Chamber Applauds DOL Union Proxy Activity Decision

Washington, D.C.—The U.S. Chamber of Commerce today applauded an Advisory Opinion Letter from the U.S. Department of Labor's Employee Benefits Standards Administration (EBSA) prohibiting union pension funds from engaging in politically-motivated proxy activity. The letter makes clear that under ERISA, the federal retirement security law, fiduciaries may not introduce or support proxy resolutions that do not provide a clear economic benefit to their plans.

"This sends a clear message that union pension trustees need to put workers' retirement security first, instead of any political agenda," said Chamber President and CEO Thomas J. Donohue. "Union pension savings belong to beneficiaries and retirees, and must not be tapped to advance goals other than the economic enhancement of those funds."

Last year, the Chamber wrote to the Department of Labor asking whether a shareholder activism campaign launched by the AFL-CIO was compatible with ERISA. The campaign seeks to pressure companies to support the AFL-CIO's health care agenda, and reportedly to reveal the personal political contributions of corporate board members and officers to candidates who oppose that agenda.

EBSA's response expressed strong concern about the use of assets to promote particular legislative, regulatory or public policy positions that have no connection to the original purpose of the fund. In particular, EBSA states that it rejects a construction of ERISA that would render the Act's tight limits on the use of plan assets illusory, and that would permit plan fiduciaries to expend ERISA trust assets to promote myriad public policy preferences. The Advisory Opinion incorporates a 2005 EBSA letter, which stated that these "myriad public policy preferences" include: federal policies concerning public debt, trade, exchange rates, interest rates, housing, the environment, labor, tax law, antitrust law, bankruptcy law, criminal law, civil rights, and myriad other matters.

In addition, the Opinion Letter states that plan fiduciaries "risk violating the exclusive purpose rule of ERISA" should they attempt to further legislative, regulatory or public policy issues through the proxy process "when there is no clear economic benefit to the plan." As articulated in previous EBSA regulations, this process includes the issuance of proxy voting guidelines. Significantly, the Advisory Opinion states that if the likelihood that a shareholder resolution would enhance the value of a plan's investment in a company is "sufficiently remote," it would be potentially illegal to introduce or support such a resolution.

"It's no longer enough to cite hypothetical beliefs as a justification for introducing or supporting proxy resolutions," concluded Donohue. "This letter gets down to dollars and cents; either your actions will demonstrably increase pension plan returns for workers or they won't."

The U.S. Chamber of Commerce is the world's largest business federation representing more than 3 million businesses and organizations of every size, sector, and region.

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