A Heartfelt Thanks to Leo

We received the news recently that Leo Gerard was planning to step down this summer as President of the Steelworkers. Leo was one of the towering founders of the Heartland Network. If you could characterize Leo’s approach to obstacles, it would be “Get out of the way or get dragged.”

Our Labor-Capital Network started in 1995 when a group of Steelworkers occupied the facility gate of a company called Franklin Steel, in Franklin, PA. The company had been making steel rail and beams, including posts for highway signs, since 1901. The SVA intervened in the shutdown of Franklin, as part of our state layoff aversion program.

We learned that managers had embezzled the firm, which did not survive the theft. The workers refused to allow the bank to liquidate the facility, as they believed that it could still profitable. I recruited Leo, then Secretary-Treasurer of the USW, who had just moved to Pittsburgh from Canada, where he had been national director. Leo jumped at the fight. Over that winter, the workers snuck into the facility and winterized the equipment, so that it would work in the Spring.

As Leo put it, in his foreword to Heartland’s first book, "Working Capital: The Power of Labor’s Capital" (2001, Cornell University Press):

In 1995, I embarked on what should have been a relatively simple task to raise about five million dollars for the modernization and expansion of a small but productive steel plant in my home state of Pennsylvania. Given the billions of dollars flowing from pension funds into risky ventures in emerging markets, I thought it would be easy to find five million dollars for investment in a solid U.S. company, generating a good rate of return. It wasn’t.

We eventually found a buyer for Franklin, a cowboy from a Dakotas utility. He put the workers back to work (despite many changes, Franklin Industries is still in business).

But, Leo didn’t let it die there.

I found others equally concerned that the current operation of financial markets undermined the very workers’ whose savings they deploy. We met as a ‘grievance committee’ and our grievance was simple: financial markets are cutting our throats with our own money and it has to stop.

We called ourselves the Heartland Project and began to promote an aggressive agenda to push capital strategies both inside and outside the labor movement. We wanted to raise awareness with labor’s pension fund trustees that there were investment options beyond those currently being offered and we wanted to put money managers on alert that we were looking more closely at the manner in which they handled our retirement savings. We moved forward with the support of the United Steelworkers of America and the AFL-CIO for whom the use of labor’s capital is of paramount concern.

As we explained in our "Responsible Investor Handbook", the Steelworkers were not strangers to dealing with Wall Street. Faced with a severe recession and restructurings in steel mill production and ownership in North America in the 1980s, Lynn Williams, then President of USW (and Leo’s mentor), began engaging with labor-friendly investment bankers, such as Felix Rohatyn at Lazard Frères. In the 1970s, Rohatyn had led the Municipal Assistance Corporation’s (MAC) effort to turn around New York City’s bankruptcy, and safely leveraged the power of the city’s pension funds to do so.

The Steelworkers deployed an investment bank set up by Gene Keilin and Ron Bloom, formerly at Lazard, to intervene in the steel industry through defensive buy-outs and other strategies, such as ESOPs (Employee Stock Ownership Plans), saving jobs and parts of the industry. Other unions such as the Machinists and Pilots followed suit.

Power never shifts without a struggle. This book challenges those with power by equipping those who confront the orthodoxy of today’s financial markets. This volume helps define an important agenda for labor.

In the mid-late 1990s, Leo and our grievance committee organized two national conferences and commissioned, with the help of national foundations, Working Capital (one reactionary SEC member called it, ironically, the "Big Labor Playbook!"). The book asked how the labor movement might harness the power of pension funds to rebuild America. Multi-employer and public pension funds began to invest in private capital funds like KPS (which evolved from K&B) and Blue Wolf that respected workers’ rights and that sought to provide a voice for workers as stakeholders in the company.

We then sent the book to every union president in the U.S. and Canada, made the rounds with national media, and embarked on speaking tours to spread the word. Leo spoke at a White House summit on retirement security, appeared in Hedrick Smith’s PBS documentary Surviving the Bottom Line, and was interviewed on NPR’s Marketplace and by Business Week.

This initiative gained ground slowly through the decade of the 2000s and was similar to efforts around worker-capitalized vehicles in Quebec, such as the $15 billion Solidarity Fund, and Australia, where the Superannuated Funds established investment managers to invest in private capital, infrastructure and renewable energy (in his role as Canadian national director, Leo was also active in the Solidarity Fund).

The challenge for labor is to find ways that align workers’ savings with workers’ values. We need to invest our deferred wages in companies that provide good jobs in stable, strong communities. We want to reward companies that value all the stakeholders in the enterprise not just their shareholders. Our capital is patient and long-term and our challenge is to develop a capital strategy that moves our savings beyond the quick saccharine highs of destructive corporate behavior.

Over the years, the Heartland Network has rolled through various iterations, but Leo was always there for us, pushing, prodding, stroking a small check to help us keep on keepin’ on. You can read about his innumerable accomplishments elsewhere, such as his role in standing up the blue-green alliances, but here, we wanted to remember his role as the Godfather of Heartland.

The Heartland Governing Board and those of us at the Steel Valley Authority (SVA) want to personally thank Leo—from the heart--for his tremendous support and leadership over the years. Leo has been an unrelenting fighter for working people, and it has been a privilege for me (and all of us), to have been able to spend some time in the fight with him.

Power never shifts without a struggle. This book challenges those with power by equipping those who confront the orthodoxy of today’s financial markets. This volume helps define an important agenda for labor.

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