Unleashing the power of labour's pension assets

Book looks at how workers - who own more than half the stock market through their pension funds - are putting their money to work on their own behalf

By: Ish Theilheimer

  OTTAWA: What was a wonkish policy discussion a few years ago could well become a force that reshapes North America's economy - and politics. Union pension funds now own well over one half the value of North American stock markets, and a growing number of trade unionists are attempting to get control over how these funds are invested.
  A new book called Working Capital: The Power of Labor's Pensions lays out successful strategies unions are using to direct their members' investments toward businesses that generate good profits while creating domestic jobs and protecting the environment. The book, published by the Cornell University Press, is co-edited by an international team including Ottawa resident Tessa Hebb.
  Sudbury native and international president of the United Steelworkers of America Leo Gerard was on hand last week for the Canadian launch of the book.
 

Leo Gerard signs a copy of the new book for Ethel Lavalley of the Ontario Federation of Labour.

  "The purpose of the book," he said, "is to build support for the idea that workers' pension funds can't be used against the interests of the workers who pay into those funds."
  He said he got involved because profitable, medium-sized steel mills and industries in the Pittsburgh area were closing down in the 1990s for lack of investment money. Although there's a big push on to "scare the hell out of union pension fund trustees" and other mangers about so-called "feel-good investments," he campaigned hard and used his clout at the union - he was secretary-treasurer at the time - to find private investors, who worked with the union to revive a steel recycling company that had been closed for two years for lack of financing. . The investment in Franklin Steel secured by the union paid off in saved jobs and fiscal dividends.
  Gerard had to overcome a lot of cautions from professionals in order to make the investment happen - and save 300 jobs. "I figured I'm secretary-treasurer, this is about money, they can all kiss my ass," he laughingly told the gathering at the launch.
 

Book co-editor Tessa Hebb is Director of the Capital Strategies Program at Carleton University's Center for the Study of Training Investment and Economic Restructuring and a long-time champion of worker pension fund investment.

  His serious point is that workers and unions need to be much more aggressive in claiming a say over how their money is invested. Professional money managers, he said, make a great deal of money managing workers' pension in ways that directly conflict with workers' interests. Yet investing in mergers, foreign companies and stock flips doesn't necessarily make any more money than thoughtful investing in domestic industry and construction. He pointed out the irony that although stock markets are virtually owned by workers' money, no one thinks of pension funds as the union innovation they were.
  "It's an idea that came from labour. No employer woke up one day and said 'I think workers out to have good pensions.'" Instead, these funds developed because workers, through their unions, fought for them.
  "US pension funds are now worth more than $7 trillion and many people believe it is time for labour to harness its share of this capital and develop strategies that will help, rather than hurt workers," said Gerard. "This book provides the hard research necessary to challenge a pension fund manager's narrow shareholder theory of value."
  The value of Canadian pension funds is probably about a tenth of the US figure - current estimations place that at close to an enormous $700 billion, although some is held in bonds rather than equity.
  Gerard says that by bringing pressure to bear on asset managers of pension funds, unions can have enormous influence on investment decisions, especially in Canada where "twenty firms control seventy percent of all investment."
  Working Capital is the result of research and conferences sponsored by the Steelworker-supported Heartland Labor Capital Network, the Steel Valley Authority, AFL-CIO's Center for Working Capital, and several foundations, including the Ford Foundation and the Rockefeller Foundation, that drew together expertise on a new labour strategy for the pension market.
  "We asked money managers what they were doing with our pension funds and assets," said Gerard. "Why do their decisions have such negative repercussions for the beneficiaries - working people? As it turns out, this question became an increasingly important dividing line in terms of how labour's capital is managed."
  Canadian Labour Congress president Ken Georgetti spoke at the launch about the successes of the labour movement in his home province of British Columbia in developing the investment fund Working Enterprises, which generates 19% annual return on a five-year investment, he said.
  He spoke of the growing shareholder activism movement and the potential for changing how companies do business. "That's our money. We need to take a more active role in determining how it is used," he said.
  "Setting up huge pools of capital and turning your back on them in my view is quite irresponsible." He said experiences in BC show "we can make more money being ethical than we can by being unethical."
  The eight essays in Working Capital address a number of issues including:

• Establishing a worker-owner approach in light of systematic negative consequences of contemporary financial market operations

• An examination of contemporary financial strategies (institutionally responsible investment vehicles - screened funds, shareholder activist strategies such as proxy voting, direct investments through fund operation and management), which use capital markets to secure collateral benefits for workers, communities, other stakeholders, and the environment

• The investigation of novel strategies such as the representation of workers in pension fund governance and making economically targeted investment a mainstream financial practice

• The exploration of strategies through which organized labour might advance its capital agenda, including using Canada's labour-sponsored investment funds as a model for targeting investments in the US

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