The Newest Activists

Pension fiduciaries are not alone in speaking out more forcefully on corporate governance. A key stakeholder group that often advises, selects and monitors fiduciaries - organized labour - has also become active in this realm. In the United Kingdom, the Trade Union Congress (TUC) has adopted the TUC Model Shareholder Voting Guidelines to assist trustees on the exercise of their rights and obligations. The premise of these guidelines is that British enterprises that are accountable will be more efficient, to the mutual benefit of owner stock values, workers and the broader community. In turn, says the TUC, British pension funds must behave as stable, long-term investors and place an onus on fostering business prosperity, economic growth and job security.

The TUC guidelines offer a framework for trustee action on multiple governance concerns. It is recommended, for instance, that company reports be regular and detailed, that decision-making of boards of directors be transparent and that proposed takeovers and mergers be fully evaluated in advance. Shareholders should also approve executive pay schemes, ensuring that they are fair, performance-based and available in comparable form to employees. The TUC also believes that a firm’s employment record should be held to certain standards, such as minimum pay and benefit levels, access to training, adequate health and safety and socially responsible practices, at-home and overseas. Finally, labour trustees must be prepared to back valid shareholder resolutions dealing with these priorities.

In the United States, the AFL-CIO has also published guidelines for labour fiduciaries. Like the TUC, the AFL- CIO emphasizes an active role for boards of directors on such governance issues as director elections, executive pay and major corporate transactions, including control changes (e.g., recapitalizations, re-incorporations, poison pills, altered board or management powers). Also like the TUC, the AFL-CIO asserts that pension activism should encourage positive industrial relations and corporate citizenship with respect to the environment, international human rights and communities of residence. Some in American labour have been assiduous in applying these principles, seen in the steadily increasing share of annual shareholder proposals forwarded by Taft-Hartley and union-affiliated funds on such current priorities as executive compensation, director accountability and anti-takeover measures. In 1997, the AFL-CIO set up the Center for Working Capital to act as a resource to this end, in part, by giving technical assistance and data to trustees and unions and by tracking the progress of labour-endorsed initiatives. One tool is the publication of annual key vote surveys designed to set new benchmarks for proxy voting.

There are signs that the labour movement in Canada may be heading in a similar direction. Like their American counterparts, Canadian unions and union centrals will sometimes join with church and non-governmental organizations in advancing social responsibility goals through concerted and strategic shareholder activism. For instance, the British Columbia Federation of Labour and its affiliates helped lead a shareholder resolution and lobbying campaign in 1998 on international abuse of child labour. To date, few Canadian pension-held shares have been voted in such events.

Sources: AFL-CIO, Investing in Our Future: An AFL-CIO Guide to Pension Investment and Proxy Voting 1990; Hutchinson, Moira, The Promotion of Active Shareholdership for Corporate Social Responsiblity in Canada, 1996; Pensions & Investments, “Special Report: shareholder activism”, February 9, 1998; TUC, Shareholder Voting: A Guide for Member Trustees, 1996

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