Institutional Impact | March 16, 2021

Why pension funds and other Amazon investors are backing the workers in union battle

Imogen Rose-Smith
ImpactAlpha Editor

Imogen Rose-Smith

Editor’s note: ImpactAlpha contributing editor Imogen Rose-Smith, a longtime senior writer for Institutional Investor, is kicking off a bi-weekly column on the policies, practices and strategies of the largest asset allocators, including pensions, foundations, and endowments. As Imogen says, she’ll be “tracking what investors do, not just what they say.”

ImpactAlpha, March 16, 2021 – Online retailer Amazon has fought long and hard to keep unions out of its business. Now the company is  facing its largest-ever labor organizing challenge. The setting: Bessemer, Alabama, where the Retail, Wholesale and Department Store Union, or RWDSU, is seeking to organize 5,800 Amazon warehouse workers.

The upcoming vote, which ends on March 29, is being closely watched as a bellwether not only for Amazon’s future but for a broader labor resurgence, especially in the Biden administration. The organizing efforts have garnered celebrity support from NFL players, actor Danny Glover and celebrities like Tina Fay, Alfonso Cuarón and other entertainment workers, many of them unionized, who signed a petition backing the Bessemer workers. 

Biden last month took the unusual step of posting a video supporting unionizing efforts, including in Alabama. “Unions built the middle class” by putting power in the hands of workers, Biden said, affirming his campaign promise that his administration will support union organizing and the right to collectively bargain. 

Amazon founder and outgoing CEO Jeff Bezos, of course, is the world’s richest man, with a net worth estimated to be in excess of $181 billion. Amazon argues that it already starts wages at $15 an hour, plus benefits, in line with broader demands for a minimum-wage hike (which Amazon supports) and far higher than Alabama’s current minimum wage of $7.25 an hour. Bezos, who turned down a request from Sen. Bernie Sanders to testify about income inequality, has said the company does not need a union intermediary between management and its employees.

The company has fought union efforts for decades, arguing that Amazon has essentially argued that a unionized workforce is bad for business, bad for shareholders and even bad for workers. 

Some shareholders disagree.

Leading investors – though still a distinct minority – contend that better treatment of workers, including through collective bargaining, can mean better long-term outcomes for investors as well. Even some conservatives are adopting that line.

Last month, as mail-in balloting for the Alabama unionization campaign began, institutional investors who collectively control more than $20 billion in Amazon shares sent a letter to Amazon’s board, urging the company to stay neutral, the Financial Times reported. The investors included New York State Comptroller Thomas DiNapoli, who oversees the state’s $250 billion Common Retirement Fund, and New York City Comptroller Scott Stringer, who plays the same role for the byzantine $240 billon (as of Nov. 2020) New York City pension system. Other signatories included BMO Global Asset Management, the Church of England Pensions Board and Swedish insurer and investment manager Folksam and Ohman Fonder.

“As these workers seek to organize for health, safety, and protection, Amazon’s investors are watching,” Stringer told the FT. “We want workers to know we have their backs. There is power in their unity and power in labor, and they have my full support as they fight for a safe, fair workplace.”

Labor revival

In addition to his fiduciary duties, Stringer is running for mayor of New York City and these days it can sometimes feel for New Yorkers as if the most dangerous place to be is between Scott Stringer and a progressive cause (if it’s not between fellow mayoral candidate Andrew Yang and a downtown bodega.)

So, it’s not a surprise to see Stringer throw an elbow at Amazon, which is hardly a popular employer on New York’s progressive left. Throughout COVID-19, Stringer has made a habit of beating up on the giant retailer. 

Stringer’s political ambition should not obscure the fact that defined benefit pension plans have become increasingly vocal when it comes defending the rights of workers of companies in which they are invested. The trustees of such plans are, after all, investing union money; many have some level of oversight from union appointees.

Investor support for Amazon’s unionization effort could herald a broader change in the behavior of pension plans, especially if these funds start demanding that the asset managers with which they are invested support the agenda of organized labor. 

The impact could go beyond publicly listed companies such as Amazon. Private equity firms, in particular, have long been viewed, rightly and wrongly, as jobs-destroyers. If public and private union pension plans start demanding greater worker protections in the portfolio companies of the private equity firms in which they are invested, the trickle-down effects on executives and employees could be profound. 

Union opposition (and hedge-fund under performance) has been very effective at reducing or eliminating the amount of public pension money invested in hedge funds. Such pressure could soon make life uncomfortable for private equity managers as well. 

Solidarity forever

The idea of pension funds defending workers’ rights is not new. Some investors have been exercising their shareholder rights and corporate governance responsibilities long before there was such a thing as ESG investment. In the last couple of decades however that voice has grown quieter.  The reasons are manifold, from growing pension underfunding, changes in policy guidance, and the shift into alternative investment including private equity.

Now it appears to be coming roaring back. COVID-19 has thrown into stark relief the divide between the haves and haves not, the need for workers’ rights and representation, and the importance of social justice. The growing income gap – apparent before the current pandemic – has caused growing unease among many investors and, even, ratings agencies. They have taken note of mounting evidence, apparent since the subprime mortgage crisis, that putting the gods of Mammon first may not lead to the best long-term outcomes. 

Add in the urgent need to combat climate change and a shift is clear, away from shareholder primacy and toward stakeholder capitalism. Advocates of the importance of stakeholders like consumers, employees, and communities, not just owners, have not always been proponents of organized labor. But pledges of corporate purpose have at least helped focus attention on the concerns of workers.  

As have the positions of President Biden’s, who looks keen to be “the most pro-union president ever,” or at least since the Carter Administration. Amtrak Joe pushing for a perhaps $2 trillion infrastructure spending bill – it’s Infrastructure Week in America, again! (listen to our 2018 podcast, “Infrastructure hopes spring eternal. What’s impact got to do with it?”). And his Secretary of Labor nominee, Marty Walsh, is a former union official who, if approved, would be the first secretary in more than 50-years who actually headed a labor union. (Biden’s Commerce Secretary Gina Raimondo, the former Governor of Rhode Island, is less than popular among some labor leaders).

Pension bailout 

A provision of the  $1.9 trillion COVID relief package that  Biden signed into law last week that hasn’t gotten much attention is an $86 billion bailout for multi-employer pension funds. Multi-employer, or Taft-Hartley, pension plans were among the original pension investors to understand the need to align investment activities with the underlying union goals.

In recent years, however, the massive underfunding concerns of this group of pensions has made it harder for them to prioritize other concerns, including alignment with the broader ESG impact investment movement. Bringing multi-employee pension plans back to the table, particularly to coalesce around common goals such as infrastructure investment, could be a significant development. 

The overlapping and conflicting interests of organized labor, ESG and the impact investment movement does not make for a simple Venn diagram. Some groups within impact investing are anything but pro-unionization. For its part, labor has a less than perfect record on supporting ESG issues, especially on climate change. 

As for Amazon. Bloomberg recently suggested that warehouse workers in Alabama will likely lose the war, even if they win the battle to successfully unionize. The company has a history of contesting results or closing down facilities where employees choose to organize.

In these times, it may be harder for Amazon to ignore worker protests, especially if pension investors continue to speak up.

Imogen Rose-Smith is a contributing editor at ImpactAlpha. A longtime senior writer for Institutional Investor, she was most recently a fellow in the Office of the Chief Investment Officer of the University of California.