Nathan Newman wrote:
> In fact, CALPERS most public campaign to increase shareholder profits has
> been to fight excessive executive compensation. There has been a lot of
> argument that excessive executive pay and distorted incentives have
> undermined profits for shareholders, not just in the left press but in the
> mainstream portfolio style theory Doug alludes to.
"Most public" in what sense? To my knowledge CALPERS has never sponsored an executive pay-related proposal. Their own proposals are focused on "management entrenchment"--i.e. making corporate takeovers easier. That's really the only reason big public and union funds do this stuff. Even the executive compensation proposals other public and union funds put forward don't have any intrinsic interest for labor--they're all about, as you say, "incentives." The only reason CALPERS engages in shareholder activism is to improve its returns.
CALPERS is also not, as you described it earlier, a "union fund." A minority of its governing board are elected by the beneficiaries (and are often union officers); the majority are appointed by the governor or are elected officials serving ex officio. The insurance industry is guaranteed a seat on its board; public-sector unions aren't.
> Now, I have no doubt that Seth or Doug can find an actual example of CALPERS
> supporting a policy that hurt workers,
It's not a question of "an example." The net effect of CALPERS and other public funds' activism is to make takeovers easier and force management to focus more on returns to shareholders. Good or bad for workers?
> And as for Doug's original argument agaisnt the Swedish funds, one of the
> problems was obviously a lack of active involvement by the funds in
> management of the firms -- remember the "lack of interest" by the workers
> that Doug bemoaned. Well, if CALPERS is pioneering active involvement under
> the constraints of fiduciary duty, it is quite reasonable to argue that
> under more socially conscious rules for worker-owned investment funds, they
> could be actively involved for more worker and society-oriented management
> of their social capital.
Rules for union funds (if that's what you mean by "worker-owned") are more restrictive, not less, of social consciousness (and what's that mean, anyway?) Under Taft-Hartley, pension funds cannot have more than 50% union representation on their governing bodies. And under ERISA, trustees are not held to the "prudent man" standard that Doug mentioned, but to the even stricter "prudent expert" standard, are forbidden from considering any goal other than maximizing risk-adjusted returns, and are personally liable for any losses to the fund if they deviate. The entire structure of these funds is designed to prevent the kind of activism you're talking about.
> Even given its limits, CALPERS has been actively involved in low-income
> housing, seeking to punish racist executives at Texaco, challenging
> clearcutting in the Headwaters forests, and supporting prevailing wages in
> the construction industry. These seem like quite good acts derived from the
> worker-base of CALPERS nature,
Again, CALPERS is accountable to the state government, not to workers. I agree with a lot of what you have to say about unions, but I think it's a big mistake to include CALPERS in the same category.
More broadly, if shareholder activism is of any value to the labor movement, it's as one component of a corporate campaign directed at a particular company, in a context where all the traditional strategies are in use too. I'm agnostic about the ultimate value of this, but one can certainly argue that there are cases where labor can use conflicts between management and shareholders to form alliances of convenience. But it's a far cry from that to imagine that institutions that in their whole structure are designed to advance the interests of shareholders--one group that by definition is not on "our side"--could be some kind of vanguard for socialism.
Josh