Access to Worker-Friendly Capital

[Josh Wolf-Powers <jwolf-powers@kpsfund.com>]

There are a couple of problems with the idea of creating specific 'worker-friendly' investment funds: the largest is that the managers of union pension funds, at least in the U.S., think just like the managers of other large pools of assets, and not especially like the overseers of the future of the unions' members. More complicatedly, in the U.S., at least, they are mandated to safeguard the interests not of current union memberships, but rather, of current and future retirees in their capacity as pensioners. So, they're basically not allowed to take into account factors other than rates of return in their investments. Despite many efforts over some years and with a sympathetic background in the labor movement, enticing union pension managers into “worker-friendly” funds aimed at employee buyouts has proven extremely difficult.

 

Which brings us to problem two. At the end of the day, investment decisions get made on the basis of one simple question: what is my expected (financial) return. For a fund or bank of the sort you describe, there'd need to be a "dual bottom line," to steal a phrase from elsewhere. That's not to say that a fund couldn't be creative and clever in its willingness to do some of these projects, but it's to say that there's a tightrope that needs to be walked between the twin masts of returning capital and being "friendly" to workers.

 

What would be needed is a fund or bank that is tied and beholden to the labor movement, one which must be mindful of what it does and how it does it. But even such an institution would face situations where its interests and those of the unions who brought it to the dance could diverge.

 

Such an institution might have two streams of revenue, one provided directly as a result of union relationships, and the other, a result of investing capital. It is a good model for the type of fund you are discussing. But there are caveats galore: first and foremost, the latter stream of revenues is likely to be much more lucrative/seductive, and in the end, it may threaten to crowd out the former stream of revenues. Which would leave only the institutional memory and affective predilection for friendliness to labor.