Labor in the Age of Finance: Pensions, Politics, and Corporations from Deindustrialization to Dodd-Frank

Abstract

After the 2008 financial crisis, advocates of regulation often observed that banking needed to be made boring again. The footprint of finance in American and world society, it was widely realized, had expanded dramatically, relying on exotic innovations and yielding incredible profits. With disastrous effects, bankers now appeared as swashbuckling adventurers rather than the gray, dull figures they once had been.Organized labor was caught up in this transformation in important ways, as Sanford M. Jacoby demonstrates in Labor in the Age of Finance: Pensions, Politics, and Corporations from Deindustrialization to Dodd-Frank. Jacoby, an eminent historian of business and industrial relations, argues that, with the rest of society, labor took a “financial turn” (1). “For much of the twentieth century, the worlds of finance and labor spun in separate orbits,” he writes. “They drew nearer as the century came to a close and a new one began” (8).While the workers’ movement in the broad sense and in its early days was concerned with questions of monopoly and corporate ownership, the triumph of the managerial firm in the twentieth century largely buried this tradition. Through the midcentury period, while community organizers and activists agitated for access to corporate decision-makers, labor leaders already had a forum in which to meet them: the bargaining table. But out of collective bargaining came the pension, an institution of unexpected significance in the nexus between workers and corporate control. As the labor movement lost members, weakened, and faced tougher opposition in the 1970s and 1980s, unions began to adopt the tactics pioneered by figures like Saul Alinsky and Ralph Nader to pressure corporate boards and managers. This approach, developed in campaigns such as ACTWU's fight against J. P. Stevens and later SEIU's Justice for Janitors, combined strategic research, spectacle confrontation, and shareholder and other stakeholder lobbying; eventually it became known as “corporate campaigning.” In some cases, unions discovered that they could use pensions accumulated by the movement's own members over years of collective bargaining—pensions that, after all, consisted of ownership shares of corporations—to gain access to corporate leadership. In this way, labor's own collective stake in financial markets began to take complex new forms of significance in workplace conflicts.The most significant player in thinking strategically about how to use labor's capital was CalPERS, the pension system of California public employees. In the 1980s CalPERS helped to organize the Council of Institutional Investors (CII), which exerted pressure on corporate governance. Along with similar organizations, including TIAA-CREF, CalPERS and CII helped produce what Jacoby calls a “cookbook” of recommendations for best practices, which investors could pressure corporations to adopt. The shareholder revolution of the 1980s was a complex process involving pressure on incumbent corporate leadership from both raiders like Carl Icahn and T. Boone Pickens and institutional investors like CalPERS, but it expanded avenues for union pension funds to lean on firms in which they held shares. In the 1990s, union pension funds built on the gains of the shareholder revolution to pressure firms around CEO pay, corporate social responsibility, transparency of firm political involvement, and collective bargaining itself—although using power in these venues to win recognition and contracts often proved elusive.One useful line of investigation, which might have been explored further, considers divisions within the labor movement. The pioneers of corporate campaigning were largely in the new service economy—SEIU, Hotel Employees and Restaurant Employees (HERE)—but the Teamsters and especially the Carpenters also played major roles. Ed Durkin, the Carpenters’ official for shareholder engagement, sought to develop a unified “worker-owner view,” at least within the building trades if not more broadly (121). But as a former SEIU official complained, the Carpenters were overly focused on “the most immediate, self-interested, short-term tactical objectives” (121). Most of Jacoby's research draws from journalistic reporting, so he does not dig as deeply as he might into the political economy of these divisions: What was going on in the trades that led Durkin to seek a relationship of “cooperat[ion] with management” through labor's ownership stake, for example? We still have a largely a personalistic account of the divisions in the labor movement in the past generation. Still, what the book does offer is highly enlightening.After largely absenting itself from the financial deregulation debate of the 1990s, labor became reengaged in questions of corporate governance following the wave of scandals of the early 2000s, and after the deflation of the tech bubble. In one of the most interesting chapters, Jacoby documents a campaign led by organized labor for “proxy access,” the right of shareholders to nominate directors for corporate boards. Union presidents leaned on pension funds to fight for proxy access firm by firm over the course of the 2000s, and corporate America became convinced that a coup was in the offing. In 2009, these efforts came to a head when Charles Schumer and Maria Cantwell introduced a bill mandating proxy access, which was eventually included in weakened form in the Dodd-Frank financial reform bill—then defeated when a conservative judge threw out the SEC's enforcement rulemaking. As the Chamber of Commerce argued, the SEC “has given special interests the ability to hold the board hostage on narrow issues at the expense of other shareholders” (163). The court agreed, ruling that institutional investors might have goals “greater than their interest in share value and [can] be expected to pursue self-interested objectives rather than the maximizing of shareholder value” (164).Even without such formal powers, however, unions continued to leverage ownership against employers, thanks to financialization. Public employee pensions acting as the limited partners for private equity funds and hedge funds created a venue for unions to lean on the companies that have come to own more and more of the American economy—particularly private equity. But such efforts repeatedly bring unions into relationships of partial cooperation not just with management—as has long been routine in American collective bargaining—but also with financial owners. When the financial crisis struck, labor was, to some extent, unprepared in movement terms (if not in intellectual terms) and did not generate the energy for protest, which flowed instead through Occupy Wall Street—a movement that enjoyed some cooperation of unions but always developed at arm's length, for good and ill.The partial integration of the labor movement into financial markets, its efforts to turn that integration into a source of power, and the constraints and divisions that have resulted, are both an exceedingly important topic and one that—because of its dryness, perhaps—is quite unknown, even within labor movement and labor history circles. In this sense, Labor in the Age of Finance does us all a service. Jacoby is light with interpretation, and the book therefore opens opportunities for future scholars to dig deeper and argue more vigorously, expanding on the foundation laid down in this excellent book.