New in Stanford Closer Look Series: Union Activism: Do Union Pension Funds Act Solely in the Interest of Beneficiaries?Tuesday, December 11th, 2012
Authors: Professor David F. Larcker, Stanford Graduate School of Business, and Brian Tayan, Researcher, Center for Leadership Development and Research, Stanford GSB.
Published: December 11, 2012
Union pension funds manage approximately $3.5 trillion in retirement assets on behalf of public and private sector employees covered by collective bargaining agreement. They are also very active in the proxy process, sponsoring approximately one-third of the shareholder proposals that are included in corporate proxies each year.
Federal and state laws (including ERISA) require that the trustees and administrative bodies that oversee these funds manage their plans “solely in the interest of participants and beneficiaries.” Furthermore, the U.S. Department of Labor is clear that pension funds are not to use plan assets and their voting rights “to further legislative, regulatory or public policy issues through the proxy process.”
We examine this issue is greater detail, including the types of proposals put forward but union pension funds, the support these proposals receive, and the companies they target. We ask:
- Are union-sponsored proposals made solely in the interest of their pension beneficiaries?
- How can the public or a pension beneficiary assess the motives of funds that sponsor proxy proposals?
- How do union pension funds determine which positions to advocate and which companies to target?
- Are unions violating their ERISA duties by sponsoring these proposals?
Read the attached Closer Look and let us know what you think!