100TH GENERAL ASSEMBLY
State of Illinois
2017 and 2018
HB5850

 

Introduced , by Rep. Mary E. Flowers

 

SYNOPSIS AS INTRODUCED:
 
40 ILCS 5/1-110.16

    Amends the General Provisions Article of the Illinois Pension Code. Provides that the Ford Motor Company and its subsidiaries are restricted companies. Requires the Illinois Investment Policy Board to make its best efforts to identify all subsidiaries of the Ford Motor Company and include those companies in the list of restricted companies distributed to each retirement system and the Illinois State Board of Investment.


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FISCAL NOTE ACT MAY APPLY
PENSION IMPACT NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB5850LRB100 21369 MJP 37764 b

1    AN ACT concerning public employee benefits.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Pension Code is amended by changing
5Section 1-110.16 as follows:
 
6    (40 ILCS 5/1-110.16)
7    Sec. 1-110.16. Transactions prohibited by retirement
8systems; companies that boycott Israel, Iran-restricted
9companies, Sudan-restricted companies, and expatriated
10entities, and the Ford Motor Company.
11    (a) As used in this Section:
12        "Boycott Israel" means engaging in actions that are
13    politically motivated and are intended to penalize,
14    inflict economic harm on, or otherwise limit commercial
15    relations with the State of Israel or companies based in
16    the State of Israel or in territories controlled by the
17    State of Israel.
18        "Company" means any sole proprietorship, organization,
19    association, corporation, partnership, joint venture,
20    limited partnership, limited liability partnership,
21    limited liability company, or other entity or business
22    association, including all wholly owned subsidiaries,
23    majority-owned subsidiaries, parent companies, or

 

 

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1    affiliates of those entities or business associations,
2    that exist for the purpose of making profit.
3        "Illinois Investment Policy Board" means the board
4    established under subsection (b) of this Section.
5        "Direct holdings" in a company means all publicly
6    traded securities of that company that are held directly by
7    the retirement system in an actively managed account or
8    fund in which the retirement system owns all shares or
9    interests.
10        "Expatriated entity" has the meaning ascribed to it in
11    Section 1-15.120 of the Illinois Procurement Code.
12        "Ford Motor Company" means the Ford Motor Company and
13    its subsidiaries.
14        "Indirect holdings" in a company means all securities
15    of that company that are held in an account or fund, such
16    as a mutual fund, managed by one or more persons not
17    employed by the retirement system, in which the retirement
18    system owns shares or interests together with other
19    investors not subject to the provisions of this Section or
20    that are held in an index fund.
21        "Iran-restricted company" means a company that meets
22    the qualifications under Section 1-110.15 of this Code.
23        "Private market fund" means any private equity fund,
24    private equity funds of funds, venture capital fund, hedge
25    fund, hedge fund of funds, real estate fund, or other
26    investment vehicle that is not publicly traded.

 

 

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1        "Restricted companies" means companies that boycott
2    Israel, Iran-restricted companies, Sudan-restricted
3    companies, and expatriated entities, and the Ford Motor
4    Company.
5        "Retirement system" means a retirement system
6    established under Article 2, 14, 15, 16, or 18 of this Code
7    or the Illinois State Board of Investment.
8        "Sudan-restricted company" means a company that meets
9    the qualifications under Section 1-110.6 of this Code.
10    (b) There shall be established an Illinois Investment
11Policy Board. The Illinois Investment Policy Board shall
12consist of 7 members. Each board of a pension fund or
13investment board created under Article 15, 16, or 22A of this
14Code shall appoint one member, and the Governor shall appoint 4
15members.
16    (c) Notwithstanding any provision of law to the contrary,
17beginning January 1, 2016, Sections 110.15 and 1-110.6 of this
18Code shall be administered in accordance with this Section.
19    (d) By April 1, 2016, the Illinois Investment Policy Board
20shall make its best efforts to identify all Iran-restricted
21companies, Sudan-restricted companies, and companies that
22boycott Israel and assemble those identified companies into a
23list of restricted companies, to be distributed to each
24retirement system.
25    These efforts shall include the following, as appropriate
26in the Illinois Investment Policy Board's judgment:

 

 

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1        (1) reviewing and relying on publicly available
2    information regarding Iran-restricted companies,
3    Sudan-restricted companies, and companies that boycott
4    Israel, including information provided by nonprofit
5    organizations, research firms, and government entities;
6        (2) contacting asset managers contracted by the
7    retirement systems that invest in Iran-restricted
8    companies, Sudan-restricted companies, and companies that
9    boycott Israel;
10        (3) contacting other institutional investors that have
11    divested from or engaged with Iran-restricted companies,
12    Sudan-restricted companies, and companies that boycott
13    Israel; and
14        (4) retaining an independent research firm to identify
15    Iran-restricted companies, Sudan-restricted companies, and
16    companies that boycott Israel.
17    The Illinois Investment Policy Board shall review the list
18of restricted companies on a quarterly basis based on evolving
19information from, among other sources, those listed in this
20subsection (d) and distribute any updates to the list of
21restricted companies to the retirement systems and the State
22Treasurer.
23    By April 1, 2018, the Illinois Investment Policy Board
24shall make its best efforts to identify all expatriated
25entities and include those companies in the list of restricted
26companies distributed to each retirement system and the State

 

 

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1Treasurer. These efforts shall include the following, as
2appropriate in the Illinois Investment Policy Board's
3judgment:
4        (1) reviewing and relying on publicly available
5    information regarding expatriated entities, including
6    information provided by nonprofit organizations, research
7    firms, and government entities;
8        (2) contacting asset managers contracted by the
9    retirement systems that invest in expatriated entities;
10        (3) contacting other institutional investors that have
11    divested from or engaged with expatriated entities; and
12        (4) retaining an independent research firm to identify
13    expatriated entities.
14    By July 1, 2019, the Illinois Investment Policy Board shall
15make its best efforts to identify all subsidiaries of the Ford
16Motor Company and include those companies in the list of
17restricted companies distributed to each retirement system.
18These efforts shall include the following, as appropriate in
19the Illinois Investment Policy Board's judgment:
20        (1) reviewing and relying on publicly available
21    information;
22        (2) contacting asset managers contracted by the
23    retirement systems that invest in the Ford Motor Company;
24    and
25        (3) contacting other institutional investors that have
26    divested from or engaged with the Ford Motor Company.

 

 

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1    (e) The Illinois Investment Policy Board shall adhere to
2the following procedures for companies on the list of
3restricted companies:
4        (1) For each company newly identified in subsection
5    (d), the Illinois Investment Policy Board shall send a
6    written notice informing the company of its status and that
7    it may become subject to divestment or shareholder activism
8    by the retirement systems.
9        (2) If, following the Illinois Investment Policy
10    Board's engagement pursuant to this subsection (e) with a
11    restricted company, that company ceases activity that
12    designates the company to be an Iran-restricted company, a
13    Sudan-restricted company, a company that boycotts Israel,
14    or an expatriated entity, the company shall be removed from
15    the list of restricted companies and the provisions of this
16    Section shall cease to apply to it unless it resumes such
17    activities.
18    (f) Except as provided in subsection (f-1) of this Section
19the retirement system shall adhere to the following procedures
20for companies on the list of restricted companies:
21        (1) The retirement system shall identify those
22    companies on the list of restricted companies in which the
23    retirement system owns direct holdings and indirect
24    holdings.
25        (2) The retirement system shall instruct its
26    investment advisors to sell, redeem, divest, or withdraw

 

 

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1    all direct holdings of restricted companies from the
2    retirement system's assets under management in an orderly
3    and fiduciarily responsible manner within 12 months after
4    the company's most recent appearance on the list of
5    restricted companies.
6        (3) The retirement system may not acquire securities of
7    restricted companies.
8        (4) The provisions of this subsection (f) do not apply
9    to the retirement system's indirect holdings or private
10    market funds. The Illinois Investment Policy Board shall
11    submit letters to the managers of those investment funds
12    containing restricted companies requesting that they
13    consider removing the companies from the fund or create a
14    similar actively managed fund having indirect holdings
15    devoid of the companies. If the manager creates a similar
16    fund, the retirement system shall replace all applicable
17    investments with investments in the similar fund in an
18    expedited timeframe consistent with prudent investing
19    standards.
20    (f-1) The retirement system shall adhere to the following
21procedures for restricted companies that are expatriated
22entities:
23        (1) To the extent that the retirement system believes
24    that shareholder activism would be more impactful than
25    divestment, the retirement system shall have the authority
26    to engage with a restricted company prior to divesting.

 

 

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1        (2) Subject to any applicable State or Federal laws,
2    methods of shareholder activism utilized by the retirement
3    system may include, but are not limited to, bringing
4    shareholder resolutions and proxy voting on shareholder
5    resolutions.
6        (3) The retirement system shall report on its
7    shareholder activism and the outcome of such efforts to the
8    Illinois Investment Policy Board by April 1 of each year.
9        (4) If the engagement efforts of the retirement system
10    are unsuccessful, then it shall adhere to the procedures
11    under subsection (f) of this Section.
12    (g) Upon request, and by April 1 of each year, each
13retirement system shall provide the Illinois Investment Policy
14Board with information regarding investments sold, redeemed,
15divested, or withdrawn in compliance with this Section.
16    (h) Notwithstanding any provision of this Section to the
17contrary, a retirement system may cease divesting from
18companies pursuant to subsection (f) if clear and convincing
19evidence shows that the value of investments in such companies
20becomes equal to or less than 0.5% of the market value of all
21assets under management by the retirement system. For any
22cessation of divestment authorized by this subsection (h), the
23retirement system shall provide a written notice to the
24Illinois Investment Policy Board in advance of the cessation of
25divestment, setting forth the reasons and justification,
26supported by clear and convincing evidence, for its decision to

 

 

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1cease divestment under subsection (f).
2    (i) The cost associated with the activities of the Illinois
3Investment Policy Board shall be borne by the boards of each
4pension fund or investment board created under Article 15, 16,
5or 22A of this Code.
6    (j) With respect to actions taken in compliance with this
7Section, including all good-faith determinations regarding
8companies as required by this Section, the retirement system
9and Illinois Investment Policy Board are exempt from any
10conflicting statutory or common law obligations, including any
11fiduciary duties under this Article and any obligations with
12respect to choice of asset managers, investment funds, or
13investments for the retirement system's securities portfolios.
14    (k) It is not the intent of the General Assembly in
15enacting this amendatory Act of the 99th General Assembly to
16cause divestiture from any company based in the United States
17of America. The Illinois Investment Policy Board shall consider
18this intent when developing or reviewing the list of restricted
19companies.
20    (l) If any provision of this amendatory Act of the 99th
21General Assembly or its application to any person or
22circumstance is held invalid, the invalidity of that provision
23or application does not affect other provisions or applications
24of this amendatory Act of the 99th General Assembly that can be
25given effect without the invalid provision or application.
26    (m) If any provision of this amendatory Act of the 100th

 

 

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1General Assembly or its application to any person or
2circumstance is held invalid, the invalidity of that provision
3or application does not affect other provisions or applications
4of this amendatory Act of the 100th General Assembly that can
5be given effect without the invalid provision or application.
6    (n) If any provision of this amendatory Act of the 100th
7General Assembly or its application to any person or
8circumstance is held invalid, the invalidity of that provision
9or application does not affect other provisions or applications
10of this amendatory Act of the 100th General Assembly that can
11be given effect without the invalid provision or application.
12(Source: P.A. 99-128, eff. 7-23-15; 100-551, eff. 1-1-18.)