U.S. Chamber's Donohue Urges Labor Secretary to Protect Shareholders from Politically Driven Union Activism

Voices concern that some union pension funds may unlawfully play politics with assets

WASHINGTON, D.C.— U.S. Chamber of Commerce President and CEO Thomas J. Donohue has written to U.S. Secretary of Labor Hilda Solis calling on her to protect shareholders from politically driven union activism by using the authority of the Department of Labor to investigate potential abuses.

In the letter, Donohue expressed concern that many union pension fund managers are putting retirements at risk by using pension assets to press unrelated social and political objectives. This shareholder activism may be in violation of the Employee Retirement Income Security Act (ERISA).

"Plan trustees must act solely in the financial interest of the plan's participants and beneficiaries," wrote Donohue. "In recent years, however, many union pension funds have become increasingly engaged in shareholder activism, using members' and employees' retirement assets to advance proxy resolutions on the environment, outsourcing, political contributions, health care, and a host of other socially and politically motivated goals."

Donohue included with the letter a recently released study by Navigant Consulting showing that shareholder activism by union pension funds provides no benefit to pension plan participants, and may actually reduce shareholder value.

The Navigant study analyzed both the short-term and long-term effects of union-backed shareholder proposals identified as "key votes" by the AFL-CIO in annual surveys from 2002-2008. Examples from the study include proxy resolutions requiring companies to disclose political contributions, take action on carbon emissions, and adopt proposals making it easier to unionize. In each case, the study found no empirical evidence that the resolutions provided any benefit to shareholders.

In 2008, the U.S. Department of Labor issued new guidance stating that such politically motivated proxy activity may violate the fiduciary duties of union pension trustees under ERISA.

"As many union-affiliated pension plans slip into financial distress, it becomes even more important for the Department to exercise its enforcement powers to ensure that such plans are fulfilling their fiduciary obligations to participants," said Donohue.

To read a copy of Donohue's letter and the Navigant study, click: /wfi.

The U.S. Chamber 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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