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Pensions at Work

Pensions at Work: Socially Responsible Investment of Union-Based Pension Funds

Jack Quarter
Isla Carmichael
Sherida Ryan
Copyright Date: 2008
Pages: 336
  • Book Info
    Pensions at Work
    Book Description:

    Pension funds have come to play an increasingly important role within the new economy. According to Statistics Canada, in 2006, trusteed pension funds in Canada had $836 billion of assets and represented the savings of 4.6 million Canadian workers.Pensions at Workis a unique collection of papers that uses a labour perspective to deal with the socially responsible investment of pension funds. Featuring leading Canadian and international scholars, it builds on existing scholarship on socially responsible investment and on the growing interest of the Canadian labour movement in joint trusteeship.

    What is unique about this collection is that it synthesizes three distinct themes - socially responsible investment, pension funds, and labour studies. The contributors address an array of critical issues such as gaps in the education of union trustees of pension funds, the impact of human capital criteria on shareholder returns, the influence of corporate engagement upon corporate performance, and the nature of public-private partnerships (PPPs). Although the essays in Pensions at Work all address the nexus between socially responsible investment, pension funds, and unions, each looks at a particular manifestation of that relationship through a different disciplinary lens. This collection moves the discussion to pension funds in which union representatives are also trustees, a relatively new approach that will be of great interest to institutional investors, the labour movement, and instructors in labour studies programs.

    eISBN: 978-1-4426-8878-0
    Subjects: Management & Organizational Behavior

Table of Contents

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  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. List of Figures and Tables
    (pp. ix-xii)
  4. Foreword
    (pp. xiii-xiv)
    Ken Georgetti

    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 – workers’ capital.

    As beneficial owners of these deferred wages, workers are theindirectowners of a substantial portion of the world’s equities. According to a 2002 estimate, workers’ retirement savings and pension funds total more than US$11 trillion globally, and it has been estimated that pension fund holdings...

  5. Preface
    (pp. xv-xviii)
  6. Contributors
    (pp. xix-2)
  7. 1 Socially Responsible Investment of Pensions: Issues and Debates
    (pp. 3-41)

    Although there is an extensive body of research on social investment and its impact, little of that research applies to pension funds, and even less to Canadian pension funds. The primary purpose of this book is to synthesize the research on social investment with the growing interest in pension investment – particularly from unions as they respond to concern about how their members’ savings are being invested. This book synthesizes three typically distinct themes – socially responsible investment, pensions, and labour studies – as they apply to the role of unions in investment. In this chapter, we shall address each of these themes,...

  8. 2 Just Having It Is Not Enough: Labour’s Voice on Pension Boards
    (pp. 42-69)

    Pension monies are the deferred compensation of employees, and with increased attention to good governance and corporate ethics and responsibility it makes sense to have employee representatives involved in decisions about the investment of those monies. The Certified General Accountants of Canada argue that a pension advisory committee comprising designates of plan members and the employer should be the minimum standard in pension governance (CGA-Canada, 2004). Interest in labour or plan-member representation also stems from other factors. For one, as a result of their size, pension funds can have a powerful impact on financial markets (Deaton, 1989; Drucker, 1976; Fleming,...

  9. 3 Fiduciary Duties, Investment Screening, and Economically Targeted Investing: A Flexible Approach for Changing Times
    (pp. 70-105)

    The legal boundaries of pension-plan investment practice continue to be the subject of much debate in Canada. This is particularly so in the context of applying non-financial criteria to investment decision-making where the absence of legislative or judicial guidance continues to leave uncertainties for pension trustees.

    This chapter introduces the reader to the fiduciary duties of prudence and loyalty through a comparative legal analysis. It examines legal barriers to two socially responsible investment practices – investment screening and economically targeted investing (ETI) – and concludes that, subject to the terms of the trust, screening and ETI are legally permissible investment practices. The...

  10. 4 Human Capital–Based Investment Criteria for Total Shareholder Returns
    (pp. 106-128)

    Many empirical studies have explored the relationship between the social and economic performance of firms. A comprehensive review of these studies has found that when treated as an independent variable, corporate social performance is positively correlated to financial performance in 53% of cases (Margolis & Walsh, 2001). In recent years, these studies have been supplemented by evidence from specialist stock market indices, all of which indicate equal or superior stock market returns from selected socially responsible investment (SRI) strategies (DiBartolomeo & Kurtz, 1999; Heaps, 2004; Mutual Fund Review, 2002).

    Observing the increasing value of ‘intangible’ resources, strategic management theorists have...

  11. 5 Corporate Governance and Environmental Risk Management: A Quantitative Analysis of ‘New Patadigm’ Firms
    (pp. 129-158)

    The risk-management practices of modern corporations differ significantly in both quality and quantity. These differences are growing in today’s marketplace, because the risks facing corporations today are more significant and less understood than ever before. The development in the importance of a firm’s intangible assets is a major source of this increasingly complex risk (DeLoach, 2000). Unlike tangible assets, which are physical, like machinery, buildings, and land, intangible assets do not have a physical existence and are therefore significantly more difficult to value by financial analysts. Examples of intangible assets include goodwill, strong brand image, and positive employee morale. Intangible...

  12. 6 Social Accounting and Reporting for Economically Targeted Investments: The Expanded Value Added Statement
    (pp. 159-180)

    This chapter presents a social accounting model called the expanded value added statement for reporting the economic, social, and environmental impact of an organization. After introducing social accounting, the chapter outlines the expanded value added statement, which is applied to a hypothetical real-estate development case as an example of an economically targeted investment. The chapter concludes with a discussion of the model.

    Social accounting provides a way of looking at how well an organization is performing economically, socially, and environmentally. It expands the range of criteria that are taken into consideration when measuring performance, by looking at the organization in...

  13. 7 Economically Targeted Investments, Union Pension Funds, and Public– Private Partnerships in Canada
    (pp. 181-206)

    Economically targeted investments (ETIs) are a form of socially responsible investment and are ‘designed to produce a competitive rate of return commensurate with risk, as well as to create collateral economic benefits for a targeted geographic area, group of people, or sector of the economy’ (Harrigan, 2003, p. 241). As Manley, Hebb,and Jackson stress in chapter 8, ‘Targeted investments focus on achieving both a financial and a social return.’ While the concept may appear straightforward, it is anything but, as there may be conflict between maximizing financial returns and maximizing a broader social/economic rate of return (Carmichael, 2003a). Furthermore, it...

  14. 8 Economically Targeted Investing: Financial and Collateral Impact
    (pp. 207-240)

    This chapter argues that pension funds can earn attractive risk-adjusted rates of return on targeted private equity investments that seek to fill capital gaps in the market, and that by doing so they can benefit their communities as a whole. Targeted investments focus on achieving both a financial and a social return. The terminology that is used to refer to targeted investing ranges from ‘economically targeted investments’ to ‘investments in underserved capital markets’ or ‘investing with intent.’ Although targeted investing may be done with any type of investment, the focus of this chapter is on targeted investments in private equity...

  15. 9 Pension-Fund Management and Socially Responsible Investment
    (pp. 241-270)

    As a result of recent shifts in the understanding of fiduciary responsibility, pension funds and their trustees find themselves caught up in a vigorous debate about the development of investment strategies that take into account issues that go well beyond a narrow focus on the maximization of financial returns. What is being debated is first, whether factoring economic, environmental, social, and governance criteria into their investment strategies is consistent with their legally defined fiduciary responsibilities. Gil Yaron addresses this issue in chapter 3, and concludes, ‘A modern reading of pension trustee fiduciary duties, supported by the majority of existing jurisprudence...

  16. 10 Training for Effective Action: Evaluation of the Quebec Federation of Labour Training Program on the Bargaining and Administration of Pension Plans
    (pp. 271-291)

    The Quebec Federation of Labour (FTQ) training program on the administration and negotiation of pension plans is the largest of its kind in Canada. After five years of development, the FTQ’s Education Department has expressed an interest in a formative evaluation to identify the strengths and weaknesses at each level of the program as well as in the ways they interact with and complement each other.

    Given the concerns expressed by the FTQ, it seemed appropriate that we should undertake an evaluative approach based upon Patton (1997). This approach rests on the fundamental principle that evaluation must be judged on...