In this Section:

» What is Worker's Capital?
» Long and short-term challenges
» The worker capital toolbox
» CWC’s role

What is Worker’s Capital?

The concentrated nature of share ownership on the world’s capital markets means that large institutional investors – insurance companies, mutual funds, and pension funds - own the bulk of the world’s listed companies. In many countries, a significant portion of these shareholdings is held in workers’ retirement savings, pension funds, and other investment vehicles, otherwise known as workers’ capital. . The largest shareholding bodies in Great Britain are the British Telecom and mineworkers pension schemes. In the U.S., it’s the public employees of California; it’s the civil service fund in The Netherlands; the workers’ pension fund in Denmark, and in Canada, the teachers and civil servants of Ontario.

Workers’ capital refers to the assets accumulated in collectively funded schemes in order to provide workers with financial security in their retirement. As beneficial owners of these deferred wages, workers are the indirect owners of a substantial portion of the world’s equities, though pension asset allocation patterns vary between countries. According to a 2002 estimate, workers’ retirement savings and pension funds total more than USD 11 trillion globally (Watson Wyatt Global Investment Review 2002), and it has been estimated that pension fund holdings account for about one-third of the world’s total share capital – and significantly more in some countries such as the United Kingdom and the United States.

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Long and short-term challenges

The investment of worker retirement savings is meant to provide long-term financial returns to pension fund beneficiaries. However, the way these funds are invested can also have significant impacts. Unnerving global trends such as corporate malfeasance, soaring executive compensation, or the privatization of public sector services demonstrate the need for unions to mobilize. In recent years, corporate scandals have rocked the financial world, destroyed jobs, and devastated pension funds. This has drawn attention to the lack of diligence on the part of mainstream investment managers, analysts, and auditors, and highlighted the leeway corporate executives and controlling shareholders have to act against the interests of non-controlling shareholders, including pension funds. Such scandals also called into question the legal frameworks for corporate governance, and the role of workers and unions in both pension fund and corporate governance structures.

Worker retirement savings and pension funds own a large portion of the capital markets. Assets held in trust in workers’ retirement funds are increasingly global, and often invested in transnational corporations. Many such companies benefit from, or are otherwise involved in human rights and international labour standards violations, the privatisation of public sector jobs or polluting the environment. With companies typically focused on short term returns, long-term social and environmental challenges go unaddressed, which may eventually undermine the ability of pension plans to deliver the future benefits they promise.

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A proactive approach to managing workers’ capital - sometimes known as capital stewardship - can help companies build long term value while avoiding short term excesses. The key idea is to influence corporate behaviour by leveraging worker capital as indirect owners of business through their shareholdings.

A wide and varied “toolbox” is available: Positive actions can range from coordinated shareholder activism and proxy voting campaigns to international engagement with companies in which retirement funds hold stock as well as investment managers. Alternately, “negative” screening is available to weed out companies pursuing undesirable practices (social, environmental, lacking workers rights, etc.) from pension fund and retirement investments. With effective organization and coordination, worker capital can help address persistent corporate or market failings, resulting in improved corporate governance. Capitalcan be steered to needy areas of the economy that traditional institutional investment has failed to serve properly (economically targeted investment).

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In order to be successful however, worker capital requires effective coordinated action. A key challenge is helping workers’ capital find its international “voice,” that is, developing a programme of trade union co-operation to implement effective workers’ capital strategies globally. The Committee for International Co-operation on Workers’ Capital (CWC) was established in 1999 for this purpose, among others.

CWC promotes international trade union cooperation on issues related to the investment of workers’ capital. It’s a trade union focal point for internationally coordinated shareholder activities and for exchanging views on topics ranging from corporate and financial market regulation and governance to trade union pension trustee education. To learn more about CWC and its activities, visit the about CWC page.

With some concerted efforts, appropriate strategies, and effective coordination, mobilizing workers’ capital in solidarity can make a real difference to the world around us, simply because workers own much of the world – however indirectly – through their invested retirement savings.

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Key reference documents on worker capital

• Working Capital: Institutional Investment Strategy, by the Trade Union Congress (TUC, UK).

• Workers’ capital and corporate social responsibility
  

• What is Capital Stewardship?, by the AFL-CIO (USA)

• The New Colossus: The New Politics of Capital, an article on the power of U.S. public sector pension funds by William Greider in The Nation, February  24, 2005
  

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