Workers’ capital must support the interests of working people

Weaker unions mean that workers are less able to bargain for a fair share

8-14 Feb 2016 is heartunions week. To mark the week, Left Foot Forward are running a series of articles about trade unions. You can find out more at heartunions.org

We have unions to thank for the existence of pension funds. It was bargaining by unions, across thousands of private sector employers and over many years, which led to pensions becoming a widespread part of the benefits package.

Therefore it is also down to the collective efforts of union members that working people in the UK are plugged into the global capital markets, and the companies that utilise them. Our pension funds own shares in companies across the world, as well as other assets like property and infrastructure, where they can have a significant influence.

In my corner of the labour movement, the billions of pounds in pension funds and other savings vehicles is known as ‘workers’ capital’, and union activity aimed at mobilising that money is known as ‘capital stewardship’.

The central idea is simple – the capital in pension funds represents working people’s deferred wages, so it should be used in their interests. To put this idea into practice in the UK a couple of years ago the TUC formed a group called Trade Union Share Owners, which represents about £1.5bn of trade union pension fund assets, and at a global level unions collaborate through a body known at the Committee on Workers’ Capital.

Over the past few years, different unions have run campaigns at UK companies where they have tried to make sure that workers’ capital does support the interests of working people.

In 2015 unions took part in shareholder campaigns to tackle anti-union activity in the US schoolbus business of National Express, and to challenge poor governance and working practices at Sports Direct. You can expect to see more of this sort of thing in 2016.

Within the financial sector there is increasing willingness to engage with corporates over environmental issues. Asset managers – the City firms that pension funds appoint to make investment decisions – regularly support initiatives seeking, for example, disclosure of companies’ carbon footprints. Billions of pounds representing several decades’ worth of workers’ retirement savings are mobilised in support of a more sustainable economy. This is a very encouraging situation.

But we do face challenges too, and when it comes to issues relating to the workplace those same investors typically go missing. In fact many seem much more comfortable using workers’ capital against initiatives intended to promote workers’ rights. Just last week the TUC published its annual survey of asset manager voting.

On page 72 you can see how various asset managers voted on a shareholder resolution that went to the 2014 AGM of National Express addressed at anti-union activity. Most of the asset manager respondents, who will undoubtedly manage the pensions of many Left Food Forward readers, voted against.

One of them has even reported to clients (including at least one union) that it thought the company should be able to campaign against union organising as this was good for business.

This is something that needs tackling, for a number of reasons. Firstly, as obvious as it should be, we need to remind those that manage our pensions that labour rights are human rights.

Regrettably, where unions raise concerns about companies not respecting labour rights asset managers often see this as a ‘difference of opinion’ between employer and employee. In reality it should be seen as a potential violation of human rights.

Often unions are able to provide specific breaches of labour law by companies. The consequences of such breaches vary considerably between jurisdictions but the key point is that companies are breaking the law, often repeatedly.

It is doubtful that a company that was shown to have breached environmental regulations would be given the benefit of the doubt. It should not be any more acceptable in respect of human rights. If anything, regardless of their personal views about unions, investors should be concerned about whether repeated breaches of labour law are indicative of a wider management attitude.

Secondly, investors should consider the broader context within which union activity around workers’ capital is taking place. It’s a bad news story really: labour’s share of the pie has shrunk, and inequality has risen. This is closely correlated with the decline of trade union strength, as an IMF paper pointed out last year.

In short, weaker unions mean that workers are less able to bargain for a fair share, but also reduce the constraints corporate management and the ability of executives to inflate their own pay.

Is it any wonder that the US, with its weak labour law and numerous anti-union companies (and union-busting firms that advise them) is so unequal? If workers’ capital could be mobilised to support working people and their unions this could help push back on these trends.

Finally, to return to our basic objective, it seems fair to ask that workers’ capital is used in workers’ interests because that is what they seem to want. There isn’t a lot of research on how pension scheme members want their money to be used, but what there is suggests that asset managers ought to focus more on workplace issues.

Research undertaken for the (then) National Association of Pension Funds found that members put more importance on employee pay and conditions than executive pay or environmental impact. Younger workers were particularly supportive of a focus on workplace issues.

None of this is to argue that investors stop looking at other issues. Asset manager engagement on executive pay and environmental issues has been a powerful force for change. But it is time the relative lack of progress on workers’ rights was addressed. Asset managers don’t invest their own money, they invest the savings of bus drivers, care workers, journalists, dockers and many others.

In fact the only reason that asset managers have a job is because generations of workers have deferred part of their pay into pension funds negotiated by their unions. The working people whose capital provides employment for many in the City have a right to expect that their voice gets a better hearing than it does currently.

Tom Powdrill is responsible investment co-ordinator at the International Transport Workers Federation

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