It’s no secret that labor unions are struggling. Even though federal law tilts decidedly in their favor, unions have seen their share of the workforce steadily decline. Membership has been dropping, both in total numbers and as a percentage of the workforce, for many decades. Only 1 in 10 American workers is now unionized, and in the private sector, the unionization rate is less than 6%.
Yet instead of trying to persuade workers to sign up, unions have settled on a more coercive strategy: activist investing that endangers union members’ retirement funding.
In a new report, I show how unions have been using so-called “ESG Investing” to advance their agenda. This investing approach, which stands for “environmental, social, and governance,” is widely known for supporting climate policies at corporations. Yet the “S” and the “G” are often covers for union demands.
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Under the ESG pretense, unions are pushing shareholder resolutions that would ditch secret-ballot elections at companies. That’s a key labor demand because it enables unions to harass and intimidate workers into publicly signing cards in favor of unionization. Unions also push shareholder resolutions ordering companies to adopt “non-interference policies,” ensuring a business can’t talk to its employees about the downsides of unionization.
Practically, unions promote these policies in two significant ways. The simplest approach is to use their own pension funds, which invest hundreds of billions of dollars, to demand that the businesses they invest in adopt pro-union policies. Union officials are also appointed to pension boards, where they directly support activist investment strategies based on ESG. Public pension plans have great clout thanks to the trillions of dollars at their disposal, enough to take significant ownership stakes in banks or investment funds. Either approach lets organized labor push shareholder proposals that tilt the scales in unions’ favor.
But when unions succeed, workers can lose. Non-unionized workers don’t benefit when unions convince companies to abandon secret-ballot elections or stay out of the election process. That deprives workers of the privacy and information they need to make decisions that work best for them.
What’s more, many unionized workers lose because their pension plans promote union demands instead of pursuing financial returns. The whole point of a pension is to make money so its members can enjoy a secure retirement. Research has shown that unionized companies can “lose 5 to 10 percent of shareholder value,” given their lack of flexibility and lessened ability to compete. In other words, when union pensions try to force unionization at other companies, they’re sacrificing their own members’ long-term financial security. At public pension funds, taxpayers must cover the gap when returns fall short. They’re paying for pension managers’ refusal to put workers first.
But the pain for workers doesn’t end there. Unions aren’t just using ESG investing to grow their own power. They’re also advancing a broader suite of leftist goals that have nothing to do with financial returns and everything to do with political gamesmanship.
The Service Employees International Union uses its investing power to pursue “racial equity and justice,” including holding “companies accountable for failing to address systemic racism.” The AFL-CIO wants pension fund managers to promote a “clean energy transition” pursuant to ESG. The largest union-owned bank — Amalgamated Bank — uses its financial resources to support “economic, social, racial and environmental justice,” which means ending fossil fuels and challenging controversial racial politics. Virtually everywhere you look, both public and private union pension funds invest trillions of dollars based on political ideology.
But this isn’t unions’ money — it’s workers’ money. Workers pay into pension funds because unions have promised to secure their retirement. In many cases, the promise of a comfortable financial future led those workers to unionize in the first place. Instead, their hard-earned money is being used — and abused — to further unions’ political goals. These workers have been sold a bill of goods, one that will cost them in their golden years.
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The good news is that Trump and lawmakers across the states are fighting for workers. The Department of Labor has overturned a rule that advised pension funds to consider “climate change and other environmental, social, or governance ESG factors” when making investment decisions. And states are passing laws re-establishing the principle that investments should be about financial value, not capital activism.
America’s workers are already avoiding unions like the plague, hence the labor movement’s shrinking size. Unionized workers, many of whom have no choice about membership, should not have to worry about unions co-opting their retirement money under the guise of ESG.
Jarrett Skorup is vice president of marketing and communications at the Mackinac Center for Public Policy.