Tom Croft, Director
Heartland
Labor Capital Network/SVA
Background: Heartland Network Started by the Steelworkers and the Steel Valley
Authority in 1995, the Heartland Working Group, chaired by Leo Gerard,
President of the USW, was organized as an unofficial “grievance committee” of
U.S. and Canadian labor leaders and activists, regional economic democracy
groups, economists and other progressive groups, and our goal was to increase
the control of working people over their pension funds. We organized a number of working committees
to research labor capital issues, and hosted two highly successful national
conferences. We pulled together a
regional network of progressive regional economic democracy groups that had
been fighting to save jobs, create worker ownership, and revitalize industrial
communities.
With support from a foundation consortium, Heartland commissioned Working Capital: The Power of Labor’s Pensions, published by Cornell University Press and now used as a textbook in universities and labor union training institutes alike. Because of the book and its work, Heartland has garnered considerable national media attention and stories, including New Labor Forum, Business Ethics Magazine, Social Policy Magazine, Business Week Online, New Perspective Magazine, NPR’s Marketplace, Yahoo Finance, and a number of Canada journals. New books by author Bill Greider (pending) and Robin Blackburn prominently cite Heartland, and a chapter on Heartland’s genesis is in a Canadian book, pending publication, Money on the Line: Workers’ Capital in Canada. Heartland has helped win a new worker-stakeholder-oriented, capital investment policy on the part of many of the nation’s labor-management pension funds, helping overcome decades of resistance.
Today, our union
allies in the U.S. at both labor-management funds and public pensions are
taking lead roles in reversing what we called “collateral damage” investment
schemes, supporting new investments in “Heartland” funds, committed to
investing in worker-friendly firms, sustainable industries. Additionally,
regional labor funds are under development in several cities, a result of
coalitions of labor and regional economic democracy groups. We hope to someday replicate and network
with the successful $6 billion-strong Labour-Sponsored Investment Funds (LSIFs)
in Canada, the most progressive investment program in North America. The LSIFs, in five provinces, have adopted
innovative social audits as a condition of investing, obtained labor-board
seats in privately-held companies, promoted worker ownership and/or
participation, and demanded sustainable business practices, on a huge scale.
These are all critical new developments in the chaotic current economic
downturn and restructuring period.
The Destructive Role of Capital Partly due to a corporate
corruption scandal in the capital markets that is unprecedented, the U.S. and
Canada have suffered a global recession with its roots in speculative
over-investment. Heartland authors
warned in our book, Working Capital: The
Power of Labor’s Pensions, about the "collateral damage" to
workers and communities from thieving Wall Street speculators. Now, our economy
is paying the price for irresponsible investment practices.
Leo
Gerard said recently "The corporate crime wave sweeping America is not
about 'a few bad apples,' it's about a system that's rotten to the core; a
system that violates the values that our two countries were founded on."
Gerard cited a corrupt and undemocratic globalization trade regime for the loss
of more than two million manufacturing jobs in the U.S. and Canada in recent
years. "It's designed to enrich the Enron capitalists and their rich and
powerful financiers on Bay Street and Wall Street." These "barons of
bankruptcy," would be "more than willing to undermine democracy
itself if that's what it takes to speed up their race to the bottom on wages
and benefits".
Many
of the nation’s blue bloods and business leaders have been hard at work in the
middle of the night, like corporate Jeffrey Dahmers, leaving their carnage
stored like partial bodies under floorboard. Con artists at several other
corporations such as MCI/World Com, Xerox, Tyco, Global Crossing, ImClone, and
others based in the U.S., and Bre-X Minerals, Cinar Corporation and others in
Canada, have bilked billions and devastated working people and communities. But
many of the "New Economy" schemes were pulled off in broad daylight.
Wall Street has been behind many of the dot-com bubble shake-downs, the
emerging markets speculation in oppressive sweatshops overseas, the destructive
mergers that manufactured golden parachutes and mass layoffs, the derivative
scams, the demolition of union workplaces and the red-lining of main street
businesses, all spelled out in Working
Capital.
Some
70-75 years ago, sociologist Thorsten Veblen railed against the
"commercial sabotage" of a similar group of entrepreneurs, the
"predator business tycoons" that led the 1920s into the speculation
and crash of 1929, and a decade-long depression.
These corruption and economic shocks, a “perfect storm” over the last two years, will not only lead to a "double-dip" recession, but, for working people in general, may lead to a prolonged slump and worsening economic future. It is but made worse by 9/11 and what appears to be a permanent international war. It has become increasingly clear that our standard of living and maybe democracy itself are indeed at risk.
Taking on the Challenge Working people and policy-makers in general must
find ways to respond to this mounting crisis.
They must be more active in the workplace, a traditional venue for
engaging in participatory and workplace democracy, promoting workable employee
and community ownership strategies, and they must demand broadened corporate
governance and open book management of our companies.
They
must also explore new strategies as "capital stewards"---and here, we
can have an impact on both corporate governance and the faltering economy. The trustees of pension funds and workers’
assets have to demand, legislatively and through bargaining, joint trusteeship
of all pension funds. Trustees do have
the power to demand independent auditors and corporate responsibility and other
measures, such as adherence to global labor standards, controls on executive
options, prohibitions on auditor consulting, and worker-represented and
independent corporate boards. And,
trustees can explore private capital strategies supported, as another way to
protect their portfolios, as investors in privately-held firms appear to be
able to demand better accountability than is the case currently with
publicly-held companies.
The
time is ripe for promoting alternatives to the status quo, and the
worker-centered, stakeholder-focused investment strategies developed by the
Steelworkers and the Heartland Labor Capital Network and the working capital
movement have gained broader acceptance. There’s at least three trillion
dollars in labor union and public pension funds in the U.S. and some $10
trillion total pension funds worldwide.
Many of the leaders of these pension funds, and vanguards like Bill
Patterson in particular, have taken a lead in forcing corrupt corporations to
change their behavior, and become more accountable to workers, shareholders and
communities.
Like
other times of progressive populism, the collapse of the New Economy may
provide a
chance
to carry the spirit of earlier reforms toward their next steps, and the working
capital movement that has arisen in the last few years is already helping to
lead the way. In many ways, the
advances made by the Steelworkers around democratic workplaces and alternative
ownership of industries and the progress of our Heartland campaigns on
re-directing working capital are on the cusp of this new paradigm.
From Short-term Responses to a New
Paradigm Consider the following comments from
renowned investor advocates Robert Monks and Nell Minnows:
"Striking,
therefore, is this historically new basis for a significant, although far from
full, convergence between stakeholder (perhaps increasingly defined as
‘citizen’) and shareholder….(as) fiduciary, public, union, non-profit,
corporate and mutual fund institutional investors come to dominate much of the
ownership landscape…The holdings of universal
owners…have the characteristic of representing the entire economy."
Hawley and Williams, The Rise of
Fiduciary Capitalism, Penn Press, 2000, Page 3-5.
Citing
both the $50 billion annual tax breaks provided by government to pension funds,
and the congruence, or lack thereof, among the public and universal owners on
major economic policy issues, the authors here argue for a new paradigm: the
involvement of the universal owners of the economy in the principle decisions
that guide the economy.
Further:
"Because their holdings are so diversified that they have the incentive to
represent the ownership sector (and the economy) generally rather than any
specific industries or companies…this endows them with a breadth of concern
that naturally aligns with the public interest. For example, pension funds can
be concerned with vocational education, pollution and retraining…"
If
economic performance is important, we need to move beyond the traditional
"insider" interests that have, to date, often neglected the long-term
needs of companies, and been implicated in insider enrichment, and align the
stakeholders—workers, communities, etc.—with shareholders. Again, from Fiduciary Capitalism, "The
fundamental characteristic of a universal
owner is that it cares not only about the governance and performance of the
individual companies that comprise its’ investment portfolio, but that it cares
about the performance of the economy as a whole. Simply put, the universal
owners concerns with overall economic performance is the recognition that it
"owns" the economy, and therefore, bears the costs of any shortfall
in economic efficiency and reaps the rewards of any improvement." (p.21)
New Developments Workers are now fighting to re-take control of their
capital. The "working capital" movement is emerging as one of the few
concrete initiatives to challenge corporate hegemony in North America. They are
demanding that pension investments—which, along with institutional investments
control 45%--and eventually a majority--of all corporate stock—require changes
in the currently corrupted and flawed corporate system.
The
model of regional economic democracy-driven, worker-friendly investing promoted
by the Heartland Network has taken some important steps forward across the U.S.
and Canada.
·
In
the U.S., a number of labor-friendly private capital funds have been
capitalized in the last three years with over $2-3 billion in assets, and they are providing critical capital for
unionized industries, and leveraging unionization in many other cases.
·
Heartland
has worked with the USW to capitalize and recently close the Landmark Growth
Capital Fund, with $77.5 million, with seven other T/H pension investors, to
target high performance, worker-friendly investments in manufacturing, other
industries.
·
In
the Tri-States of Pennsylvania, Ohio, and West Virginia, Heartland is working
with the Steelworkers, the Center for Working Capital, the OEOC and the state
labor federations to bring together labor and public pension trustees to learn
democratic corporate governance strategies and explore long-term alternative
investment proposals.
·
In
Ohio and other Great Lakes States, 2/3 of the Republic Engineered Steel (RESI),
once an ESOP firm that later was bought out and went bankrupt, is being
re-opened by the KPS Fund, which is partly financed by pension funds.
·
New
York City public employee pension trustees are investing in strategies to
rebuild the city after 9/11, and CALPERS pledged to invest 2% of its total
assets in poor and under-served areas in California.
·
CALPERS,
the California Public Employee Retirement System, with the support of
international advocates for workers’ rights, withdrew hundreds of millions of
dollars invested in anti-democracy, anti-union sweatshops, and committed to a
labor-friendly national merchant bank with several hundred million dollars in
assets.
·
In
Hawaii, a campaign to create a socially-responsible mandate for the state’s
pension funds and natives trusts, which are fairly large and have been
mismanaged, coalitioned labor leaders, trustees, greens and the elders of the
native peoples--a "blue-green-gray" alliance--to pass SRI legislation
in one legislative house.
It’s Time for the Blue-Green and Gray As an adjunct to the anti-globalization movements that
descended on Washington and Seattle and Quebec City, where the Steelworkers
have played significant roles in the blue-green
alliances, we want to create momentum for long-term economic alternatives
to the crises of sweatshops, unfair trade and anti-democratic global financial
institutions, that has inspired students and young people. It’s time to explore important economic
considerations coming out of these movements.
For
example, pension funds could make long-term investments in profitable
alternative energy and transportation companies, to lessen our dependence on
overseas oil and cut the cords from the perpetual war machine. In fact, labor
and blue-green-gray alliances could
begin a long-term plan for the universal owners and stakeholders of our assets
to buy, organize and control many of these "industries of the
future"—wind power generation, solar energy, fuel cell technology, etc. To
counter corporate interests and scam artists that have often blocked these
industries from the market, we could promote the kinds of community, state,
federal and global policy supports that would enhance long-term labor-capital
investments in developed and emerging countries alike.
I’ll close with three additional relevant quotes.
As Harold Meyerson noted in Shifting to Offense:
“Indeed, anyone wanting to see labor and capital go at it these days should probably skip the plant gate (where union power ain't what it used to be) and go straight to the annual shareholder meeting. Unions have a cool $3 trillion invested in pension funds, and…with the assistance of the AFL-CIO's Office of Investment, they've amassed enough leverage to credibly challenge corporate behavior”. (American Prospect, 8/26/02 Issue).
And, for the longer view,
in Foxes and Pension Funds,
Alexander Cockburn pointed out:
Lurking in back of the current uproar about corporate chicanery is an argument about the management and disposition of society's acccumulated wealth… Former British Labor minister, Tony Benn, in his 1979 book, Arguments for Socialism, said "The financial institutions do not necessarily use the huge sums put at their disposal in a manner compatible with the common interest. This is one area where there will have to be change. These savings belong to the workers, they are their own deferred earnings. Workers want them not only as income when they retire, but while they are at work, and so to guarantee that they will retire in a buoyant economy". (Counterpunch.Org, 8/5).
There
are upwards of $3 billion in new worker-friendly pension-financed investment funds
in the U.S. that are coming into operation, and $6 billion in Canada, on top of
over $3 and ½ trillion in workers’ assets with labor/worker trusteeship in the
two countries. There are tremendous
religious/social assets that could also be mobilized. These new strategies—built around Universal Owners and Worker/Stakeholders –could have a long-lasting positive
impact on society internationally, and, might just begin to break the shackles
of the war-mongering, resource-plundering and polluting, anti-worker and
colonializing corporations that have shoved this world to the brink of the
abyss.