Isla Carmichael has been writing about union pensions for a decade. Over the past ten years, she has examined different aspects of union-based pension funds and labour-sponsored investment, including fiduciary responsibility, the role of union pension trustees, social accounting, collateral benefits and economically targeted investment. In this book, she brings together these, and other, arguments to make a case for the greater involvement of unions in directing and investing pension funds, not only to provide benefits to union members but also to shape economic growth and community development. Her analysis is comprehensive and her argument is persuasive.
The book is divided into three parts. Part one describes the vested interests—of employers, governments and even of some unions—which form barriers to workers' control of pensions. Initially, Carmichael documents how workplace pensions evolved in Canada and how fiduciary, or “prudent man” and loyalty, rules have required pension trustees to focus on the maximum rate of financial return to the exclusion of social criteria. She then goes on to show how existing practices have led to inefficiencies in the structure of capital markets in Canada, an increased concentration in the ownership of large blocks of shares by institutional investors and limitations in shareholder activism.
In spite of these restrictions, Carmichael documents how some unions and socially minded institutional investors have acted to redirect management and investment practices without necessarily reducing the rates of financial return. Two examples are the California Public Employees Retirement System in the United States and the Taskforce on the Churches and Corporate Responsibility in Canada, which have used proxy votes to change corporate behaviour. Similarly, she shows how social audits, ethical screens, value added accounting and economically targeted investment can be used by investors to develop measures of corporate social performance, which provide practical guides for alternative ways of investing in the market and economic development.
Part 2 of the book is a fascinating and informative case study of Concert, a real-estate development company in British Columbia funded through the pooling of capital from 26 pension funds with union trustees. Concert is currently one of the largest real-estate companies in the province. It is owned exclusively by union and management pension funds. It was founded on the principle of building affordable housing.
Carmichael uses the experience of Concert to illustrate, through social accounting, how union-based pensions and investments in British Columbia contribute to increased benefits to pension funds, job creation and government. One advantage, for example, is the creation of employment for unionized carpenters in housing projects because of an insistence of union labour on construction sites. Another is a significant contribution to the Carpentry Workers' Pension Plan (one of the union investors). Still another is the amount of taxes paid to government because of the employment of the carpenters.
Carmichael argues convincingly that unions can play a bigger role in the economy if they gain more control over their own members' funds—she uses the term deferred wages to refer to such funds. She demonstrates, by example, how the investment of pension funds can move beyond current, conservative, fiduciary practices to incorporate labour, environmental and social standards without financial loss (and possible gain) to pension beneficiaries. At the same time, she recognizes that her examination of Concert and Mortgage Fund One, while illustrative of the potential of unions to control their pension funds, is only a first step in gaining a more comprehensive understanding of economically targeted investment, ethical screening and social accounting. To achieve the larger goal, she argues that it is important to research the extensive experience of the solidarity fund of the Quebec Federation of Labour and the “Caisse de Dépôt et Placement du Québec,” as well as other provinces like New Brunswick and Manitoba.
Still, one has to ask why unions across Canada have been so slow to move in the direction she proposes. Part of the reason is the resistance of some big private-sector unions, like the CAW, which argue against social investment and union involvement in pension fund management on the grounds of conflicting role obligations and diminishing returns. Another is that some big public-sector unions have limited negotiability in terms of their pension funds. In spite of these limitations, however, several union federations across Canada have teamed up with academics, at the Ontario Institute for Studies in Education and abroad, to develop more research and education resources for the labour movement to help shape a union pension agenda. Carmichael's book is part of a set of building blocks. More needs to be done if the ideals of the book are to be realized.
