Capital Matters IV - Managing Labor's Capital

April 26-28, 2006

Conference Resource Book - Table of Contents [PDF]

 Selected Conference Presentation Materials 

Jarvio Grevious - Deputy Executive Officer ’Retirement System, " CalPERS Health Benefits Program" [PDF]
Peter R. Orszag - Brookings Institution, Joseph A. Pechman Senior Fellow, Economic Studies, "Strengthening Retirement Security" [PDF] 
John Slatery - CEBS Director, Benefits Department International Brotherhood of Teamsters, "What is the Current Status and Future of Retiree Health Benefits?" [PDF] 
Adair Turner - Vice Chairman, Merrill Lynch Europe, "Pensions Reform and Capital Markets"  [PDF] 


Several sessions focused on challenges to retirement security over the long term (and the shifting roles of public pension schemes, occupational pensions, and individual savings in meeting those challenges) as well as to the closely related issues of health care and insurance during retirement. More particularly, the opening speaker provided a comprehensive look at the problems with retirement security in the United Kingdom and detailed proposals by a special national commission (headed by the speaker) to solve the them, proposals that have been at the center of public debate. These remarks were followed by a session in which presenters spoke to retirement security in the United States and ideas relevant to this country for addressing it over the long term, offered critical commentary on those ideas, and shared insights about how two other countries, Sweden and the Netherlands, have grappled with similar problems. 

Two other sessions addressed health insurance issues.  In extended remarks, an expert on health care policy and politics detailed the historical and continued importance of social insurance schemes and how an understanding of both must inform responses to efforts to “modernize” supposedly “unaffordable,” “ungovernable,” and “undesirable” retirement security and health insurance schemes embodied in Social Security and Medicare. Then a panel of experts turned to assessment of challenges in both the private and public sector to employment-based retiree health insurance (and their relation to Medicare) occasioned by the pressure of rising medical costs, employer efforts to reduce benefits, and the impact of changes in how health benefits are accounted for financially. Finally, the Thursday dinner speaker offered a detailed and critical assessment of attacks on state and local pension plans and their relation to efforts at the national level to privatize Social Security.

Several other sessions canvassed a range of pension fund investment and activism issues. One focused on the prospects and perils of dramatically rising investments in hedge funds which have increasingly gained the attention and interest of pension funds. Panelists, drawing on extensive academic and practical (hedge fund and fund-of-hedge funds) experience, considered not only the financial risk-reward calculus of hedge fund investments but also the advantages and disadvantages of hedge fund activism on matters of corporate governance and control.

Such discussions necessarily implicate questions of the proper role of shareholders in corporate governance and the impact of that role on corporate innovation and performance (and whether and how labor shares in the gains and wealth produced). These matters were considered in the luncheon speaker’s detailed and comprehensive assessment of "The Stock Market, Corporate Governance, and Sustainable Prosperity.”

Much discussion of shareholder activism in the pension fund context is, not surprisingly, addressed to the role of defined benefit plans. However, large and increasing amounts of assets are held in defined contribution plans. Though vigorous efforts to sustain defined benefit plans continue, in many cases, collectively bargained agreements provide for a defined contribution plan as a supplement to a (primary) defined benefit plan. This fact, in turn, poses possibilities for perhaps a different form of capital stewardship and activism consistent with a different fiduciary role.  This subject was explored in a session which brought together discussants who described, among other things, specifically labor-friendly defined contribution investments, means for configuring defined contribution plans to ensure shareholder activism, and a nationally mandated defined contribution scheme (in Australia) and whether and how trustees in that scheme play an activist role. 

 While pension funds have had a leading role on corporate governance, human rights, environmental, labor, and other issues, these issues have been an overlapping concern of a wide range of institutions, organizations, and people concerned about socially responsible investment. Panelists with extensive experience with both communities assessed past practice and the possibilities for greater mutual understanding, more broadly shared goals and greater collaborative action among the communities.   

Pension fund trustees are, of course, the stewards of the assets held for the benefit of plan participants, and ensuring that trustees are knowledgeable, active, and effective is a top priority. Trustees gain knowledge and develop their skills in a range of venues organized by unions, universities, pension-fund related organizations, pension industry firms, etc.  A panel which offered diverse perspectives – from public and private sector unions in the United States, Canada, and the Netherlands – considered the proper goals of and effective methods for trustee education.



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