Socially Irresponsible Investing

by: MBoz

Thu Jul 03, 2008 at 17:11

Crossposted at Boztopia.

We're all familiar with the black-hole collapse of Enron, where millions of employees who were forced to vest their retirement savings in Enron stock lost their shirts and more when the company imploded.  Since then, there's been a much more comprehensive focus on ensuring that pension fund investors make sure that whatever holdings they put employee savings into will at least maintain enough stability to, y'know, actually be there when the investor hits the golden retirement age.

Given that, why would Pennsylvania's school employees retirement system (aka PSERS) make the move of investing a whopping $350 million into the terribly underperforming Lazard-affiliated fund, the biggest asset of which is the "troubled" Atria assisted living chain?:  

MBoz :: Socially Irresponsible Investing
That Lazard fund's largest asset is Atria Senior Living, a national assisted living provider which operates more than 130 facilities in 26 states, including 4 in Pennsylvania. Elderly residents and workers have cited wide-ranging concerns at Lazard's Atria, such as poor patient care, poverty wages for employees and skyrocketing rent increases. Legislators in multiple states have called on Atria to stop gouging residents and respect its employees. Instead, Lazard's Atria has retaliated against low-wage, predominantly minority workers struggling to form a union to improve their pay and the quality of resident care.

PSERS is not the only retirement board with holdings in the sagging Lazard fund--others include New York's state employees, Colorado's Public Employees Retirement Association (PERA), and Virginia's public employee retirement fund. This is truly twisted--these retirement funds are one of the few examples of guaranteed pensions left in this country, as so much of our retirement investing has been left to sway with the whims of the market.  Yet these retirement boards have sunk the hard-earned employee savings of their investors in a fund that not only has belly-flopped for its shareholders, but has rewarded the CEO with insanely exorbitant bonuses at a time when families of Atria residents are telling stories like that of Susan Burns:

"My father lived in the Lily Garden (Alzheimer's/dementia unit) at Atria's Vista del Rio facility in Albuquerque, New Mexico for three years. The turnover in staff at every level has been extreme and there seems to be no time to train people before they are gone and no one to manage the caregivers who stay. We have asked repeatedly that the Lily Garden be staffed adequately or closed. Atria promised my family a level of care and services that they didn't provide. For this treatment he paid $5,095.93 a month which is not a very good value for the dollar. My dad is no longer at Atria Vista del Rio. I worry [that other] family members may be trusting Atria to deliver services that were paid for and promised. My experience is that trust is badly placed. In my view a tragedy is waiting to happen."

It boggles the mind on many levels. Why would any sane investment manager put their funds in something with such a low performance return? How sick is it to think that these state employees may potentially lose their earnings, but that they do so in service to a fund whose largest asset's job seems to be making retirees suffer and endure losses of dignity?

Pension fund investors have a responsibility to their charges to ensure that the investments they make are smart returns both socially and fiscally.  By trusting so much money to the Lazard-affiliated investment fund that is running Atria like a work camp, these states are doing their employees a terrible disservice--one which will sting all the more when many of them retire into assisted care facilities with crappy conditions and low-paid, overburdened workers.  Our elders--particularly those who've given their careers and lives to public service--deserve better.

This post was sponsored in part by The Campaign To Improve Assisted Living. Read my previous post about Atria's problems and Lazard here.

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