Overcoming Obstacles on Shareholder Proposals Union shareholder activism faces a number of formidable regulatory, financial, and legal obstacles to winning on shareholder proposals important to organized labor. To bring issues to a vote at shareholder meetings, unions have to make the case that they are not part of ordinary business. Executive compensation, for instance, was considered ordinary business, and hence excludable, under the SEC s rules until 1992. To push the envelope further, unions have to bring their issues to shareholder meetings and await both management s reaction and possible regulatory answers, in case management wants to exclude a specific proposal. Financial market obstacles to running successful proxy voting campaigns are both the need to form alliances with other institutional investors and their reluctance to become more activist.
Unions have only potential access to a minority of equities.
In addition, institutional investors are more concerned with turning over their portfolio and chasing the highest short-term gains, instead of actively influencing corporations. Most institutional investors are simply unwilling to invest the time and energy to change corporate strategy. If things are not going their way, they would rather leave than stick around to alter the outcomes in favor of working people who are, ironically enough, the clients of mutual funds or insurance companies. Finally, the law stands in the way of unions that want to flex their financial muscle. Fiduciary requirements are designed to protect beneficiaries from mismanagement and abuse, but they may also force trustees to make decisions consistent with the economic best interests of beneficiaries, and against the interests of current workers.