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Workers Capital News - May 25, 2010

In this issue:

  • Governance and Disclosure

    US Pension Funds add new charges to on-going lawsuit / New survey indicates private equity firms may be warming to ESG

  • Shareholder Activism

    Coalition of investors call for shift towards clean energy / Pension funds lobby shareholders for Massey board changes

  • Pensions and Investments

    Australia raises employer contribution to pension funds / French government considers later retirement and higher taxes / Canada proposes restriction removal on pension investments

  • Feature Section

    Workers’ Capital at G8/G20 in 2010

Governance and Disclosure

US Pension Funds add new charges to on-going lawsuit

Following a recent complaint by the Securities and Exchange Commission (SEC), charging Goldman Sachs and one of its vice presidents with defrauding investors, two US pension funds have amended earlier lawsuits over executive compensation at the firm to include new charges.

These new charges address the demand for board accountability and projected future damages stemming from the substantial 12% drop in market value and slipping share prices.

The funds argue that executive negligence to monitor the ethical standards of the company’s activities have threatened the organization’s reputation as a whole and potentially created civil liability, to which the shareholders, clients, and public taxpayers would be unjustly subjected.

New survey indicates private equity firms may be warming to ESG

According to Responsible Investor a survey by Ethos, an 84-member Swiss investor group comprised mainly of pension funds, shows that private equity firms are increasingly conscious of responsible investment principles.

Respondents included 21 companies that are already active on environmental issues. The majority of respondents said they took Environmental Social and Governance (ESG) issues into consideration for investment decisions, although Ethos noted that just eight had adopted management procedures to guarantee that process.

A further 16 respondents said they would be willing to publish an ESG report for their investors alongside financial reporting.

Shareholder Activism

Coalition of investors call for shift towards clean energy

Ceres, a US-based environmental investor group, is lobbying the American government to abolish any financial incentives or tax breaks for companies in the oil industry and to invest the funds in clean energy instead.

This action is in response to the damage caused by the recent Deepwater Horizon oil spill in the Gulf of Mexico. The CERES recommendation addresses environmental and safety concerns of deep sea oil drilling and the costs of the oil slick to the shareholders. Such costs include clean up operations and the possible drops in share price.

For example, BP, the UK oil corporation which owns Deepwater’s drilling rights, saw an 11% decline in its share price since the rig explosion which caused the oil spill.

Pension funds lobby shareholders for Massey board changes

Nine public pension funds, as well as proxy advisory firms including RiskMetrics and Glass Lewis, advised Massey Energy shareholders to withhold support for the re-election of three board directors at the May 18th shareholder’s annual meeting.

The directors are alleged to have neglected their safety oversight duties, which ultimately led to the recent mine disaster in Virgina, where twenty nine workers lost their lives.

Despite the recommendations to withhold votes for Baxter Phillips, Richard Gabrys, and Dan Moore – members of the Board Safety, Environmental and Public Policy Committee (SEPPC), all three were re-elected.

Election results indicate 42% to 45% of voting shareholders at the meeting opposed the re-election. Observers state that this indicates that a near- majority portion of shareholders have lost confidence in Massey following the reveal of its poor safety record and the ensuing reputational and market damage for the company.

Pensions and Investments

Australia raises employer contribution to pension funds

Following recommendations of a recent tax review (the Henry Tax Review), the Rudd government has announced a commitment to raising employer contribution to pension funds from 9% of salaries to 12% by the year 2020. Observers note that the measured approach of a 3% increase over 10 years will give business ample time to implement the proposed changes.

Some reasons for proposing this change include: - Reduction of the long-term cost of retirement on Australian taxpayers - Reduction of the cost of funding the population aging - Greater monetary funds that can be directed into investment in Australia’s infrastructure and economy

French government considers later retirement and higher taxes

On 17 May, French Labour Minister Eric Woerth proposed research on a longer working life and new taxes on high earners in order to cover losses suffered by France’s pension system.

Global pensions reports the proposals follow the Ministry’s rejection of across-the-board increases in taxes and the subsequent suggestion of levying high earners and investment income. They are designed to combat the financial impacts of longer life expectancy and climbing unemployment rates in France. However, unions have threatened to go on strike to protect France’s current legal retirement age of 60.

Canada proposes restriction removal on pension investments

Finance Minister Jim Flaherty proposed removing limits on the amounts that private pension plans are allowed to invest in resource and real property. This is expected to allow more flexibility in how funds build their portfolios.

The government also wants to use average, rather than current solvency ratios, to determine minimum funding requirements. The aim is to reduce the impact of sudden shocks, such as those induced by the 2008 financial crisis, to the funded status of plans.

Feature Section

Workers’ Capital at G8/G20 in 2010

World leaders, central bank governors and representatives from the IMF, World Bank, and the EU are preparing to gather for the G8 and G20 Summits, scheduled for 25-27 June in Toronto. The Summits will focus on reform of the global financial system and international trade.

Summit outcomes pertaining to financial sector reform and green jobs will influence how and where workers capital is invested. Likewise, social and environmental issues raised at these meetings could signal important extra-financial factors that stewards of workers capital will be expected to account for in their future investment decisions.

The global trade union movement will bring their collective voice to the Summit, and preparations are already underway to highlight the priorities of workers. A few initiatives are noted here:

Petition for World Leaders to back Financial Transactions Tax

A global petition has been launched to ask G20 leaders to implement the Financial Transactions Tax. It is available at www.makefinancework.org. The petition, backed by a global coalition including the International Trade Union Confederation (ITUC), will be presented to the G20 world leaders prior to the summit in Toronto.

Unions Unite on Universal Access

The G8 has failed to fulfill its promise of achieving universal access to HIV and AIDS services by 2010. This is among the foremost social protection issues on the trade union agenda.

In the lead up to the June Summit, the Global Unions AIDS Programme (GUAP) and the African Regional Organisation of the International Trade Union Confederation (ITUC-Africa) have launched program of action calling for universal access to HIV and AIDS prevention, treatment, care, and support.

Canadian Labour Congress Public Rally

The CLC is coordinating a Rally and March on June 26. This is seen as a rare opportunity for Canadians to speak out on policies that industrialized nations should adopt on economic recovery, environment & human rights, decent & green jobs, equality & social protection.

As the Summit approaches, CWC members are encouraged to inform the CWC Secretariat of key developments and outcomes of interest for the responsible stewardship of workers’ capital. 

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