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Union Activism: Do Union Pension Funds Act Solely in the Interest of Beneficiaries?


David F. Larcker


Stanford University - Graduate School of Business

Brian Tayan


Stanford University - Graduate School of Business

December 11, 2012

Rock Center for Corporate Governance at Stanford University Closer Look Series: Topics, Issues and Controversies in Corporate Governance and Leadership No. CGRP- 30

Abstract:     
Union pension funds manage approximately $3.5 trillion in retirement assets on behalf of public and private sector employees covered by collective bargaining agreement. They are also very active in the proxy process, sponsoring approximately one-third of the shareholder proposals that are included in corporate proxies each year.

Federal and state laws (including ERISA) require that the trustees and administrative bodies that oversee these funds manage their plans “solely in the interest of participants and beneficiaries.” Furthermore, the U.S. Department of Labor is clear that pension funds are not to use plan assets and their voting rights “to further legislative, regulatory or public policy issues through the proxy process.”

We examine this issue is greater detail, including the types of proposals put forward but union pension funds, the support these proposals receive, and the companies they target. We ask: Are union-sponsored proposals made solely in the interest of their pension beneficiaries? How can the public or a pension beneficiary assess the motives of funds that sponsor proxy proposals? How do union pension funds determine which positions to advocate and which companies to target? Are unions violating their ERISA duties by sponsoring these proposals?

Includes: Response from Brandon Rees, Acting Director, AFL-CIO Office of Investment.

Topics, Issues and Controversies in Corporate Governance and Leadership: The Closer Look series is a collection of short case studies through which we explore topics, issues, and controversies in corporate governance. In each study, we take a targeted look at a specific issue that is relevant to the current debate on governance and explain why it is so important. Larcker and Tayan are co-authors of the book Corporate Governance Matters, and A Real Look at Real World Corporate Governance.

Number of Pages in PDF File: 10

Keywords: union pensions funds, shareholder activism, shareholder proposals, corporate governance, retirement assets, proxy process

JEL Classification: G3, G30, G34, J33, M4, M14, M52

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Date posted: December 10, 2012 ; Last revised: September 3, 2013

Suggested Citation

Larcker, David F. and Tayan, Brian, Union Activism: Do Union Pension Funds Act Solely in the Interest of Beneficiaries? (December 11, 2012). Rock Center for Corporate Governance at Stanford University Closer Look Series: Topics, Issues and Controversies in Corporate Governance and Leadership No. CGRP- 30. Available at SSRN: http://ssrn.com/abstract=2187514

Contact Information

David F. Larcker (Contact Author)
Stanford University - Graduate School of Business ( email )
Graduate School of Business
518 Memorial Way
Stanford, CA 94305-5015
United States
650-725-6159 (Phone)

Brian Tayan
Stanford University - Graduate School of Business ( email )
518 Memorial Way
Stanford, CA 94305-5015
United States

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