Labor unions are losing influence with American workers. Only about one in ten workers belongs to a union, and union membership has fallen below 6% of the private sector labor force. But rather than rebuilding their appeal by persuading workers to join voluntarily, unions are increasingly trying to exercise power through a different channel: capital activism.
A new Mackinac Center study, “Unions and ESG: From Worker Representation to Shareholder Activism,” shows how activist investing by organized labor slows the economy, weakens the financial system, and directly harms union members.
The most common vehicle is ESG investing, in which shareholders pressure publicly traded companies to enact certain environmental, social and governance policies. While ESG advocates often present the movement as a benign effort to make companies more socially responsible, unions use it to advance their political and organizational self-interest. They do this by using the power of their own pension funds, placing union officials and allies on public pension boards, and lobbying lawmakers and regulators to bless their activist strategies.
Unions that use ESG tactics gain influence far beyond what their shrinking membership would give them. Pension funds control enormous sums of money, and union leaders can use those assets to pressure companies into adopting policies that serve organized labor. ESG resolutions can push companies toward labor neutrality agreements, discourage secret-ballot union elections, or pressure management to stay silent during organizing campaigns. As a result, unions use workers’ retirement savings to tilt the playing field in favor of union officials.
But the bigger problem is that ESG activism often harms union members themselves.
Many union workers are employed in industries that develop fossil fuels or depend on affordable, reliable energy: transportation, oil and gas exploration, pipeline operations, nuclear energy, construction, manufacturing and related sectors. ESG campaigns that punish these industries, restrict energy development or steer capital away from traditional energy production threaten those jobs directly. A union pension fund that pressures companies to adopt anti-oil and anti-nuclear policies may be undermining the livelihoods of its members.
An activist pension fund violates its fundamental purpose. Pension managers have a fiduciary duty to maximize returns for workers and retirees through legal means. Their job is not to advance specific political goals, social causes or union organizing campaigns. When pension funds prioritize ESG goals over financial performance, they risk missing out on investment gains. Pension systems can be underfunded as a result, putting retirees at risk and forcing taxpayers or current workers to cover the shortfall.
The new Mackinac Center report lays out how new federal and state laws can clarify or enforce traditional investment rules, protecting the economy, union members and the rest of us.
