U.S. Chamber Study Shows No Benefit to Investors from Union-Backed Shareholder Activism

Wednesday, May 1, 2013 - 8:00pm

WASHINGTON, D.C.—Union-backed shareholder activism has failed to increase shareholder value, according to a new report released today by the U.S. Chamber of Commerce. The report, produced by Navigant Consulting, examined all proxy proposals “key-voted” by the AFL-CIO from 2009-2012 and was introduced during a forum on union shareholder activism. 

“Unions and their allies are among the most prolific shareholder activists, but the key question is whether this produces any benefit for shareholders,” said Lisa A. Rickard, president of the Chamber’s Workforce Freedom Initiative.  “This report demonstrates that the answer is ‘no’ and shows that politicizing the boardroom hurts the millions of individuals who rely on these investments for retirement.”

“The U.S. Chamber supports strong corporate governance and opposes any effort to hijack this process to promote unrelated narrow interests that do not serve the long-term goals of a company or its investors,” said David Hirschmann, president and CEO of the Chamber’s Center for Capital Markets Competitiveness. “Once again, this report shows that shareholders and retiree’s lose because of politically motivated agendas.”

The report, titled “Analysis of the Wealth Effects of Shareholder Proposals – Volume III,” looked at a broad range of proxy proposals covering governance issues like proxy contest reimbursements, as well as non-governance issues such as disclosure of political contributions, and found no statistically significant improvements in shareholder value in the short run or long run. The analysis of non-governance issues in particular shows some negative results.

The proposals analyzed were introduced by a wide variety of entities including unions, Taft-Hartley pension plans, public sector pension plans, and individual investors.  The report notes that some of these entities, in particular pension plans covered by the Employee Retirement Income Security Act (ERISA), have specific fiduciary obligations under federal law and must be able to substantively demonstrate how engaging in shareholder activism is expected to benefit plan participants.

The full study is available here.

Since its inception in 2007, the Center for Capital Markets Competitiveness has led a bipartisan effort to modernize and strengthen the outmoded regulatory systems that have governed our capital markets. The CCMC is committed to working aggressively with the administration, Congress, and global leaders to implement reforms to strengthen the economy, restore investor confidence, and ensure well-functioning capital markets.

The Workforce Freedom Initiative is a grassroots mobilization and advocacy campaign of the U.S. Chamber of Commerce to preserve democracy in the American workplace, restrain abusive union pension fund activism, and block the anti-competitive agenda advocated by many labor unions.

The U.S. Chamber of Commerce is the world’s largest business federation representing the interests of more than 3 million businesses of all sizes, sectors, and regions, as well as state and local chambers and industry associations.