Organized labor in America has never been closer to extinction. In the 1960s, more than one-third of the American workforce was unionized. Today, that number has dropped to 10 percent, mostly concentrated in state and local government jobs. Loss of unionization has not only led to lower compensation and job security for workers but has weakened unions themselves. One-party control of the American government makes this grim picture even worse. As this book comes to press in 2018, the Republicans control the White House, the Senate, the House of Representatives, thirty-four governorships, thirty-four state senates, and thirty-two state house chambers. With the appointment of Justice Neil Gorsuch, the Supreme Court’s majority is as conservative as ever and seems set to deliver sharp legal blows to unions. The political marginalization of the Democrats, labor’s traditional partner, has left labor exposed to unprecedented levels of political, legal, and economic attack.
In the face of this bleak backdrop, a group of ingenious, committed, and canny labor activists has quietly developed a formidable new source of power for labor: shareholder activism. These activists have taken advantage of the only decisively positive trend affecting labor in recent decades: the massive growth of worker pension funds, which amount to somewhere between $3 and $6 trillion, depending on how one does the math. These pension funds—sometimes called “labor’s capital”—are invested in corporations, hedge funds, and private equity funds. And they are a tremendous source of power for labor.
As this book shows, this pension fund power has been used in several different ways. Some of it has been employed to thwart self-serving and entrenched corporate managers and directors. Some has been used directly against hedge funds and private equity funds that take working-class shareholder money and direct it against workers’ interests. Some has been put to benefit labor directly: to fend off attacks on pensions, push back against job losses, and create jobs—jobs that can strengthen pensions by increasing contributions to them. And some has been used to find common ground with other investors. These investors include anyone with a retirement account, as well as mutual funds, foundations, and socially responsible investors who may share labor’s long-term investment focus and sympathize with its broader social goals. This book tells the story of the activists who have fought for these developments, and the accompanying legal and political challenges they have faced.
What analysis of their activism reveals is that the power of labor’s capital operates along two dimensions: advancing workers’ interests as workers, and advancing workers’ interests as long-term shareholders saving for retirement. These interests are rarely considered together. They are studied in different parts of the academy, covered by different bodies of law, and serviced by different professionals and businesses who often show little awareness or understanding of the other dimension. On the rare occasion when these interests are discussed together, they are portrayed as being in conflict. Although that’s sometimes true, they can also be highly compatible, and mutually reinforcing. Neither interest can be understood properly without reference to the other.
In addition to telling the stories of some of the activists who are looking out for workers’ interests, this book articulates a legal and policy framework for navigating this dual set of concerns. I offer a structure for assessing how workers should balance their interests in their jobs with their interests as pension fund investors in a way that best advances their economic well-being overall. Sometimes, that means directly promoting their interests as workers. Other times, it means directly advancing their interests as shareholders. Sometimes, it means finding common ground with other investors. And sometimes it means going it alone. To help guide workers through this maze, I propose a worker-centric legal and policy vision that provides for taking into account the full range of workers’ real interests when determining how their powerful pension funds make investment decisions.
Finally, I also explore the well-funded and forceful backlash against labor’s capital. In particular, the Koch brothers’ political advocacy group Americans for Prosperity and the Laura and John Arnold Foundation, among others, are funding pension “reform” efforts that are ostensibly aimed at solving an alleged pension crisis, one whose existence is debatable. These pension reform efforts, if fully implemented, will destroy labor’s ability to continue its shareholder activism. Just as unfavorable congressional legislation or an unfavorable Supreme Court decision could undercut unions themselves, these efforts by the Kochs, the Arnolds, and others could undercut labor’s pensions, undermining both worker retirement security and shareholder power. These efforts amount to a form of economic voter suppression—a reduction in the economic voice of working- and middle-class people—paralleling voter suppression efforts in the political sphere. Still, there are reasons to remain optimistic that labor’s capital can withstand these challenges, not least because these funds are primarily concentrated in Democratic states and cities with large public sectors and relatively friendly politicians and laws.
It is ironic that much of what may survive of the labor movement in the twenty-first century is its capital. Labor is clearly going to have to adapt to an even more hostile legal and business environment in the near term. There are many calls for reconstituting labor in newer, more sustainable forms, forms that are better adapted to the twenty-first-century workplace. Recent activist campaigns, like the Fight for $15, a movement for a sustainable minimum wage, are examples of the kinds of street power in which labor must continue to invest. Other policy initiatives, like a universal basic income, should be explored. But these initiatives are not enough. While the future of the American labor movement cannot be built on shareholder activism alone, it cannot be built without it. The reason for that is simple. For far too long, labor and its progressive sympathizers have sought to transform the market from outside the market: from courts, from legislatures, from regulators, from street protests, from strikes. These tools are important. But ultimately, it is not possible to transform the market from the outside. It must be transformed from within.
The activists you will meet here have proven that labor can, through pension-based stock ownership, project power straight into the heart of American capitalism, into its corporate boardrooms, into Wall Street, into banks, hedge funds, and private equity funds, as well as into the halls of Congress and state capitals. Many of the activists who have developed and refined these weapons are still in their thirties and forties and have decades of fight left. They have the skills and the expertise, the networks and the tactics, to continue to fight between elections and between financial crises, when public attention drifts away and business as usual returns. But they will only be able to go on doing so if they have the support of the broader labor movement and of others interested in workers’ welfare.
At a time that is rightfully dispiriting for workers, I hope that readers will take inspiration, as I have, from the passion and skill of these activists, who are formidable strategists and tacticians. To date, their successes have been completely invisible. There are two main reasons for that. One is that the American left—particularly the segment that is focused on worker issues—is viscerally uncomfortable with labor wielding shareholder power, a capitalist weapon. The failure of virtually the entire left-of-center political spectrum to adequately defend these pensions and the power they exert—the failure to even understand how these pensions function—is a profound strategic, tactical, and moral blunder. That failure has left these pensions and their shareholder power deeply vulnerable to counterattacks by the Kochs and others. And it is one reason why, despite all the heroics you will read about in these pages, shareholder activism remains a large stick lying on the ground, waiting to be picked up. In contrast, the American right pounces on these activists anytime they exhibit even a hint of concern for workers, an entirely cynical exercise in which special interests accuse labor’s capital of being a special interest. This combination of progressive neglect and conservative hostility has kept this form of activism in the shadows. But the dire situation faced by workers in this country makes it crucial to bring it into the light.
I hope that this book will enlighten readers about the important work that is being done by labor’s shareholder activists. And I hope that it will convey in the starkest terms what would be lost if this power were eliminated. Regardless of who occupies the White House, the Congress, or, for that matter, the Supreme Court, protecting labor’s pensions and labor’s shareholder power is one fight that isn’t quite over.