Pension funds currently hold some $7 trillion in worker savings. Union officials understandably yearn for the power of these funds to be used for the workers' benefit. Working Capital is a comprehensive volume that not only speaks to the desirability of this happening-it also suggests a number of ways this is occurring and can be increased.
One may or may not agree with one of the contributors that "corporate governance will trump labor laws in importance and shareholder rights will constitute a new focal point for labor relations in the United States in the twenty-first century" (p. 67). However, it is certainly true that at a time when, as now, traditional labor relations are not very fruitful for workers and unions, and the power of capital is ascendant, it makes sense for unions to look to the capital owned by workers as a source of influence over corporate policy.
One of the services performed by this book is to provide a great deal of detailed information on the extent to which workers' capital is already being used for their benefit. The best-known example of this comes from Canada-the Labour-Sponsored Investment Funds-that exist in several Canadian provinces. These funds represent the largest source of venture capital in Canada. The labor-controlled ones have been quite successful both as investment vehicles and in producing "collateral benefits" such as jobs. Also of considerable interest are the less publicized union-friendly alternative investment funds in the United States, such as Union Labor Life Insurance Company's Separate Account P and similar funds. These have not only earned higher than market returns but have also created union jobs and helped unionized companies turn a profit.
Another way to benefit workers is through Economically Targeted Investments (ETIs), which are "investments selected for the economic benefits they create apart from their investment return" (p. 183). According to these writers, by filling "capital gaps," ETIs have shown themselves capable of producing returns at or above market levels, while at the same time providing jobs and affordable housing. Among other ways, they do this by making capital available to new ventures and established medium-size companies that would not otherwise be able to attract funding. So long as they are comparable to other investments as to returns and risks, ETIs are legal investments for employee funds regulated by the Employee Retirement and Income Security Act. There are good opportunities for such investments in private placements (as opposed to public stock offerings) of either equity or debt, where it is customary for investors to require contingencies to be met by the receiving company.
Labor can affect corporate governance by being part of the "shareholder revolution." For example, labor shareholders and trustees have sponsored shareholder resolutions and bylaw revisions on general corporate governance questions and have negotiated changes in broad corporate policies. On occasion they have effectively protested exorbitant executive salaries.
The power of workers' capital is being taken quite seriously by American labor. The AFL-CIO establishing the Center for Working Capital is just one sign of this. The publication of Working Capital is another. Practitioners and scholars of industrial relations interested in important new trends in the labor movement would be well advised to read it.
