NCPA - National Center for Policy Analysis

LABOR UNIONS MISUSE PENSION FUNDS

January 31, 2005

The retirement pension funds managed by labor unions have become major shareholders in hundreds of U.S. and foreign corporations. But by becoming intimately involved in questions of corporate governance as shareholders of the corporations, they undermine the integrity of union-related pension funds, observes Christopher Reilly of the Capital Research Center.

While this tactic has its limits, it has scored some notable successes:

  • State pension funds representing unionized public employees were among those responsible for removing Michael Eisner as chairman of the Walt Disney Company board of directors.
  • A coalition of public pension funds managed to rally shareholders to oust four directors of Federated Department Stores.
  • In 2002, pension funds and their allied unions stage an aggressive public relations campaign to embarrass Stanley Works, a U.S. tool company, which had planned to reincorporate offshore in Bermuda.
  • The Service Employees International Union (SEIU) directed its allied pension funds for public-sector employees to pressured real estate companies the funds were invested in to allow SEIU to organize a portion of their employees.

A current pending Securities and Exchange Commission (SEC) decision will be critical to the future of union-inspired shareholder activism, writes Reilly. The commission is considering a rule that will allow certain investors, such as pension funds and unions, to nominate corporate directors if enough votes are withheld from slates nominated by corporate executives.

Source: Christopher Reilly, "Labor Unions Seek Relevance on Wall Street," Capital Research Center, January 2005.

 

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