Unions Have a Role in Proxy Fights
Union representatives of the 19,000 production workers at Lockheed Corp. sat in frustrated silence during the just-concluded, sometimes-ugly fight for control of the giant company.
The International Assn. of Machinists, or IAM, could have had a significant impact on that bitter proxy battle if it had been able to decide whether to support the billionaire Texas corporate raider, Harold C. Simmons, or the incumbent management. Lockheed is claiming victory, although the outcome of the voting won’t be known until April 16.
But understanding the machinists’ potential influence in the Lockheed struggle will help illuminate the increasing role that unions are playing in corporate management through their massive pension funds.
The IAM leaders stayed out of the combat at Lockheed because they were torn by conflicting evaluations of the two sides in the contest.
On the one hand, the machinists are unhappy with the incumbent management because nearly 950 of them are currently embroiled in a bitter strike against Lockheed’s facility in Ontario over a pay offer that is less than the one the company recently gave to the vast majority of IAM members at Burbank and other Lockheed locations.
Also, for IAM members outside of Ontario, the union was forced recently to accept a new contract that provided smaller increases than the union won at Boeing. The alternative was a strike that would have been even more distasteful.
The company insists that it made a fair offer in both cases, considering Lockheed’s drop in earnings, but it would have been hard for union leaders to explain why the union was supporting the incumbent officers in view of those labor troubles.
On the other hand, the members should have been even more dubious about the wisdom of their leaders had Simmons won the union’s support.
Most of the leaders knew or should have known that several other unions have been in furious fights over the years with one or more of Simmons’ many companies.
One union was on strike for nine months against a trucking company Simmons owned. Simmons finally shut the firm down and turned over its assets to another of his companies.
The United Auto Workers had a five-year strike against another Simmons company, Service Metal Crafters. The UAW fought in court for years alleging that Simmons illegally cut off contributions to the employees’ pension fund and stopped payments on retiree health insurance premiums.
Simmons argued that his actions were legal because the union contract had expired, but ultimately the Supreme Court ordered him to pay money into the funds and take care of the retirees.
One exception to the complaints against Simmons comes from John Peters, president of the Independent Steel Workers Alliance that represents employees at Simmons’ Keystone Steel & Wire Co. in Peoria, Ill.
“I cannot say how he deals with other unions, but while we had to take wage cuts, our relations with his company have been generally harmonious,” Peters says.
George Kourpias, president of the machinists’ international union, says: “We were faced with a real dilemma. . . . But we should have backed the incumbents, not only because we now know much more about Simmons’ rotten labor record, but also because he foolishly opposes diversification of Lockheed and wants to concentrate on military production that is certainly going to be cut as the Cold War diminishes.”
The IAM’s influence on the proxy fight, had it joined the fray this time, would have come indirectly through representatives of other unions who serve as trustees of huge employee pension funds that own big blocks of Lockheed stock.
Workers and their unions are becoming increasingly aware of their potential power in corporate struggles and are less willing than before to leave all of the investment decisions to a few trustees who may be interested only in the short-range bottom line.
By law, trustees must exercise great care when investing billions of dollars of workers’ retirement money. And they also must act prudently when they cast votes in a proxy fight. For instance, they could not vote their shares of stock for management in a company that is strongly pro-union but is losing money hand over fist.
But if everything else is equal, union trustees of pension funds can legitimately try to get a majority of their colleagues to vote their stock in favor of company managers who are pro-union, or at least not union busters.
Among the giant pension funds that have substantial holdings in Lockheed are the California Teachers Retirement Fund and the California Public Employees’ Retirement System. Trustees of those funds voted for the raider, Simmons.
Officials of the funds said they did not spend much time considering Simmons’ labor record because they didn’t know about it and the machinists’ union didn’t contact them. So they cast their votes based on, among other things, Lockheed’s reduced earnings and the hope that a change in management might improve profits.
The IAM and other unions, too, say they are paying more attention these days to the labor records of proxy combatants such as Simmons. And they are keeping closer track of the way their pension funds are invested.
At Lockheed, production workers themselves will soon start getting stock under an employee stock ownership plan that was established through their recently negotiated contract.
In time, workers at Lockheed and other companies should use their stock ownership plans and their influence on those massive pension funds to become major players in the corporate games that have such a powerful impact on their lives.
