are looking at ESG factors in the corporate and government bond class, real estate and alternatives.
While 39 of the funds reviewed – 65% of the sample – have an exclusion policy for public equity, the VBDO found that 32 have a similar stance for corporate bonds, and six have exclusion criteria for government debt.
As for ESG integration, the VBDO found that 20 funds “demonstrably” integrate ESG into their public equity investment selections. This compares to 11 who integrate, five systematically, in corporate bonds. Two funds, Pensioenfonds SNS REALL, and Rabobank Pensioenfonds, integrate ESG into their government bond portfolios.
via Responsible Investor.
Chamber of Commerce, mostly funded by 19 U.S. corporations, raised and spent $75 million pushing the corporate agenda of reduced regulation – in order to increase shareholder value.
The question becomes where is the line.
We let Big Tobacco lobby their cause until it became apparent they were wrong about cigarettes being healthy. They persisted for decades. When should they have stopped and said “Have we crossed the line from working for shareholder value to behaving immorally if not criminally?”
Today Big Oil tells us climate change has nothing to do with their actions. They have the right to lobby their cause. Regulation will effect profits; or so they would say. (Others point to how new technology has always increased profits.) At what point are they obligated, not obliged, to step back from theline? When the shareholders say enough to the immoral, sometimes illegal, unsustainable, unfettered greed that drives the behavior?
Shareholders need to realize the corporations are not capable of stopping themselves. Push the line for greater profits or move aside for the next guy to create value! Shareholders need to step-up and say
enough.
Recent editorial from Editor of The Nation:
Decades ago the Chamber of Commerce enjoyed a Norman Rockwell-like image in the minds of many Americans: working in the interest of mom-and-pop stores everywhere and sponsoring community events such as Little League baseball and holiday parades.
And while there may still be some local chambers that fit that bill, this election cycle has given a much clearer picture of what the U.S. Chamber of Commerce is all about – except when it comes to lobbying to make their health care more expensive, privatize their social security and outsource their jobs .
The U.S. Chamber stated that its goal has been to spend $75 million on a midterm election that will break fundraising records. Its war chest is devoted almost entirely to defeating Democrats who take on big corporate interests. While Chamber President and chief executive Tom Donohue would have Americans believe that his organization is still working in the interest of small and mid-sized businesses, that’s simply not true. In 2008, a third of its income came from just 19 members – big companies to whom the chamber is beholden . That probably explains why only 249 of 7,000 local chambers are now members, and why more and more are dropping out.
via Katrina vanden Heuvel – Chamber of Commerce backlash.
SocialFunds.com — Founded in 2007 in response to genocide in the Darfur region of Sudan, where hundreds of thousands of people have been killed and another three million displaced, Investors Against Genocide (IAG) seeks to bring pressure on investment firms to end their investment in companies that contribute to genocide or crimes against humanity.
According to IAG, five Asian oil companies—PetroChina, CNPC Hong Kong, Oil and Natural Gas Corporation, Sinopec, and PETRONAS—have provided revenue to the government of Sudan for arms and funding of genocide, rather than economic development for the poor people of Sudan. Large mutual funds that have not yet made a commitment to genocide-free investing include Fidelity, Franklin Templeton, and Vanguard.
In a white paper entitled Genocide-free Investing: New Opportunities for Investors, IAG documents some of the successes it has had in its engagement with financial institutions on the issue. Unlike the three above-named companies, which continue to hold large investments in companies linked to genocide, American Funds and Teachers Insurance and Annuity Association – College Retirement Equities Fund (TIAA-CREF) have sold their holdings in companies with ties to the government of Sudan.
via Investors Against Genocide Expands Focus Beyond Shareowner Engagement to Include Recommendations for Financial Advisors.
Environmentally responsible investing is about more than just avoiding unfriendly companies. Green Century Capital Management (Green Century) is committed to shareholder advocacy as a critical component of environmentally responsible investing, and the promotion of corporate environmental responsibility through active dialogue with companies has been a primary mission of Green Century since our inception in 1991.
What is Shareholder Advocacy? Green Century helps foster a sustainable economy by directly encouraging companies to lessen their environmental impacts. From strategic dialogue with management and top executives, to raising issues with the public and other shareholders through the filing of shareholder resolutions, to responsible proxy voting at the companies in which the Green Century Funds hold shares, Green Century employs numerous strategies to encourage improvements in corporate behavior. We work in coalition with other socially responsible investors, religious leaders and our environmental non-profit partners to actively encourage companies to adopt cleaner and healthier practices and products.
via Shareholder Advocacy – Engaging companies in dialogue.
With the new oil spill cap put in place over the weekend seeming to last long enough for permanent fixes to come on line, the BP oil spill crisis is likely to shift out of disaster response mode and accountants will ramp up the tallying of costs. However, one group of investors that managed to shuck their exposure early on, often before the crisis even hit, will be counting profits instead, gains secured by following the emerging use of ESG investment screens, analysis that considers environmental, social and governance factors.
via BP: the landmine ESG investors avoided – Thomas Van Dyck.
Catharine Reeves is doing her part to save the honeybee.
The 49-year-old lawyer from Bethesda, Md., is a newly minted backyard beekeeper. She tends two hives and thousands of bees, which might produce just a jar or two of honey by mid-summer, if she’s lucky.
Plentiful honey was the motivation. Ms. Reeves says she added bees to her garden after seeing news reports on disappearing colonies. “I’m not a tree hugger or anything,” she says. “We have a vegetable garden, and it all seemed to go together.”
Ms. Reeves is part of a fast-growing trend, a result of consumers increased concern about the environment and where their food comes from. These backyard beekeepers, or apiarists, are swarming in to help fill a void left by more commercial beekeepers, many of whom have exited the industry in recent decades.
via A Backyard Battleground to Save the Honeybee – WSJ.com.
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