Unions want say in pension fund reserve use
The AFL-CIO, eyeing the billions of dollars in private pension funds, is planning to demand a voice for organized labor in the investment of fund reserves.
Its intent, AFL-CIO officials say, is to provide financing for "socially desirable economic activities" and to ensure "prudent investment of workers' retirement savings."
AFL-CIO's Industrial Union Department (IUD) has analyzed 545 pension plans of 10 major corporations along with 35 investment portfolios. It has advised affiliated unions that plans administered by their employers often do not meet "the short-range and long- range interests of the workers for whose benefit the funds were created."
Individual unions should become "more actively involved in the administration of benefit funds," said IUD, a department whose core is a liberal, socially conscious block of unions from the old Congress of Industrial Organizations.
Howard D. Samuel, president of the department, said the study was in part inspired by reports from professional analysts who found that investment returns on many funds (an average 4.3 percent a year) were even lower than interest on bank savings accounts, in part as a result of very conservative investment policies.
Most pension and welfare funds set up by collective bargaining agreements since the 1930s (about 400,000 in all) are administered solely by the employers. Mr. Samuels noted "disturbing evidence of a vast concentration of decisionmaking in a very few hands."
These decisions involve a capital pool large enough to have a substantial impact on the national economy. According to a recent US Labor Department report, the value of private pension plans was estimated at $211 billion in 1975 and this year is expected to exceed $300 billion. By 1995, the assets will be valued in excess of $900 billion in 1975 dollars.
Other estimates place total assets of pension funds, including those in the public sector, at more than $560 billion, exclusive of social security and Railroad Retirement Act reserves.
There is growing criticism of the economic power this gives fund managers. Sen. Howard M. Metzenbaum (D) of Ohio said recently, "Without question, those who manage pension funds are in a position to play a crucial role in determining the method and redirection of the nation's economic growth and development."
The IUD, which has 58 union affiliates with a claimed membership of 5 million , is the first major labor body to call for unions to share administrative decisionmaking on the use of pension reserves. It is recommending that its affiliates -- and unions generally -- "use the collective bargaining process to obtain as much voice as possible in the management of benefit funds."
Where joint administration cannot be negotiated, IUD recommends seeking a commitment from employers that the union may participate in important decisions affecting funds, including the selection of fund trustees, managers, and counselors, the determination of general investment policies, and the way stock owned by the fund is voted.
The IUD urged unions to insist on more investments in residential mortgages and projects that promote the development of communities in which beneficiaries live; investment preference for firms with largely domestic work forces to support US jobs; investments in firms with good labor relations -- excluding firms with strong anti-union records or attitudes; and a preference for investments that tend to promote the ready availability of food, shelter, and energy.