NCPA - National Center for Policy Analysis


January 24, 2008

The Labor Department has a statutory responsibility to conduct investigations and bring federal court actions when labor unions misuse labor union pension funds for shareholder activism, says Eugene Scalia, a lawyer in Washington, D.C., and former general counsel of the U.S. Department of Labor.


  • The department does not hesitate to bring test cases against employers to highlight neglected legal responsibilities -- the AFL-CIO often demands such litigation.
  • Some union shareholder activism is appropriate and even salutary, but there are abuses that call for the department's scrutiny and, potentially, investigation and enforcement.

Moreover, participants in union plans (including company managers promoted from the rank-and-file who retain retirement accounts) can engage in some activism of their own -- they may ask fiduciaries for information on their activities, and may bring their own legal actions if they conclude that plan assets are being wasted.

Finally, corporate managers have an important oversight role, says Scalia:

  • Union plans must be overseen by equal numbers of trustees appointed by the union and by the companies that contribute to the plan.
  • These management trustees have the same fiduciary duty as union trustees to assure that plan funds are used properly.
  • And yet, to hear some union leaders' intentions for "their" benefit plans, you would think that management trustees have abandoned their oversight responsibilities; that would be improper.

In a word, unions are not entitled to use retirement funds to raise costs at the companies where the funds are invested, says Scalia.  And unionized corporations are not required to permit this.  Rather, management trustees and the Labor Department are obligated to prevent it.

Source: Eugene Scalia, "The New Labor Activism," Wall Street Journal, January 23, 2008.

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