New book: Labor in the Age of Finance

Labor in the Age of Finance: Pensions, Politics, and Corporations from Deindustrialization to Dodd-Frank (Princeton 2021) by Sanford M. Jacoby

Summary [submitted by the author]

How Unions Tries to Rebuild their Power by Engaging with Finance through Politics and Pension Funds

Since the 1970s, American unions have shrunk dramatically, as has their economic clout. Labor in the Age of Finance traces the search for new sources of power and shows how unions turned financialization to their advantage. The book focuses on the two decades preceding the enactment of the Dodd-Frank Act.  It catalogs the array of finance-based tactics that labor deployed to stanch membership losses, chiefly shareholder activism and, to a lesser extent, engagement with private equity.  Much has been written about recent financialization but little about what happened when unions labor reckoned with finance.

         Leveraging pension capital was a new tactic for pressuring employers when unions sought new members. There were some victories, which the book discusses, but often these efforts failed. To increase labor’s bargaining power when confronting employers, its pensions funds (co-called multiemployer plans) sought alliances with other large institutional investors, including union-influenced public pension funds. Common ground was provided by governance reforms that gave shareholders greater clout, as with say on pay and proxy access. Shareholder interests aligned with the funding needs of pension funds but less so with the present-day concerns of corporate employees, as with the negative correlation between investor payouts and wages. The irony is that labor’s financial activism had bigger effects on corporate governance than on reversing its own decline.

         But there were other objectives. Unions gained greater access to CEOs and corporate boardrooms. Attempts to check rising CEO pay tarnished management’s image and drove a wedge between executives and employees. To weaken corporate political power, union pension funds and their allies demanded transparency of corporate political donations, which was a prelude to legislation. The interplay between private orderings and regulation--as also occurred with proxy access, say on pay, and Dodd-Frank--is a thread that runs throughout the book. Lastly, labor’s new-found financial expertise provided entrée into the SEC and Congressional negotiations over Dodd-Frank Act, a little-known story.

         Labor in the Age of Finance not only is corporate history but also labor history. Explored through the lens of finance are tensions within the labor movement: between public and private workers, conservative and progressive unions, and between top-down strategies and the involvement of union members in formulating them. The book describes the history of unions and finance as it was--with all the messiness and complexity--yet at the same time draws out the main threads that ran through that history and the direction they are pointing.