Pay to Play

Recently, Risk Metrics revisited an article published earlier this year called Is 'Pay-to-Play' Driving Public Pension Fund Activism in Securities Class Actions? An Empirical Study, written by David H. Webber, the Wagner Fellow in Law & Business at NYU's Law School and Stern School of Business earlier this year.  The article analyzed whether elected officials acting as trustees for pension funds funnel business to law firms that provide campaign contributions to that official.  Despite general sentiment that this is a widespread practice, Webber's article found that a negative correlation existed between the percentage of politicians on a fund's board and the lead-plaintiff appointments obtained by the fund.  The general sentiment continues to hold popular opinion however as evidenced by legislation recently introduced in New York which would create a board of politically appointed trustees to oversee the state's pension fund, supposedly curtailing the ability of firms to engage in "pay to play" practices.