Author: Jay Youngdahl

Youngdahl is a Senior Fellow in the Initiative for Responsible Investing (IRI) at Harvard's Hauser Center. He is an Independent Trustee of the Middletown Works VEBA, a member of the Executive Committee of the IRI's Trustee Leadership Forum for Retirement Security, and a partner in the law firm Youngdahl & Citti, P.C. He has a JD from the University of Texas and a MDiv from Harvard.


In this article, views of Jay Youngdahl are expressed followed by a response from Ai-jenPoo and Palak Shah

Greed-Washing the On-Demand Economy: The NDWA’s “Good Work Code”

By Jay Youngdahl

Readers of New Labor Forum are familiar with the depleted state of America’s unions, workers’ depressed living standards, as well as of the emergence of responsive ideas, strategies, and struggles.  The current ferment will surely to lead to successes, but in the process a number of counterproductive strategies are emerging.[i]

Though led by smart, empathetic activists, one of the oddest and most problematic of the new efforts is the Good Work Code (GWC or the Code) for the on-demand or “gig” economy, formulated by the National Domestic Workers Association (NDWA).[ii]  While the Teamsters and the Service Employees International Union (SEIU), in particular, are engaged in unionizing strategies in the tech sector, and enterprising wage and hour lawyers are confronting the sector’s wage theft, the NDWA, working with a number of corporate partners such as the Uber-like delivery company DoorDash, has created an aspirational code for tech-sector employers.

An analysis of the GWC is a lesson in the problematic nature of a number of trends in the Philanthropic Labor Movement (PLM).  Unfortunately, within the non-profits in the foundation-funded PLM, worker agency, power, and democracy, the bedrocks of a strong movement, are often hard to find.[iii]

The Code was unveiled last fall with a splashy website and media campaign, after the well-respected NDWA canvassed “on-demand” employers.[iv]  Signatory companies committed to endorse general “values” for their work forces Safety, Stability and Flexibility, Transparency, Shared Prosperity, A Living Wage, Inclusion and Input, Support and Connection, Growth and Development––and to make public a few sentences about what “progress” they will make in relation to two of the eight values.[v]  Nothing more was required. In exchange, they received a kind of “Good Housekeeping Seal of Approval” to trumpet on promotional materials, backed by the progressive reputation of the NDWA.

Codes which inure to the benefit of workers are sometimes developed for areas in which worker power is lacking and protection at work sorely needed.   But like codes for organic food or product safety, many are simply corporate greedwashing.2)  As the trajectory of the Fair Labor Association has shown in the garment supply chain, “many companies adopt codes to assist with their reputational risks over questionable labor practices,” says Ben Hensler, Deputy Director of the Workers Rights Consortium.[vi]

Good codes exist, but to work, Hensler continues, they “need several attributes including legal enforceability, independent and transparent monitoring of compliance, and meaningful involvement of worker representatives.” One successful code is the Accord on Fire and Building Safety (the Accord) in Bangladesh negotiated between international trade unions at such companies as Fruit of the Loom and Benetton.  Coming on the heels of the Rana Plaza building collapse in which, scandalously, more than one thousand people were killed, the Accord is a legally binding agreement covering over two million workers. To ensure a safe working environment the Accord includes inspection programs, public disclosure of reports, a democratically elected factory-based health and safety committee, and a right to refuse unsafe work.  Fruitful codes are present in the U.S. as well.  The Coalition of Immokalee Workers, through a strategy of farmworker organizing, consumer education, and boycotts, has forced a number of retail companies, including Walmart, to sign onto its Fair Food Code of Conduct, which contains labor protections.  And, the NDWA’s original caregiver’s Bill of Rights is a solid type of code, whose use has advanced efforts to protect in-home labor.

It is easy to see why tech companies would like the Good Work Code.  NDWA’s anointing of DoorDash as a company that provides good work gives the company a powerful weapon when questioned about the compensation of its drivers.[vii]  And, for a troubled public company like, the reputational boost from its NDWA seal of approval is valuable.[viii]   But why would the NDWA, a very well-respected organization, leverage its prestige with this mealy-mouthed GWC, even as an experiment?[ix]

First, the sparkly potential of the “on-demand” economy glimmers for many schooled in social entrepreneurship, and is seducing too many labor advocates.[x] The Good Work Code is based on the Silicon Valley utopian vision featured in TED talks with breathless paeans to “innovation” and “disruption.”  In this Garden of Eden, it is claimed, wonderful “new opportunities” exist for workers featuring “flexibility” and “freedom.”[xi]

Further, the GWC is a manifestation of the Good Capitalism movement.  Here, the “rich can save the world,” and “capitalism itself can be philanthropic, working for the good of mankind  . . . by [innovating] to benefit everyone, sooner or later.”[xii]  In what the writer Anand Giridharadas has called the “Aspen Consensus,” generosity becomes a substitute for justice. Companies are exhorted to “Do More Good,” but never, “Do Less Harm.”[xiii]  And, in Good Capitalism, “the business approach is the only thing that can change the world.”[xiv]

Worker power is Lilliputian in Good Capitalism, and worker “betterment” is mediated by well-meaning politicians, foundation program officers, and PLM leaders.  Ideas of confrontational unions, with their worker solidarity and messy democracy, is shunned. Describing the GWC, Ai-jen Poo of the NDWA told Forbes, “Our goal is to create a new story—a new narrative– that’s not about abusive employers and downtrodden workers, but rather that brings companies front and center into the conversation about the future of good work.”[xv]  Given the realities of life for Silicon Valley workers, this brings to mind Barbara Ehrenreich’s writing on the perils of positivity as “an apology for the crueler aspects of the market economy;” lower-rung “gig” workers are simply “modern” day laborers.”[xvi]  Even one of the signatories of the GWC admitted that in the “new economy” “the basics remain much of the same … a time clock used to be something that was mounted on the wall of a factory; now it’s a mobile app.” [xvii]

For those who would say that criticizing the Code is just “old labor” negativity, consider Poo’s statement to Forbes that, “We see a moment of opportunity right now because the gig/online economy is relatively new and its values and principles regarding work are still forming.”[xviii]  There is much to chew on here, but it is farcical to claim that the “values and principles of these Silicon Valley creations are still forming.” Silicon Valley has a well-formed negative ethical code– raw profit-seeking individualism.  Their leaders are constantly in the news for some kind of unethical actions whether in their personal lives– cheating a sex slave or closing public access to beaches for their private use– or in their business–cheating workers out of their wages.[xix] As to the “evolving ethics” for employees, advocates and discharged workers know that many business models are based on “exploiting workers and disregarding employment laws.”[xx]  The bigger on-demand companies such as Uber and Instacart have recently cut pay to their drivers. And, an “occupational segregation” exists in the Silicon Valley as full-time jobs are replaced with low-wage subcontracting work staffed by predominantly black and Latino workers.[xxi]  A recent report found that the average blue-collar subcontracted worker has an annual income of $19,900.  A living wage for a single mother with one child in this area, for example, is at least twice this amount.[xxii]

New ideas for worker justice and power are needed and certainly a thousand flowers should bloom, but the Good Work Code is a bad strategy even though advanced by good people.



[i] For a light “taxonomy” of these “new labor” formations and commentary of their promises and perils, see, Jay Youngdahl, “Is a Progressive Phoenix Rising?  The New Labor Movement is Approaching,” Social Policy Winter, 2016.

[ii] The NDWA is led by Ai-jen Poo, who is on the Board of the New Labor Forum.

[iii] Recent events have shown that success may come in areas of personal identity and work culture from PLM activities, such as shown petitions demanding the right of retail workers to dye their hair blue, red, or pink.  Challenges to income inequality do not fare as well.


[v] Palak Shah, the leader of the GWC, said that each signatory commits to “focusing on at least two of the eight as priorities over the next year. The idea is to kick off a conversation– it doesn’t mean these companies will get to all eight right away, but it means they aspire to do so, and they are taking public steps to do so. And it means they won’t have to do so alone, but rather in a community of practice grappling with the same questions.” Michael Zakaras, “Can the Online Economy Become a Labor Leader,” Forbes, November 13, 2015

[vi] The Fair Labor Association has been called a “fig leaf” to cover supply chain labor abuse.

[vii] Lyft recently was forced to admit in court that it has taken $126 million in compensation from drivers through its classification of them as independent contractors.

[viii] The case of and NDWA is especially interesting.  Given’s business space and the mission of the NDWA, their closeness is understandable.  Like the UAW and GM or the APWU and the USPS, unions often stand by their employers.  Unfortunately though, unlike GM and the USPS, staff is not unionized.

[ix] I want to thank Ai-jen Poo and Palak Shah for speaking to me as part of my writing in this area.  I salute their openness.  Shah, to her credit, told me that the GWC is an “experiment,” to “shift the conversation to workers.”

[x] A close look at the public relations push behind the “Portable Benefits” movement and efforts to replace worker “employee status” with a form of “independent contractor status” highlights this attraction to Silicon Valley language and thought.  See, and Jay Youngdahl and Darwin Bond-Graham, “When Labor Groups and Silicon Valley Capitalists Join Forces to “Disrupt” Protections for Employees,” Working In These Times blog, December 4, 2015

[xi] As to flexibility, when asked, “Legal arguments aside, why is DoorDash opposed to having its drivers classified as employees?” the company responded that: “Our goal at DoorDash is to provide meaningful, flexible work for people across the country. When we speak with Dashers we regularly hear that one of the most important benefits of their work is flexibility and we want to ensure we continue to provide them with that option. We are proud to have created opportunities for a growing community of tens of thousands of Dashers that offer them flexibility, freedom and a meaningful source of income.”  In fact, this flexibility and new opportunities remind one of the famous quote of Anatole France in “The Red Lily.”  “The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread.”

[xii]  See, Recently, the former head of BP, the company responsible for the largest environmental disaster in the U.S., wrote on how companies can “tackle big social problems,” lauding Walmart’s success in this area.

[xiii] While a fellow at the Aspen Global Leadership Network, Anand Giridharadas gave a speech which included these remarks.

[xiv]Unfortunately, the NDWA is not the only organization that has been seduced by this “business case.”  In “old labor”, for example, many labor Capital Strategies activists use the term “human capital” to describe workers, even their own members. And the labor program at Harvard, partially financed by unions, is starting a “human governance” research program “Human Governance as a management paradigm that emerges when an organization recognizes and seeks to fulfill a commitment to the never-ending pursuit of societal value through realizing the full potential value of its entire human capital.”

[xv]  At a recent White House forum Poo told President Obama that NDWA found that many on-demand employers “just wanted to do the right thing and it wasn’t clear what that was.”  Poo followed that there were “no standards, no guidelines” for employers.  The President responded that he was a fan of collective bargaining.

[xvi] Barbara Ehrenreich, “Bright-Sided: How Positive Thinking is Undermining America,” Picador Press, 2010.

[xvii] See, Cole Stangler, “Meet the Gig Economy Companies That See Investing In Workers As a Smart Business Strategy,”  March 17, 2016  International Business Times

[xviii] See, Greg Bensinger, “Grocery-Delivery Startup Instacart Cuts Pay for Couriers,” March 11, 2016 Wall Street Journal


[xx]; recently a lawyer for Wage Theft Coalition echoed the former Zirtual employee: “In Silicon Valley, exploitation is part of the business model.”  Jennifer Wadsworth, “Recent Cases Highlight Silicon Valley’s Wage Theft ‘Epidemic,’” March 9, 2016 SanJoseInside





RESPONSE: New Business Models Demand New Forms of Worker Organizing

Response by Ai-jenPoo and Palak Shah

We welcome the opportunity to discuss the merits of the Good Work Code (GWC) and engage with Jay Youngdahl’s critique. As we read it, Youngdahl poses three main objections to the GWC: (1) The values framework articulated is aspirational and unenforceable; (2) it “greedwashes” companies engaged in bad labor practices; and (3) it is based on the notion that “Good Capitalism” can be mobilized to solve the problem of worker exploitation. In the course of his critique, Youngdahl also targets what he calls the “Philanthropic Labor Movement,” that is, those of us with the temerity to organize workers outside the frame of traditional labor unions.

Digital technology and on-demand hiring platforms are rapidly transforming how workers engage with various sectors of the labor market and their terms and conditions of work. Domestic work is among the many occupations impacted by new technology. Increasingly, workers and employers are matched online for child care and eldercare jobs through companies like, and the on-demand economy has penetrated the housecleaning market through companies like Handy and TaskRabbit.

NDWA turned its attention to Silicon Valley not because, as Youngdahl implies, we were bedazzled by the bright, shiny objects dangled by tech companies, but because, the fact is, these models are transforming labor markets. Increasing numbers of domestic workers, and other low-wage workers, access work through these companies. This phenomenon is in its infancy and our expectation is that it will grow. We believe these workers deserve the best wages and conditions of labor. We assume that Youngdahl agrees with us, at least on this point.

The labor movement is still in the early stages of determining how best to meet the multiple challenges posed by companies that aggregate and deploy workers through digital platforms. Mechanisms for exploiting labor are proliferating and changing far more rapidly than our capacity to organize workers and represent their interests. Tech companies are building new business models, often creating ever more precarious conditions of life and labor, lowering wage floors and job quality. However, with the exception of the ridesharing companies Uber and Lyft, most gig-economy companies are in early stages. It is in this environment, that the labor movement is called upon to develop interventions on many fronts, fearlessly exploring traditional and nontraditional means of articulating, defending, and expanding workers’ rights.

It is in this context that NDWA initiated the Good Work Code. We quickly saw the structural similarities between domestic workers and so-called ‘gig’ workers. Both groups face inconsistent hours, working without contracts, lack of benefits, little to no labor law protections, and no clear path to unionization. At the same time, those who follow the gig economy know that it has been tech companies, not unions or labor advocates, driving the national conversation. By releasing a simple values framework, we have successfully inserted the demands and voices of workers into a narrative dominated by tech companies, with the intention of creating space for a conversation about what better employment practices could look like in the digital economy. That conversation is not meant to obscure problematic or patently illegal practices. It does not take the place of workers organizing, through unions or other forms, to improve conditions. And it does nothing to resolve critical issues like worker classification–it was not meant to. It does, however, broaden worker-driven demands without unscrupulously cutting deals. Our framework consists of eight simple values that we think are foundational to good work in the online economy: Safety, Stability and Flexibility, Transparency, Shared Prosperity, A Livable Wage, Inclusion and Input, Support and Connection, and Growth and Development.[1] The values were developed based on in-person interviews with workers in the tech economy about their experiences working on platforms— though the overarching values and principles are fairly commonsense. To participate, companies identify their current practices related to two of the values and their commitments going forward.[2] The GWC is not a seal of approval.[3] Its purpose is to function as a framework and an initial roadmap for companies to assess and improve working conditions for their employees. The GWC, or any derivative of it, can also begin to serve as a demand framework for all of us in the labor movement as we seek to better understand how work is changing specifically in the online economy.

So far 12 companies have chosen to affiliate themselves with the Good Work Code–launched in October 2015– and publicly endorse the eight values. Our own experience in the domestic worker movement has shown us that organizing strategies complemented with norms and culture change strategies can yield great results.

Over the last six months, we have seen the national conversation about work in the online economy advance from an exclusive focus on employment classification to what workers need and employer obligations to meet those needs. We believe we contributed to this important shift, and that the ground has been softened for a diverse range of interventions that will improve online work and increase worker power in the future.

How will this improve the lives of workers? The simple answer is that we don’t know yet. The vision of the GWC is to articulate aspirational values that extend beyond the rights and protections provided to workers by law, even when those workers are classified correctly as employees rather than independent contractors. But of course these are values, not yet measurable standards or specific rights enforceable by contract, though we support the emergence of concrete standards and enforceable contracts. Not being represented by unions, these workers currently have no contracts. NDWA and the GWC do not stand in the way of union efforts to organize these workers or any other efforts to realize gains for workers. And we understand that the ultimate arbiters of how these companies are doing are neither the GWC nor NDWA, but the workers themselves. However, what Youngdahl interprets as “greed-washing” we offer as one tactic or intervention, in a rapidly changing environment, which we believe has the potential to improve the work lives of tens of thousands of workers. Organizers and advocates would do well to keep their eyes on both long-term goals and on the full range of ways to improve working conditions in the current context.

Youngdahl suggests that we suffer the illusion that “Good Capitalism” will somehow reform itself and begin to operate in the interests of workers and all humankind. To the contrary, we understand that digital technology has, in most cases, exacerbated already stunning levels of inequality in our economy. But our own experience has taught us that an orientation toward collective bargaining or nothing at all is counter-productive and limiting. In the absence of an aggregated workforce, domestic workers have experimented for decades with multiple tactics and strategies to win better wages and decent work. Further, we believe– as we assume most workers do— that some companies are better to work for than others. They pay better wages, they don’t sweat their workers, they provide avenues for advancement, they encourage and incorporate worker input. Perhaps their owners adhere to a set of moral and ethical values that ultimately lean contrary to the demands of capital, and they actively engage that contradiction. Whatever the case, short of a comprehensively unionized workforce or universal worker control of production and service provision, we orient toward making consistent progress on impacting the framework of dialogue and meeting new challenges with new tactics.

We would remind Youngdahl of something he surely knows: Unions have had the opportunity to organize domestic workers since the dawn of the U.S. labor movement. They have chosen not to. Worker organizers outside traditional union structures, with the welcome support of foundations, have pioneered ways to organize neglected sectors of the working class to exercise their power and win better conditions of labor. Youngdahl’s cut at what he calls the “Philanthropic Labor Movement” seems to imply that it would have been better to leave these workers unorganized, or to continue to wait until traditional unions determined that organizing domestic workers was a worthwhile endeavor. We disagree.

As for the notion that those who fight for the rights of workers within the context of non-profit organizations squelch worker agency, power and democracy, we invite Youngdahl to meet the worker leaders and members affiliated with NDWA and dozens of other worker centers. Their power, voice, initiative, creativity, strategic thinking and commitment are the foundation for multiple victories that have expanded the rights and lifted the dignity of previously unrepresented workers.

We understand ourselves to be part of one labor movement, unified in its interest in winning the best deal for workers. We depend on our friends and long-term allies in traditional unions to stand with us in our joint effort to build a powerful and inclusive labor movement. We expect that there may be tactical disagreements among us along the way, but reject Youngdahl’s troubling assertion that we are deluded and that our methods are dangerous.

The reality is that none of us, including Youngdahl, know what it will take the rebuild the power of the labor movement in this country. What we do know is that the future of technology and the future of work are inextricably bound, and that the best work happens in the field. We contend that simply protecting and promoting a model of traditional trade unionism is not sufficient, nor is it working. We need many experiments, new forms of organizing and organization. And, we believe that changing the conversation–the cultural and narrative environment around work– is a key part of creating the context for the ultimate success of a new workers’ movement in this country. Capital is adaptive and sophisticated; at minimum, we must be as well.



[1] See:

[2] Each company and their public commitments are listed here:

[3] We are puzzled by Youngdahl’s consistent misrepresentation of the structure and nature of the Good Work Code as an initiative. We have consistently clarified that the Good Work Code is a commitment made by companies, not an endorsement by NDWA. Misrepresentation of these facts changes the nature of the initiative and we can only imagine is being employed to better suit Youngdahl’s argument.


Working on the railroad, Walking in Beauty: The Voices of Navajo Railroad Workers

Those who drive along Interstate 40 from Albuquerque, New Mexico through northern Arizona and into the Southern California desert are treated to a rainbow of colors in the mesas and through the mountains. They encounter the Grand Canyon, the Petrified Forest, a stunning descent into the canyon of the Colorado River, and the subtle variations of a cactused landscape. While the beauty delights travelers, this natural view is often interrupted by the consistent stream of trains—owned by Warren Buffett’s Burlington Northern Santa Fe Railroad—rolling over the double-tracked rails that parallel much of the highway. If you drive past these rails, you’ll often see large gangs of men—some working with hand tools, others operating machinery—maintaining the rails so the tracks can absorb the constant pounding that the trains dish out. Travelers in the Southwest often don’t know that many, if not most, of these men are Navajos. The Navajo Nation, occupying a landmass north of these tracks that’s nearly the size of the state of West Virginia, has been their home for roughly seven hundred years. Nearly a quarter million Navajos live here.

Railroad work has been one of the only forms of continuous wage labor available to Navajo men since their return to this reservation after the infamous U.S. government-enforced “Long Walk” of the 1860s. While Navajos and the Western railroads have a constant connection, an upsurge in Navajo railroad employment began after World War II, when companies were forced to send Mexican “bracero” workers home. In order to supply labor to the railroads a paternalistic triangle was formed. It was comprised of the U.S. government, mainly represented by the Railroad Retirement Board, an obscure federal agency based in Chicago; the Western railroad companies; and the owners of the trading posts that dotted the reservation. The Navajos had no say in the arrangement. Leroy Yazzie Sr., a pleasant sixty-year-old man with a sparkling Navajo sense of humor, found work on the railroads through his trading post. He got his job on the Rock Island Railroad after talking to a trader at the local trading post who told him to “round up some Navajos.” Leroy found some men willing to go work at the railroad. All of the Navajo men got in the back of a pick-up truck and the trader drove them to the embarkation site.

Railroad work is generally dangerous and, with few exceptions, Navajos are offered only the most difficult work on the major Western railways—track maintenance. Injuries are commonplace, as track work is still performed much as it was well over one hundred years ago. So, to this day, after the snow begins to melt in the spring, Navajo men leave their reservation and travel between the Pacific Ocean and the Mississippi River, in gangs of up to one hundred, maintaining and replacing aging railroad tracks.

Jerry Sandoval, the brother of a traditional medicine man, lives in a family compound at the end of a road on a beautiful small mesa overlooking a small settlement in the “checkerboard” area of the Navajo Nation. Jerry, a pleasant stocky man in his fifties, went to work for the Missouri Pacific Railroad in 1978, travelling throughout the Southwest and the southern Midwest off and on for the next eight years, rising at one point to the position of assistant foreman. He is a family man, and his house is festooned with artwork made by his kids. One of them now serves in the U.S. military.

Jerry thought it was “pretty nice to see a lot of places” during his railroad work and to meet a lot of different people. Most of his work was as a trackman on a steel gang laying rails. He worked on some gangs that had Navajos, Anglos, blacks, and Mexicans.  But usually he worked on steel gangs that were all Navajo, consisting of more than one hundred men, mostly from the Arizona side of the reservation, living in railroad cars and often working twenty days without a day off. He is proud of the work of the Navajos saying, “We Indians were the best.”

Jerry stayed employed over several winters, working on curb gangs and replacing switches. However, like many workers who fall out of the world of wage labor, he suffered an accident, breaking his leg in a car wreck on his way back from work. He never recovered well enough to return to the railroad.

Track work takes its toll on workers, physically and psychically. Navajos are unionized, but their relationship with their union has not completely satisfied them. While these men have the same legal rights as non-Navajo railroad workers, Navajos turn to their cultural traditions to survive the relentless demands of industrial capitalism. Rituals and ceremonies are employed to find personal protection at work and to maintain or restore beauty and balance, an integral concept of Navajo existence, known as hózhǫ́. Jerry told me about a variety of his co-workers’ rituals and ceremonies—given the brutal schedule that is life on a track gang, however, the men could only occasionally get away for these practices. Some workers used corn pollen before work, ritually applying it to their bodies. Some “churchgoers” used anointing oil before work in a similar manner. Native American Church practitioners had medicine pouches, and they would often (after work) put herbs on the diesel stoves in the bunk cars, filling the cars with the aroma from their smoldering. On Sundays,

Christian men would try to go to nearby churches. Co-workers who practiced traditional religion sometimes went into the mountains after work to “do their stuff” (i.e., traditional singing).  Some mornings Jerry could hear some of them praying.

Hoskie Pinto started working on the Union Pacific Railroad in 1957, as a laborer with a shovel and a pick. His gangs included Navajos, other Native Americans, whites, and Mexicans. While he worked all over the Union Pacific system, on and off, for more than twenty-five years, he was never able to accumulate the months of service required to earn a pension. Again, as with many others, his railroad service ended when he got hurt. In the 1980s, while he was laying ribbon rail in

Cheyenne, Wyoming, a piece of rail fell on his foot. When he was taken to the hospital, a company claims agent came to his room and told him to sign something. According to the agent, it was a good deal. Hoskie was never given a copy of the paperwork, but it was most likely a settlement agreement, in which Hoskie gave up all his rights to sue or collect compensation. The railroad made no plans for what he should do after this. As soon as he was physically able to travel, the railroad put him on a plane to Denver. When he got there he did not know what to do, and he speaks little English. Fortunately, he met a Hispanic man from Santa Fe who recognized his plight. Hoskie followed him and they flew to Albuquerque, where Hoskie boarded a train and got off near the reservation. Due to the inadequate medical treatment he received, his leg still hurts. After his accident, his grandfather taught him and his brother the craft of becoming a medicine an.

Kee Spencer, who lives on the Arizona side of the Navajo Nation, is especially adept at these traditional strategies for combating the rigors of railroad work. Kee, a medicine man in both the traditional and peyotist religions, often was asked to hold ceremonies for railroad workers. Several years ago he held a “meeting,” the term used in the peyotist tradition for what Christians would call services, for a worker who came to him complaining of harassment on the job. The worker expressed a fear to Kee that the railroad was hurrying people to work too fast and that injuries would result. The men understood from their Anglo bosses that the railroad wanted their gang to install two thousand railroad ties each day on a section of track, resulting in a speed-up that guaranteed serious safety problems. In response, Kee performed a traditional Goodway ceremony and a peyote meeting for around twenty-five people who gathered in Burnt Corn, Arizona. As it was summer, the meeting took place in a tepee, and lasted through the night. It was important, Kee told me, that those in the ceremony “think good thoughts.”

During the ceremony, participants were able to “look into the fire and see things,” he said. Some days after the ceremony, the workers came back to Kee and told him that the railroad had changed its production quota for the men, reducing it from the requirement to lay two thousand railroad ties a day down to a manageable five hundred ties a day. There is now less harassment and more safety. Kee says the ceremony is responsible for the improvement. “My prayers were answered,” he said.

Railroad life puts great stress on Navajo families, as well as on the workers themselves. The family of Dickie and Marilyn Sandoval is one such example. Dickie worked for Union Pacific from 1988 to 1994. In 1988, he hitched a ride with his uncle, who was working on a Union Pacific gang in Wyoming. He was hired onto this mixed gang, which included Anglos, Mexican-Americans, and Navajos. With much difficulty, his wife Marilyn and their two children followed the gang in the summertime when the children were out of school, staying in a motel near the work site. Later, Dickie worked on steel and tie gangs, and his railroad career took him and his family to Nebraska and Kansas. However, Dickie lost his job because transportation difficulties prevented him from consistently getting to work at the appointed hour. The Navajo Nation reservation is a sprawling piece of land and few surfaced roads cross it. At the time, Dickie did not own a car and had a hard time getting to the gangs when he was recalled after seasonal layoffs. He was eventually fired for not showing up to work, even though he says he notified the railroad whenever he could not make it. His Anglo boss maintained there was no record of notification efforts.

As is the case with many American working families, young Navajos often go into the military. Jared—the son of Marilyn’s sister, Patty—was serving in Iraq with the U.S. Army when we talked. Patty had a hogan—a small, round building like those that can be seen throughout Navajo land—built near her house in which ceremonies to protect her son were performed. Patty made sure that a Blessingway ceremony was performed for Jared when he left for Iraq and when he returned from military duty. While Jared was in Iraq, Patty acted as his “stand-in.” People sung over her while traditional ceremonies were performed to better ensure his safe return. After each of these ceremonies, she had to stay “holy” for two to three days. This meant, Marilyn told me, that she could not cut meat, chop weeds, or shake hands with people. Finally, for Jared’s protection, she had a medicine man perform a ceremony on an arrowhead that she found. When Jared returned home on leave, Marilyn gave the arrowhead to him and he wore it for the remainder of his military assignment. When Jared finally returned for good, he was alive but had two pieces of shrapnel lodged in his body.

Navajos don’t shun collective labor action or legal rights. Strikes by Navajo workers, especially in Western coal mines, are not uncommon and today they often seek lawyers for help with their workplace injuries. But, like all of us, Navajo people struggle—in culturally specific ways—to find methods to resist the onslaughts of the system in which we live.

Life is a constant negotiation of forces that must be faced, through actions that aim to reintegrate and replenish. All workers seek well-being through practices and resources that are available to them and, as such, seek to satisfy common needs and desires in what often seem like uncommon ways to others. For Navajo railroad workers, in spite of their many obstacles and continuing difficulties, their practices have allowed them to stay cohesive, balanced, and even cheerful—states of mind we all aspire to attain.

The Odd Couple: Wall Street, Union Benefit Funds, and the Looting of the American Worker

Readers of this journal are familiar with the contemporary struggles of American workers to retain health and pension benefits, long promised but now often denied.  The painful and shameful treatment of retired auto and other industrial workers—who have seen their pensions and health insurance eviscerated and ridiculed as undeserved “Cadillac” legacy benefits—has recently occupied center stage.

What has received less notice is the amount, status, and use of the money that unionized workers have accumulated to pay for health and pension benefits in labor-affiliated benefit funds.1 The sums involved are huge.  Before the market crash of the “Great Recession” in the last quarter of 2008, defined-benefit pension funds that are affiliated with unions and unionized public employers held assets in excess of $3 trillion.2  Even with the downturn in financial markets and the attacks on the safety net that workers built through collective bargaining, assets of labor-affiliated benefit funds serve as important providers of capital for the U.S. and global economies.

The fundamental role of labor-affiliated funds is to provide decent benefits for the worker participants. Yet in their efforts to provide and safeguard these benefits, these funds have invested with Wall Street in ways that have been, for the most part, indistinguishable from those of any other large investment pool. Labor-affiliated funds are universal investors; that is, as a group, they invest in every nook and cranny of the economy, in every type of asset, and with nearly every major investment manager.  Their collective, though often unfocused, decision-making has a major effect on the economy.

By their nature, nearly all labor-affiliated funds are long-term investors, though they often do not act like it.  These funds invest in order to protect and grow the assets necessary to pay off benefit liabilities that stretch out for years in the future. An understanding of the real potential of progressive capital strategies for these funds, and a concerted effort to implement a coherent approach across the labor movement, could dramatically affect the current dynamics of the capital markets, and, indeed, the overall economy. Instead of being at the mercy of financial gyrations, we could build and truly protect assets held in trust for those who labor.

Comparing the assets in labor-affiliated funds to the falling union density rates, it is obvious that the labor movement has the ability to punch significantly above its weight in the capital markets, as it has in its engagement in electoral politics.  Yet labor has not exercised this ability; it should.

A Problem Recognized But Unaddressed

For some time, advocates for labor have noted the inherent potential available to labor in this arena.  Three decades ago Jeremy Rifkin and Randy Barber wrote The North Will Rise Again, a book which marked the beginning of labor’s contemporary consciousness about the nascent power in these labor-affiliated funds. Writing in 1978, as the economic decline of the unionized Midwest was in its youth, Rifkin and Barber argued that labor’s capital could and should play a central role in protecting the interests of workers and a just society.  They also recognized what could happen if this issue were not forcefully addressed.  Speaking of workers and the labor movement, Rifkin and Barber wrote, “[T]he question is whether they will continue to allow their own capital to be used against them, or whether they will assert direct control over these funds in order to save their jobs and their communities.”4

Over twenty years after the Rifkin/Barber book, Leo Gerard, the perceptive president of the United Steelworkers of America (USW), wrote that the “use of workers’ capital is one of the key challenges facing the labor movement today.”5  In 2001 he pointed out that, in spite of the huge pool of assets that sits in benefit funds in which worker representatives are trustees, labor’s efforts had “not altered financial market operations in any significant way.  All too often, investments made with our savings yield short-term gains at the expense of working Americans and their families.”6

Unfortunately, for all the good intentions, the labor movement has been unable to fulfill the promise noted by Rifkin, Barber, and Gerard.  There are many reasons for this deficit.  They include: the lack of a coordinated strategy, which has resulted in a confusing array of approaches; trustee indifference or self-interest; and pressure from the corrupting influences of money and the financial services industry.  In addition, efforts in this area are undermined by the lack of high-level capital markets expertise in the labor movement, a legal straitjacket imposed by federal and state pension laws, and a lack of worker-friendly ideas in the setting of investment policy.

Buffeted by these forces, and mesmerized by a furious chase for short-term financial returns, workers’ benefit funds in many cases have paradoxically become silent and unwitting, yet crucial, supporters of the very economic arrangements which are often responsible for the plant closings, long-term stagnation in real wages, and diminished benefits that afflict working Americans.

Over the past thirty years or so, financial services became an oversized part of the U.S. economy. Through the use of new leverage-based products—that is, making debt-based investments (such as leveraged buyouts, junk bonds, collateralized debt obligations, and credit default swaps) with other people’s money (OPM)—Wall Street financial firms claimed to be able to sometimes generate higher returns on capital than could be found in other parts of the economy, justifying the participation of labor-affiliated funds in these financial engineering strategies.

Workers’ assets have been used as pawns in this cold and calculating game, sometimes even backing the most vicious anti-worker maneuvers perpetrated by financial engineers. In the Chrysler bankruptcy of 2009, once the fundamental deal was cut in bankruptcy court with the involvement of the United Auto Workers (UAW), a group of hedge fund managers put together a “Committee of Chrysler Non-TARP Lenders.” Claiming to represent “many of the country’s teachers’ unions”—including teachers and other public workers in Indiana, as well as major pension and retirement plans—these hedge funds attempted to disrupt the Chrysler settlement and the few benefits that had been retained for past, present, and future Chrysler workers. Many of these funds were “vulture” investors that had bought Chrysler bonds when they were trading at their lowest levels. The battle was framed in the media as auto workers against teachers, with the only question being how big a killing the hedge fund operators would make.7

While comprehensive data is unavailable, due to a lack of transparency on Wall Street, much of the capital used by financial engineers comes from benefit funds, some labor-affiliated. Participation in this system is problematic. It is from OPM leverage and cuts from workers that a substantial portion of the financial engineers’ profits is generated. Numerous cases of Wall Street greed abound. On October 8, 2009, the Stella D’oro bakery in New York closed, throwing 136 unionized employees out of work. The company was purchased in 2006 by a private equity fund, Brynwood Partners V, whose investors include pension funds, at least one of whom, Pennsylvania State Employees’ Retirement System, has thousands of union participants and two labor trustees. Brynwood demanded extensive concessions from the Bakery Workers local. The workers refused, and went on strike. When a National Labor Relations Board judge ordered the company to reinstate the workers with back pay, due to the misdeeds of the company, Brynwood immediately announced its intention to shutter the plant. It has now sold the brand to a publicly traded company, Lance Inc., which closed the Bronx bakery and plans to move production to a nonunion bakery in Ohio.8

Or consider the venerable Simmons Mattress Company that is currently facing bankruptcy. Under the ownership of Thomas H. Lee Partners, a private equity firm with capital from many laboraffiliated pension funds, the company is, as of this writing, $1.3 billion in debt and a thousand people have been laid off. A bankruptcy-induced change of hands will be its seventh such sale in little more than twenty years, each of them undertaken by machinations of financial engineers. Leo Gerard recently wrote, “Repeatedly, new owners stuck their greedy hands under the mattress and pulled out money. Each time, that hurt the company and the workers.”9

Labor must acknowledge that, as participants in hedge funds and exotic investments, the capital that is being saved and invested for the benefits of workers has played a substantial role in the system that generates these travesties.

Moving Toward a New Benefit Fund Investment Strategy 

Given this backdrop, where should the labor movement focus its efforts?  We suggest three initial steps that could pave a way toward changing the current dynamics.  First, labor needs to advocate a more intentional selection of fund trustees, and should reinvest in education and coordination so that trustees can more meaningfully and progressively participate in fund investment and management decisions.  Second, labor needs to end the reliance of workers’ capital on harmful short-term investment strategies, and focus instead on the long-term needs of beneficiaries. We must develop and articulate a clear approach to investment, and its inherent risks, that does not get subsumed by the drive for short-term returns that results in asset bubbles that wreak destruction when they burst.  Finally, labor needs to adopt strategies to redefine the legal conception of the “fiduciary duty” of trustees as it applies to investing, so that it allows and promotes an approach that can emphasize economic growth over short-term profits. Trustees must be able to incorporate a consideration of environmental, social, and corporate governance (ESG) risks that will make longer-term, sustainable investment returns possible.

To consider the first point, the leadership of the labor movement has been unable to provide a common structure through which trustees could come together in a way that can produce a robust response to these concerns.10  Without a common movement based on collective labor-oriented values, as pension expert Teresa Ghilarducci has noted, it is very difficult for any individual trustee to act in a progressive manner in this area.11  The lack of a center with labor-oriented values, that would educate trustees on useful information needed to ask difficult questions of outside advisors, significantly hampers trustees’ ability to invest and deploy funds in a manner that is good for the economy and ensures stable long-term returns. The labor movement should work to create common guidelines for trustee selection, training, and involvement that are not controlled by “service providers” who make their living working with the funds. Far too many trustees cannot resist the blandishments of these professionals or the institutional inertia that makes independent and creative thinking difficult. An effective organizational structure—with buy-in across the labor movement—must be developed, which clarifies the true effects of labor’s present activity and gives trustees the tools they need to ensure that workers’ benefit funds are not unwittingly used against them.

Focusing on a Sustainable Long-Term Strategy 

The second step for labor is to begin to more cogently address the disconnect between the prevailing short-term investment strategies, which have infected labor-affiliated benefit funds, and the true long-term needs of workers’ capital.

Despite their fundamental long-term time horizon, labor-affiliated funds have tended to choose investment strategies that seek to maximize their annual and quarterly returns rather than their long-term returns.  Many have sought to “juice” their short-term returns by availing themselves of the various tricks that Wall Street marketed to them. All of these “genius” strategies generated Midas-like fees for Wall Street, yet many of them contributed to the credit bubble that burst in 2007 and collapsed with the market crash of 2008. We have seen firsthand that union-affiliated funds lost millions of dollars when their securities were lent out for short-selling, backed by complex financial “products” that failed.12 And many of the faulty mortgages at the heart of the credit crisis were held by these funds directly in their fixed-income portfolios, and indirectly through hedge funds and other parts of the so-called shadow banking system.

What happens now that the constructs of the financial “experts” have collapsed? It is the participants who will ultimately pay for these “mistakes.” The workers who depend on these monies are facing reduced pension and health benefits, or reduced wages to maintain their benefits, or both. Trustees of labor-affiliated funds have been left scratching their heads, trying to figure out what went wrong, where they should go from here, and how to explain the disaster to the participants in the funds. Trustees must ask themselves and their service providers, “How do we invest so that our capital helps the overall economy grow and positions our funds to earn long-term, sustainable returns that come from solid economic growth?”

The reality is that, while financial lightning occasionally strikes, it is not ordinarily possible for any fund to earn a consistent nominal rate of return of 8 percent—over the long term—if the economy in which it invests is shrinking, flat, barely positive, or punctuated by booms and busts, as the last decade’s economy has been.13 For example, the largest U.S. pension fund, CalPERS, which covers public workers in California, achieved overall annual returns of less than 3.7 percent for the ten-year period ending on June 30, 2009.14 Yet many funds’ actuarial assumptions continue to be based on an annual return expectation in the vicinity of 7 to 8 percent, or more.

In addition to short-termism failing as an investment strategy, this strategy has come at the expense of sustainable economic growth.  The pressure for short-term returns drives companies to cut costs, reduce research and development, shirk capital expenditures, and lay off or otherwise reduce their number of employees.  These actions sometimes benefit a company’s stock price in the short run, but they can also undermine its long-term growth and profitability.

Finally, as part of the change in direction toward long-term investment, the concept of risk must be addressed. Economic theories about risk, sometimes developed by Nobel Prize winners, have driven investment decisions that—twice in the last decade—have produced devastating drops in the market. In each case—the Internet-telecom bubble that burst in 2001, and the housing finance bubble that burst in 2007- 2008—the risk models employed by investors, from pension funds to investment banks, gave no hint of the true risks those investors were facing. To maximize short-term returns, too many labor-affiliated funds focused on searching for “alpha,”15 while forgetting about managing risk. The relationship between risk and return often became submerged.  Investors thought risk had diminished.  After all, the “Maestro” himself—the former chairman of the U.S. Federal Reserve Board, Alan Greenspan—reassured the world that the rise of financial alchemy, such as was seen in the  dazzling array of “derivatives,” had made the financial system more diversified and safer by spreading risk.  Now we know that this attitude put everyone at greater risk, causing arguably the worst economic downturn since the Great Depression, and generating the worst investment performance most labor-affiliated funds have experienced in their entire existence.

Yet even today, as Wall Street leverage-driven strategies and gigantic bonuses seem to be back on the agenda, there is scant indication that members of the investment community, or trustees, are paying sufficient attention to risk in the risk-return trade-off about which they are making decisions at every investment committee meeting. Developing a sustainable, long-term risk management strategy will require disregarding the self-interested schemes that most financial services providers promote.

Redefining the Legal Duty of Trustees

The current legal landscape acts as a third significant factor that limits labor’s effectiveness in positive capital market engagement.  Over the last fifteen years or more, a battle has raged in the Department of Labor (DOL) about the ability of trustees to do anything other than invest solely along the lines of Wall Street’s short-term profit mania.  Depending on the administration, the DOL has issued guidance that, by turns, has tepidly allowed or strongly discouraged an approach to investment that takes into account broader considerations than only the drive for short-term gains.16 The current DOL, under Secretary Hilda Solis, has not yet weighed in, but is expected to show sympathy to greater long-term considerations.

At the foundation of this dispute is the definition and interpretation of pension fund trustees’ fiduciary duty codified in the landmark 1974 Employee Retirement Income and Security Act (ERISA). ERISA prescribes that pension funds are to be managed “with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.”17 While the concept of fiduciary duty is an old legal concept that operates in many areas of legal and regulatory practice, the ERISA standard is often rigidly and strictly interpreted by lawyers, in contrast to the looser fiduciary duty that applies to corporate directors and other financial officers.18 The effect is to stifle attempts to invest fund monies in ways that take ESG concerns, as well as how corporations are governed, into account.

Recent research makes clear that companies that pay attention to ESG issues are better longterm investments than those that do not.  Many investors have recognized this and are employing such analysis in their investment decisions.19  ESGinformed investing is becoming an integral part of benefit funds in many parts of the world. The UNPRI, a UN-sponsored group which promotes principles of responsible investment that include ESG considerations, is expanding its presence in the U.S. Labor-affiliated funds should consider working with the UNPRI, or institute a similar effort that can gain traction in their ranks. 20

A recent example of the impact of ESG-oriented investing on the often shortsighted perspectives of corporate management is G4S, the largest company in the global security industry and one of the largest employers in the world.  As G4S expanded, its labor practices in less developed countries became the subject of criticism by labor advocates, and the target of a global campaign led by UNI, the international union network.  European investors asked why a company known for constructive labor relations in its home market, the U.K., was embroiled in escalating labor controversy globally.  This investor engagement helped foster a global agreement between G4S and UNI, in December 2008, that has the potential to raise standards for millions of workers in the security industry, in countries such as Malawi, Uganda, and India.21  At the same time, the agreement rationalizes the company’s labor practices, stabilizes its relationship with labor organizations worldwide, and reduces the risks to the company’s continued growth and profitability.  At the core of the agreement is an understanding that an industry’s leading company can help set standards that lead to a sustainable economy, rather than fueling a race to the bottom that destabilizes the industry and the economies the pension fund broadly participates in.  The effective role of European investors and U.K. pension funds in this case stands in contrast to the typical timidity of U.S. pension funds in stepping beyond their narrowly defined fiduciary roles.

Further, the actual operation of labor-affiliated funds has exacerbated the problem as well. Most of them are fairly small, so they rely on outside consultants to advise them.  These consultants—including investment consultants, lawyers, actuaries, and others—cost too much and tend to arrogate authority to themselves by scaring the trustees into going along with them. The easiest, safest path for trustees is to go along with these “experts.”22  The fragmented set-up of the labor-affiliated fund universe exacerbates the stranglehold of the current definition of fiduciary duty that makes any other road extraordinarily difficult for an individual trustee to traverse. A redefined concept of fiduciary duty could improve this situation.23

Therefore a coordinated legal and political strategy, which targets the debilitating current definition of “fiduciary duty,” must be developed. There are several places to begin. First, there needs to be a regulatory effort to incorporate benefit funds’ long-term investment horizon into the interpretation of their fiduciary duty under ERISA. Labor should push for a DOL interpretation that states that the exercise of fiduciary duty should be guided by the need for prudent investment of assets in a manner that will be for the long-term benefit of fund beneficiaries. This simple change would empower trustees to demand investment strategies that focus on sustainable returns that will match their liabilities rather than short-term, annual, or quarterly returns. This work should come in conjunction with efforts to improve trustee knowledge and performance, as outlined earlier.

Second, the labor investment community should actively work with groups committed to environmental and economic sustainability. A blue-green investing alliance should be developed to encourage Congress and regulators to become sensitive to these concerns. Finally, if necessary, a targeted litigation strategy could be employed that could address common law impediments to a workable definition of “fiduciary duty.” Labor has the tools to make these efforts happen.


While many in labor are working hard on crucial initiatives—including new organizing strategies, organizational models, international solidarity, and legislative and political campaigns—insufficient attention and coordination have been given to the labor-affiliated benefit funds.  The current approach to investment of this capital has paradoxically produced negative results for workers’ benefits, and has contributed to the boom-and-bust cycles, income inequality, and financial distortions of the overall economy.

We believe that bringing a long-term investment horizon, and ESG considerations, to the forefront of decision-making in labor-affiliated trust funds can result in capital being directed to companies that will generate sustainable economic growth, fueling productivity, wage increases, and job creation, rather than financial engineering. Most importantly, this approach will better secure workers’ benefits. But, in addition, such an investment approach will have positive ramifications throughout society, resulting in better income distribution. Trustees in labor-affiliated funds will be creating a stronger and more sustainable economy through their investment decisions, which will improve their long-term investment returns. Investing in activity that fosters growth in the real economy will improve the purchasing power of working families and their ability to buy the products that fuel our consumer economy, which now accounts for more than two-thirds of economic activity.

It is time for the entire labor movement to take a frank and serious look at this situation and reposition workers’ capital to assume its natural role in support of long-term, sustainable economic growth that will benefit those who directly rely on labor-affiliated funds, as well as all working families.

*The views expressed in this article are the authors’ own, and do not necessarily reflect those of their organizations, clients, or fellow trustees.


1. There are a number of ways to describe these entities. Often they are called “Taft-Hartley” or ”multi-employer” plans, as many are established pursuant to Section 302 of the National Labor Relations Act, and require equal voting power for labor and management trustees.  See 29 U.S.C. 186(c).  In addition, benefit funds for workers are increasingly being held in Voluntary Employee Benefit Associations (VEBAs) that have varying forms of trustee selection.  For clarification, we shall use the term “labor-affiliated” to apply to all such funds. Closely linked are public employee benefit funds that cover teachers, public safety workers, and other public employees (such as CalPERS). Many of these funds have some labor trustees.
2. According to the Investment Company Institute’s Research Fundamentals report, as of the end of 2007, state and local pension funds had assets of $3.3 trillion. “The U.S. Retirement Market, First Quarter 2009,” Research Fundamentals(Washington, D.C.: Investment Company Institute, 2009), figure 1, p. 2, available at pdf/09_q1_retmrkt_update.pdf. Given the overall market declines since the fourth quarter of 2008, it is likely that the current value of the aggregate assets in these funds is slightly below the $3 trillion figure. This figure does not include money held in other types of labor-affiliated funds, such as health and training funds of various types. According to the Pension Benefit Guarantee Corporation, as of the end of 2006 (the most recent data available), private multi-employer pension funds had assets of $392 billion. Pension Benefit Guarantee Corporation, Pension Insurance Data Book 2008 (table M-9, p. 105), available at http://www.pbgc. gov/docs/2008databook.pdf.
3. Jeremy Rifkin and Randy Barber, The North Will Rise Again: Pensions, Politics and Power in the 1980’s (Boston: Beacon Press, 1978).
4. Ibid., 13.
5. Archon Fung, Tessa Hebb, and Joel Rogers, eds., Working Capital: The Power of Labor’s Pensions (Ithaca: Cornell University Press, 2001), vii.
6. Ibid.
7. For the Committee of Chrysler NonTARP Lenders’ statement, see For an example of the media response framing the issue as auto workers against teachers, see http://dealbook.blogs.nytimes. com/2009/05/01/ are-chrysler-hedge-funds-being-unfairlyblamed/?scp=5-b&sq=Chrysler+nontarp+lenders&st=nyt.
8. pbcs.dll/article?AID=/20091009/ FREE/910099984 http://www.nydailynews. com/opinions/2009/09/13/2009-09-13_ highfinance_lowlifes_fastmoney_tactics_have_killed_136_jobs_at_stella_ doro_.html#ixzz0THLR4BrL.
9. leo-w-gerard/anything-goescapitalism_b_313013.html.
10. This is not to say that the labor activists in finance do not issue important and useful guidance to trustees.  The work of the AFL-CIO Office of Investment was crucial, for example, in the fight over Social Security privatization.  See its report dated October 18, 2007, “Retirement Security: How Do Investment Managers Stack Up?,”available at
11. Teresa Ghilarducci, “Solving the Paradox of Workers as Shareholders: A Comment on Sanford Jacoby,” Comparative Labor Law & Policy Journal 30, no. 1 (Fall 2008): 91. In the 1990s, the AFL-CIO established a “Center for Working Capital” to train and engage trustees, independent of pension fund investment managers. For a variety of reasons, the Center never took off and is defunct today.
12. The investment technique of shortselling involves selling a stock the seller has borrowed, with the expectation that the stock will decrease in value. Short-sellers make profits when the stock price decreases.
13. A nominal rate of return is one which does not factor in the direct effect of inflation or deflation.
14. CalPERS, Executive Summary of Performance, Investment Committee Agenda (December 14, 2009): 4.a-1, available at board-cal-agenda/agendas/invest/200912/ item04a-01.pdf.
15. “Alpha” is the amount by which a manager outperforms her performance benchmark.  If a manager is managing against the S&P 500, and she generates an annual return of 12 percent—vs. the S&P 500 return of 10 percent—then she is said to have generated 2 percent, or two hundred basis points, of alpha.  When the manager under-performs the benchmark, she is said to have generated “negative alpha.”
16. The recent history of this issue began in 1994 in the Department of Labor, under the administration of President Clinton. The most recent government proclamation on this matter was issued by the DOL under the Bush administration, and can be seen at 29 U.S.C. 2509.08, Part 1590—Interpretive Bulletins Relating to the Employee Retirement Income Security Act of 1974,  http:// cfr&sid=f4b0d34303359af0c82d2e2a7899 fe0f&rgn=div8&view=text&node=29:9.1.3.
17. 29 USC §18.1104.
18. For additional legal background on this, see the forthcoming chapter by Jay Youngdahl, “Varying Concepts of Fiduciary Duty,” (tentative title) in the 2010 Comparative Law Yearbook of International Business. For a comparative and comprehensive description of the law by an international corporate law firm, see
19. Today, many research studies support this approach. See, e.g., http://www. materiality/, and files/PRI%20Report%20on%20Progress%2009.pdf. A recent study by McKinsey & Co. found that two-thirds of corporate financial officers, and three-quarters of investment professionals, agree that ESG activities create value for their shareholders in normal economic times. See McKinsey Global Survey Results: Valuing Corporate Social Responsibility (2009), available at McKQ_Valuing_Corporate_Social_ Responsibility.pdf.
20. In 2009, the trustees of the Middletown Works VEBA became signatories to these UN principles. The UNPRI principles are available at principles/.
21. For a news release describing the G4S-UNI Ethical Employment Partnership, see c767/3936bec54f482d53c1257521003c40 30?OpenDocument. 22. See, e.g., Donovan v. Bierwirth, 680 F. 2d 263 (2d Circ. 1982).
23. For further discussion of the problems of “herding” and short-termism among pension funds, and for an argument in favor of modernizing the interpretation of fiduciary duty, please see Keith L. Johnson and Frank Jan de Graaf, “Modernizing Pension Fund Legal Standards for the 21st Century,” consultation paper no. 2 (Network for Sustainable Financial Markets, February 2009), available at http://utpjournals.metapress. com/content/1886248461787p57/?p=afe 5f2f39b434d0f8e27cc915bf0dbd5&pi=7.


New Labor Forum 19(1): 81-89, Winter 2010
Copyright © Joseph S. Murphy Institute, CUNY
ISSN: 1095-7960/10 print, DOI: 10.4179/NLF.191.0000012