Union- and other worker-based pension, health and savings funds, worth some $6 trillion, hold the retirement and health security of millions of working families. How well are these funds being protected from the corporate malfeasance that brought down Enron, WorldCom and Tyco International? The Office of Investment leads the AFL-CIO’s capital stewardship efforts to protect worker capital - workers’ futures.
What Is Capital Stewardship? Workers have fought long and hard to win secure benefits through retirement, health and welfare plans. Workers' capital—the accumulated funds from pension funds and other savings—is a major force in global markets. Some $6 trillion of workers' capital is invested in public-sector, single employer or multiemployer Taft-Hartley pension funds, Taft-Hartley multiemployer health and welfare funds, employee stock ownership plans, 401(k) and other defined-contribution retirement plans, profit sharing and stock plans, as well as individual savings and union reserve funds.
The corporate scandals at Enron and WorldCom alone resulted in the loss of more than $36 billion from worker funds. The market collapse dealt serious blows to the retirement plans of millions of working families and demonstrated the flaws in Wall Street's conventional wisdom. Even before the collapse of Enron, WorldCom and others, the AFL-CIO and its member unions argued that the problems afflicting corporations were deep and systemic, not just the fault of a few "bad apples." These problems demonstrate the need for capital stewardship programs.
Capital stewardship is about worker-owners and worker fund trustees (who are legally bound to promote secure benefits and sustainable long-term returns for fund beneficiaries) making sure worker investments are managed in workers' best financial interests.
Because worker investments are made primarily to secure health and retirement benefits, workers have a long-term interest in how investments are managed. Further, since workers have widely diversified investments and own the whole market, it is particularly important for workers and their benefit funds to actively advance sound corporate governance practices at all companies.
Capital stewardship means investing based on the principle that the long-term, sustainable value of any investment requires mutually beneficial cooperation among all those involved, including workers, managers, investors, customers and members of the community. Capital stewardship means that when investors are choosing among comparable investments, workers and their benefit funds have the right to choose those that support working families and their communities and are aligned with their view of value.
Capital stewardship means that worker-owners and worker fund trustees must play an active role in how their money is invested and managed. Active ownership involves education of trustees, holding accountants and money managers accountable and making sure shares in corporations are voted in accordance with worker-owner principles.
Capital stewardship and active ownership mean also that worker-owners and their fund trustees work for reform in the capital markets, support and initiate such legislative reforms as those contained in the Sarbanes-Oxley Act of 2002 and work for reforms at agencies such as the U.S. Securities and Exchange Commission.
Contact You can reach the AFL-CIO Office of Investment through e-mail at invest@aflcio.org or by phone at 202-637-3900.
