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Panels & Workshop Summaries CONFERENCE PANELS U.S. Investment Initiatives: Federal and State Leaders Moderated by Tom Croft, Heartland Project A panel of federal and state policymakers discussed domestic investment initiatives targeted at poor and working-class communities, including the Clinton Administration’s New Markets Initiatives. Their presentations were reviewed by a response panel made up of investment professionals and a union organizer.
PHIL SINGERMAN - Assistant Secretary of Commerce for Economic Development There are opportunities for labor to participate in the Economic Development Administration’s (EDA) programs in general and its RLF program in particular. EDA’s program relies upon local planning. In some cases, labor is a participant; in most cases labor is not. Labor organizations also qualify as non-profits to be direct applicants for EDA funding. We’re also working with or speaking to specific organizations about potential collaboration. We’re working with the Pittsburgh Heartland Regional Fund to see if we can participate and assist in the development of this financing mechanism [for industrial development]. MILLICENT HODGE - Director, President’s New Market’s Initiative The president announced his New Markets Initiative on Wall Street and on Martin Luther King’s 70th birthday. He did that to emphasize the importance of opening opportunities in hard-hit communities for economic development and to tap into untapped markets. And he did it on Dr. King’s birthday because Dr King, toward the end of his life, turned his extraordinary vision to what he called the next frontier of freedom. And that’s economic freedom. JIM HILL - Oregon State Treasurer; Chair, National Association of State Treasurers The reason that I’m here is that I believe with all my heart that you can make these [targeted] investments and that these investments can do well and do good. And there’s more here than just the idea of winners and losers here, union vs. others. This is about how you allocate capital that is going to shape the world. I hope that the Heartland Project will continue in its efforts to demonstrate that those two goals — getting a market rate of return and doing something that is socially good — are compatible. ALLEN KUKOVICH — State Senator, Pennsylvania The work that’s been done by the Heartland Fund has inspired me and some of my colleagues to work on a tax credit bill in Pennsylvania. As part of the social audit [required for using those tax credits], we need to make sure that there is a connection between the money invested and jobs created. We must ensure that whatever those businesses are, they are union companies. We must begin to look at what economists like to call cluster industries, at industries that have growth potential and are likely to remain within the state and not move their capital to foreign lands. We also need to take a look at the environmental record, the workplace safety record, the community involvement of those companies in which we could possibly invest. This kind of tax credit program should transcend tinkering with investment policy. What we have to do is change investments from the transactional to the truly transformational. The kinds of things we’re talking about in this room are transformational. They’re based on need. They’re based on merit. We’re talking about distressed communities and about people who have something to contribute who have been overlooked. We’re talking about serious change. That’s what’s at stake here. If we can leave this room with some unanimity of purpose, we can make that change in our states and across the whole country.
U.S. Investment Initiatives: Response Panel Moderated by Linda Tarr-Whelan, President, Center for Policy Alternatives BRUCE COLBURN — Midwest Coordinator, AFL-CIO Office of Field Mobilization In the 1980s, I was a county bus driver and was also elected president of the union representing about 1,700 members in southeastern Wisconsin. Everyday, my route would take me through the inner city of Milwaukee, past boarded up plants, past huge industrial facilities, which were really the basis of Milwaukee. At one time, Milwaukee had the second-highest per capita earnings for African-American workers in the country. Within 15 years it went to the second lowest of the top 25 cities across the country. So, as a bus driver, what I saw driving through some of the meanest streets were a lot of angry people. And being president of the union, I was given the job of being head trustee of the pension board for that bus company. At that time we had about $120 million; it was a fairly small pension fund. The job was sort of strange because you’d go up to the 40th floor of the biggest bank in town every quarter and you’d sit around and talk about what you would do with the last quarter’s earning and whether you should invest in some apartment in Phoenix or some company in Taiwan. It was crazy. I mean, think about it. How hard would it be to try to invest in family-supporting jobs — in unionized jobs in Milwaukee? And, so we took that question on as a project, we tried to figure it out. Our pension fund voted to find answers and we set aside funds to do it. And our labor, religious and county partners funded a study to look at national models, if there were models. It’s our goal to find some sort a vehicle to invest in small and medium-sized unionized companies in Milwaukee that are profitable but need an infusion of capital. SHERMAN KREINER - CEO, Crocus Fund, Co-Chair, Heartland Network As the American labor movement begins to undertake investment initiatives targeted towards small and medium-sized businesses, several strategic lessons can be learned from the Canadian experience. The first lesson is that the bulk of the funds that have been raised in Canada come from retail investments by individuals. This is a giant pool of people. Very large amounts of money have been raised. The second real strong benefit that comes from a retail focus is that we do public marketing. Crocus does TV advertising. The Solidarity Fund does TV advertising, radio advertising, newspaper advertising. There’s a broad public education component that comes from the work we do that’s missing if you raise money only from institutional sources. Further, a retail initiative that’s successful makes it much easier to bring institutional money in later. Then there’s the question: "what is the cost to the Treasury?" In Canada, the government breaks even in two years, offsetting the costs of its tax credits. That’s because the tax credit is given for an investment that generated wealth back in the political jurisdiction. All the money that’s raised is going back into the local economy, so it’s being recouped in corporate taxes, sales taxes, and payroll taxes. The last point that I want to make is that these investment pools are basically trying to balance financial and social objectives. The way that’s been accomplished in Canada is through a stakeholder board whose majority control rests with the labor movement. The best way to achieve those balanced objectives is to make sure that the worker, government and shareholder constituency are all represented in the governance of these institutions. RON RICHMAN - Counsel, Shulte, Roth and Zabel I come at this from the perspective of representing trustees of Taft-Hartley pension funds in the United States. There has been a confluence of events that makes investing in these types of job-creating projects very timely. First, as you know, there’s been a tremendous run-up in general markets that has caused these Taft-Hartley funds to be extremely well funded. Trustees have grown increasingly concerned about the risks of continuing to keep money in the same old places that have run up dramatically in recent years. Trustees of Taft-Hartley funds also are becoming significantly more sophisticated. Years ago, mentioning private equity investments at a trustee meeting would result in people looking at you as if you were from Mars. But by and large, the trustees have all heard of these investments now, many of them have had some experience, and some of those experiences were very good. So we’re now at a time where the funds have sent their consultants out to find alternative investments. I haven’t seen that before in the 18 years I’ve been practicing in this area. The fact of the matter is there is nothing, absolutely nothing, preventing trustees of Taft-Hartley funds from looking at a range of appropriate investments, going through the proper procedures and making those investments. I really don’t think there are tremendous legal barriers to these investments. So the question is, why haven’t they happened? I think the answer is two-fold. One, there’s been a lot of talk and relatively little action. We’ve got to stop the talk and start engaging in some action. The other hurdle — and it’s something you always come across with fiduciary issues — is that somebody has to go first. I think we ought to be able to do that.
CONFERENCE WORKSHOPS Heartland Regional Investment Network Moderated by Rich Feldman Executive Director, Worker Center of King County, AFL-CIO; Sherman Kreiner, CEO, Crocus Fund, Manitoba (Co-Chairs of Heartland Regional Network); Robert Ginsburg, Research Director, Midwest Center for Labor Research; Bruce Herman, Executive Director, Working for America Institute, AFL-CIO This workshop provided an update on the Heartland Fund and the Regional Labor Capital Network. Panelists discussed the challenges of replicating Canadian labor-sponsored investment funds in the U.S. and how such efforts fit in with a broader capital strategies agenda. Workshop participants also discussed a Strategic Market Research project managed by the Center for Labor Research (CLR), which conducted market analysis for eight network communities seeking to achieve manufacturing sector growth, good jobs and ways to fill local capital gaps. (See Volume II of the Final Report for the CLR Strategic Market Research and other Regional Network toolkit reports). Recommendations:
Heartland Stakeholder Education Program Moderated by Tom Schlesinger, Director, Financial Markets Center (Co-Chair, Heartland Education and Communications Task Force); Chris Wallace, Center for Working Capital; Fernand Daoust, Solidarity Fund The workshop focused on various education models that equip workers to advance their interest effectively in capital markets. Fernand Daoust described the extensive "worker stakeholder" education programs that have been created in Canada for individual investors. Chris Wallace explained the U.S. labor movement’s promotion of shareholder education for pension trustees and plan participants. In his presentation, Fernand Daoust described the Solidarity Fund's efforts to use economic training as "a tool to introduce change in workplace culture." The Fund makes this education tool available to workers in companies in its investment portfolio and other workers interested in learning about enterprise development, management and finance. Training is also offered in Fund operations and promotion as well as in conducting social audits. The Fund's training program also has developed four new initiatives involving apprenticeships, public school teachers, family-run enterprises and higher education. Mr. Daoust also discussed the general public education aspects of LSIF advertising and promotions in Canada. Chris Wallace discussed capital stewardship education for U.S. trade unionists from the perspective of the Center for Working Capital, a new non-profit institute developed by the AFL-CIO. Through the Center's emerging program and efforts by the AFL-CIO's Office of Investment, the Meany Center and other labor organizations, union officials and pension trustees are receiving education about high road investment strategies and techniques for the active ownership of fund assets. In addition to providing training for these constituents, the Center also conducts research on investment management practices and financial sector issues. It also provides information and training to investment professionals. Recommendations:
Federal and State Policy Initiatives Moderated by Greg Williams, NJ Assembly Labor Committee; Doug Greenfield, Bredhoff & Kaiser; Ron Richman, Schulte, Roth and Zabel; Kirsten Spalding, University of California (Berkeley) Labor Center The U.S. has experienced an explosion of federal, state and local initiatives supporting business investment. Participants in this workshop discussed the prospects for these initiatives, particularly a "domestic OPIC" proposal the congressional Progressive Caucus is developing with input from the Heartland group, President Clinton’s New Markets Initiative for community development working capital and new state programs such as a tax credit to finance venture investment funds in Kentucky. Recommendations:
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