Linda Chavez
The unions' anti-Social-Security stance is actually hurting the people they claim to protect
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Unions are losing members and clout at the bargaining table, but
that doesn't mean they aren't still powerful players on the political scene.
Now, Big Labor is trying to stop Social Security reform, even if it hurts
union members. Unions are supposed to represent their members' interests by
negotiating higher pay and better benefits, including pensions. In fact,
union pension funds are the single biggest source of investment in the stock
market, amounting to an estimated $6 trillion in 2003. Now, the AFL-CIO and
individual unions are threatening some investment firms and corporations
with pulling out their pension fund investments unless the companies
withdraw their support for President Bush's plans to overhaul the ailing
Social Security program.
It's a dangerous move, for the unions and the nation's economy,
but the administration is not taking these threats lying down. Last week,
the Department of Labor fired a shot across Big Labor's bow, warning the
AFL-CIO not to play politics with its members' pensions. The unions have
threatened to withdraw their pension funds from firms that have joined a
coalition in support of the president's Social Security reform plan. The
unions have staged high-profile protests in New York, Washington, San
Francisco and 70 other cities, many of them outside brokerage firms that
support the Bush plan for private retirement accounts financed with a
portion of individuals' Social Security taxes. And the threats have worked.
Several companies and securities firms have backed away from the plan out of
fear that they would face union pension fund boycotts.
But should unions be wielding their power in this way? In fact,
the unions' anti-Social-Security reform efforts are part of a broad strategy
to force corporations to take positions they favor. Unions have used pension
funds to pressure corporations to settle strikes, maintain costly benefit
programs, block privatization and force union recognition. For example,
public employee unions in California and Ohio forced building management
companies that operated pension-fund-controlled buildings to hire only
unionized janitorial companies to clean the buildings. Unions have also
employed their pension funds to try to force out corporate directors whom
they viewed as unfavorable to unions and to sponsor shareholders'
resolutions.
The problem with many of these actions, however, is that they
actually hurt the union pension beneficiaries, who get lower returns on
their investments because the union is pushing policies that lower profits
and stock price. Pension fund managers have a moral — and legal — duty to
invest retirees' money wisely. Their fiduciary responsibility is to act
prudently on behalf of those whose funds they manage. They are supposed to
invest funds to ensure a good return, not to promote the political or
organizational goals of the unions. When a union pension fund coerces a
company to adopt policies that make it less profitable, union retirees lose
money. The only thing fiduciaries are supposed to consider is the return to
the pension fund on the investment made — certainly not the unions' desire
to sink a key element of the president's domestic agenda.
AFL-CIO-affiliated unions have assigned 36 full-time staffers to
work in 21 states to oppose Social Security reform, according to the New
York Times, and union delegations have personally met with nearly 100
members of Congress to lobby against the president's plan. All of this
activity is paid for by union dues, without the express consent of union
members who might rather have their dues go to better representation at the
bargaining table. But it's the threat to use pension funds as a weapon in
this high-stakes battle that has finally pushed the Bush administration to
its limits. The Department of Labor oversees union pension funds, which have
historically been one of the chief sources of union corruption and
racketeering. Corrupt union pension fund trustees have bilked hard-working
union members out of millions of dollars while enriching themselves. As of
2002, 44 percent of the Justice Department's 357 pending racketeering
investigations involved union pension and welfare funds.
The AFL-CIO's anti-Social Security reform campaign doesn't
represent the nadir of unions' misuse of pension funds, but it may be the
most widespread.
Editor's note: Linda Chavez is president of Stop Union Political
JWR contributor Linda Chavez is President of the Center for Equal Opportunity. Her latest book is "Betrayal: How Union Bosses Shake Down Their Members and Corrupt American Politics". (Click HERE to purchase. Sales help fund JWR.)
