Innovator Article

Barber Wins Award for Socially Responsible Business Research

The 2006 Moskowitz Prize for Socially Responsible Investing has been awarded to Professor Brad Barber, director of the UC Davis Center for Investor Welfare and Corporate Responsibility, for his study that explores the motivation and impact of institutional activism by reviewing the stocks on CalPERs Focus List from 1992-2005.

The study finds a positive 25 basis point positive benefit from the CalPERS program, which translated into wealth creation of $3.1 billion. Barber’s winning paper, “Monitoring the Monitor: Evaluating CalPERS’ Shareholder Activism,” reviews the theory and empirical evidence underlying the motivation for institutional activism by public pension funds.

In the study, Barber analyzed the gains from CalPERS activism linked to their focus list firms and theorizes that CalPERS has generally pursued reforms at focus list firms that increase shareholder rights. Over the years, there have been numerous studies exploring the impact of CalPERS’ corporate governance program on stock prices. Some have argued that the program has added significant value, while others have found a less powerful effect, and still others have questioned whether there is a ‘CalPERS Effect’ at all.

Based on conservative short-term announcement reactions, Barber shows CalPERS activism has resulted in total wealth creation of $3.1 billion in the short term, and long-term benefits of up to $89.5 billion. But, he argues, institutional activism should be limited to situations where there is strong theoretical and empirical evidence indicating the proposed reforms will increase shareholder value.

Awarded by the Center for Responsible Business at the Haas School of Business, in cooperation with the Social Investment Forum, the Moskowitz Prize promotes the concept, practice, and growth of socially responsible investing.