LABOR'S LOST LEVER

...But in more fragmented industries, where workers tended to move around among employers, industry-wide funds were established with unions and management sharing control...

...What ACTWU and the Carpenters did was so straightforward and effective that one would expect to find it happening all the time...

...The Reeves and Aetna episodes demonstrate how unions can use pension power—stock ownership by worker pension funds—as a lever against recalcitrant employers...

...The effort was impeded by the Taft-Hartley Act of 1947, which among its other anti-labor provisions barred unions from more than 50 per cent control of funds while allowing single-employer plans to be run exclusively by management...

...He enlisted the aid of James Lewis, a trustee of the fund and president of a United Auto Workers local representing Bell Helicopter employees...

...appeals court both ruled against the Labor Department in the Operating Engineers suit...

...It wasn't supposed to turn out this way...

...In the 1950s, unions made occasional use of their partial control over pension investments...

...In May 1981, the Labor Department filed charges against the trustees of a plan linked to an Operating Engineers local in Florida...

...In the late 1970s, when American business began its open assault on unions, labor strategists began looking to "pension muscle" as the new device for shifting the balance of power in industrial relations...

...The plan also provided low-cost home mortgages for plan participants...

...The Employee Retirement Income Security Act was welcomed by organized labor because it gave additional protections to retirement benefits of workers and created a Federal insurance program for the funds...

...These plans now account for about $ 130 billion in assets...

...We can meet social objectives and get a good rate of return," argues Barber, now a consultant to unions on pensions and other matters...

...The Teamsters used holdings in the stock of Montgomery Ward in 1954 to help management fight a takeover bid by Louis Wolfson...

...usually such resolutions are lucky to capture 1 per cent or 2 per cent of the vote...

...If the options are economically equivalent, then non-economic factors can be taken into account...

...But this initiative falls short of addressing labor-management power relations in the United States...

...Fear of breaking the law has reinforced the conservative inclinations of union trustees, who generally are not the firebrands of the labor movement...

...Labor's lost Lever BY PHILIP MATTERA The organizing drive at a Reeves Brothers foam plant in Cornelius, North Carolina, was running up against the usual problems: Management was taking a hard line against recognizing the union, and many workers were intimidated...

...The committee urged the company to reexamine the use of asbestos products in its manufacturing process and reconsider its investments in Raytech Corporation, which is the defendant in thousands of asbestos-related lawsuits...

...Only ten years ago, Jeremy Rifkin and Randy Barber published The North Will Rise Again, a manifesto for a pension-fund revolution...

...Last year, the two unions put together a shareholder committee at Echlin, Inc., a maker of auto parts in Branford, Connecticut...

...Labor leaders expressed indignation when they discovered that the pension funds of unionized workers were invested in the securities of some of America's most anti-labor and socially irresponsible corporations...

...that culminated in victory in 1980...

...Ray Rogers, director of Corporate Campaign, Inc., decries "the lack of serious commitment on the part of many union officials to carry through with the pension weapon...

...Private pension plans originated in the early part of the century, initially as a move by paternalistic employers seeking to thwart unionization and later as a means of reducing labor turnover...

...Ghilarducci sees the greatest potential for labor's pension weapon in an arena of power called corporate campaigns...

...But he admits that what unions have done is "only the tip of the iceberg of what is possible...

...The Act did, however, legitimize union involvement in multi-employer plans, which are still known as Taft-Hartley funds...

...Other unions have joined the move to divest their pension funds of the securities of companies doing business in South Africa...

...It isn't...

...The Reagan Administration's aim," says Randy Barber, "has been to intimidate union trustees from pursuing alternative investments...

...Fortune, for instance, published an article entitled "Pension Funds Could Be the Unions' Secret Weapon...

...Under William Brock, the Department appeared to adopt a somewhat more tolerant approach toward targeted investing, though Assistant Secretary of Labor Dennis Kass told a symposium in 1986 that the court decisions in the Operating Engineers case were "incorrect...

...It helps position unions as players in the shareholder arena," says William Patterson of ACTWU...

...But Ed Durkin, director of special programs for the Carpenters union, admits, "We're not there yet...

...in exchange, they persuaded the company to soften its rigid opposition to union-organizing efforts...

...The United Mine Workers tried to use pension investments to persuade utility companies to purchase coal from union-organized suppliers, but that tactic was struck down by the courts...

...We've got a lot more to do to translate ownership into real power...

...After the union persuaded dozens of union pension trustees to pledge not to buy Duke Power stock, the utility company caved in...

...The labor trustees withdrew funds from the insurance company, and within a few months Aetna sent Ponderosa back to the bargaining table with a more cooperative attitude...

...It's for this reason that Teresa Ghilarducci, an economics professor at the University of Notre Dame who is writing a book on the politics of pension plans, believes that unions should not frame their desire to control the investment of retirement money in terms of property rights...

...The Carpenters union and the Amalgamated Clothing and Textile Workers have'once again taken the lead...

...Yet David Walker, the current pension administrator, has continued to criticize the Operating Engineers ruling and has recently issued proposed regulations that would prohibit pension funds from providing low-cost mortgages...

...The AFL-CIO hierarchy began to echo the slogans, issuing tough-sounding statements that pension monies should be invested in ways that furthered the interests of working people...

...Money manager John Harrington, founder of the socially responsible investment firm Working Assets, uses a similar image: The pace of change in the pension area, he says, has "been glacial at best...

...Yet the Act also contained strict rules on the fiduciary responsibilities of pension trustees, obliging them to invest in ways that were supposed to maximize the rate of return...

...There are hopeful signs, however...

...Rogers warns that "if labor is to succeed in reversing the decline of its power, union leaders must learn to make full use of all the tools at their disposal...

...Plans were all but required to turn over responsibility for investing their assets to professional money-management services of commercial banks and large insurance companies...

...At present, the Department continues to send out mixed signals...

...The Department deliberately tried to make big splashes with these suits in order to discourage targeted investing," says James Ray, a Washington, D.C., lawyer who represents union trustees...

...The pension tactic has had a role in subsequent campaigns, such as those against Transamerica, Phelps Dodge, and Louisiana-Pacific, but it has usually taken a back seat to more traditional pressure on companies and their outside directors...

...Legal obstacles erected by the Reagan Administration, coupled with an excess of caution on the part of the labor leadership, have stymied most attempts at harnessing the power of pensions...

...A Federal district judge and a U.S...

...Pension power is largely an unfulfilled dream, a grave disappointment at a time when the labor movement has been under siege...

...Dealing with burning issues is outside their experience," says Richard Prosten, research director of the AFL-CIO's Industrial Union Department...

...The Labor Department brought a series of additional suits against other union plans engaging in similar practices, now known as targeted or social investing...

...their influence over the country's $1.3 trillion in pension-fund investments to promote the interests of labor in disputes with management...

...The years of legal uncertainty and ambiguous Government policy helped to dampen union enthusiasm for pension power...

...But these were isolated instances...

...The Reagan Administration immediately turned that warning into a threat of prosecution...

...The suit was directed against the decision of the plan to join other construction-industry pension funds in shifting assets from corporate securities to investments in home construction and commercial real-estate projects that used union workers...

...Lewis promised to exert pressure on Reeves management to bargain fairly, and in 1986 the workers voted for ACTWU representation...

...A couple of years earlier, the United Brotherhood of Carpenters was having a tough time trying to renew its contract with Ponderosa Homes, a northern California builder owned by Aetna Life & Casualty...

...They are trying to get union funds to join with other institutional investors to influence corporate decision-making...

...Some unions, especially those in the construction industry, have made innovative pension-fund investments aimed at creating jobs and providing low-cost home mortgages for their members...

...Whenever workers try to challenge the system on ownership grounds, they ultimately lose," she says...

...Unions "have to go beyond the investor's mentality" and see that what is at stake is power...

...After World War II, unions made a priority of improving their pension rights and began demanding a greater degree of control over the investment of retirement funds...

...As owners of Reeves, we want you to have a union," Lewis wrote to the Reeves workers...

...Knowing that a large block of Reeves Brothers stock was held by the Bell Helicopter Union Pension Fund, Patterson decided to exercise some pension power...

...There's no doubt this has had a chilling effect...

...The surprising truth is that the two initiatives were among only a handful of instances during the past decade in which unions seriously attempted to use Philip Mattera, a New York writer, is also a research consultant to Corporate Campaign, Inc...

...Stevens & Co...

...When unions began promoting alternative-investment policies in the late 1970s, the Labor Department warned trustees that their first concern had to be financial...

...David Lurie, an employee-benefit-plan specialist at the Labor Department, says the official line is that "a fiduciary first has to take into account the economic interests of plan participants...

...But then William Patterson, national field director of the Amalgamated Clothing and Textile Workers Union (ACTWU), took a new tack...

...Even the business press took a worried look at the potential power of union pensions...

...Pension assets were to be used to make sure management treated workers fairly, and they were also to be redirected to investments in such areas as public works that created union jobs and improved the quality of life...

...But the legal offensive against targeted investing was not successful...

...For example, a threat by a group of union funds to boycott the money-management services of Manufacturers Hanover Trust played an important role in the first corporate campaign—the battle by ACTWU against J.P...

...More prominent in the public mind was the corruption involving the Teamsters and organized crime in the handling of union pension funds...

...At Echlin's annual meeting in December, the union committee managed to garner about 25 per cent of the vote on these issues—a remarkably high figure for an independent resolution...

...In the 1970s, the United Mine Workers dusted off the pension tactic during a strike against Duke Power...

...At about the same time as the Duke Power victory, however, Congress passed legislation that ended up making it more difficult for unions to carry out similar actions...

...Both unions and management lay claim to what is, in fact, social wealth...

...These are non-workplace tactics by which unions exert pressure on employers by putting heat on the company's outside directors, creditors, and other corporate connections...

...Even with the revival of unionization in the 1930s, control over these plans generally remained in the hands of individual companies...

...Pension power is largely an unfulfilled dream, a grave disappointment at a time when the labor movement has been under siege...

...Pension funds represent an unusual form of property...

...The union identified pension funds whose assets were managed by Aetna and persuaded labor trustees of the funds to protest the anti-union stance of the Aetna subsidiary...