Institutions Asleep at the Wheel

Big Heads

To be sure, Calpers, TIAA-CREF, the State of Wisconsin Investment Board and others may have started out with noble intentions. In the 1980s, these funds began to turn their attention to the corporate boardroom to take action against poison pill antitakeover plans and the practice of "greenmail," where directors paid a premium to corporate raiders to stop them from taking control of the company.

It was through activist lobbying that a 1992 SEC rule barring 10 or more shareholders from communicating was overturned. But the emphasis on short-term financial gains has long been apparent, according to some observers, who say the whole system has been geared towards instant gratification.

Larraine Segil, partner at the Lared Group and professor of executive education at Caltech, said some institutions and fund managers that once advocated good corporate governance have seen their agendas change over time.

"Those kinds of activists become quite important in their own right," she said. "And then it goes over the edge of representing their constituency to personal aggrandizement."