The New Labor Activism
According to the Wall Street Journal:
As public companies sift through shareholder proposals in preparation for their annual meetings, a recent Labor Department action could indicate stepped-up scrutiny of one of the most activist investor groups -- labor-union pension funds.
By conventional measures, unions are in sharp decline: They represented 38% of the private sector workforce in 1956, but only 7.5% today. In an odd twist, though, labor unions are in a sense among our most influential business owners as a result of the billions of dollars invested in public companies by union pension funds.
In 2006, union funds accounted for more shareholder proposals than any other group of investors. Unions have been articulate voices in recent debates over executive compensation, "shareholder access" to the company proxy in director elections, and other governance issues. In the words of AFL-CIO Secretary-Treasurer Richard Trumka, unions have learned to "organize our money essentially the way we organize workers."
Critically, however, "union pension funds" do not belong to unions. The funds are managed by trustees -- half appointed by the union and half by the companies that contribute to the fund pursuant to their collective-bargaining agreements. Under the federal employee benefits law (ERISA), which is administered by the Department of Labor, these trustees are to act "solely in the interest of the plan's participants and beneficiaries, and for the exclusive purpose of paying benefits and defraying reasonable administrative expenses," as the Department reiterated in an advisory opinion last month...click to continue.
