September 2014 Newsletter
An End to Excessive CEO Perks
The AFL-CIO Equity Index Fund is a collective investment fund available to qualified employee benefit plans. Launched in March 2011, the Fund tracks the returns of the broad U.S. large-cap equity market, as represented by the S&P 500 Index, at an ultra-low annual fee of only 1.5 basis points (0.015%).
At three-and-a-half years old, with more than $5 billion in assets, the Equity Index Fund is the fastest growing AFL-CIO fund in history.
We are also proud of the fact that the Equity Index Fund continues to be one of the top funds of its type in the country. In fact, although past performance is not a guarantee of future results, just having passed its three-year anniversary the Fund has a three-year annualized return of 16.50% compared to the S&P 500 Index Fund Average three-year annualized return of 15.92%.
The AFL-CIO Equity Index Fund also has the added benefit of voting in line with the AFL-CIO Proxy Voting Guidelines 100 percent of the time. And the Fund uses its share ownership to successfully tackle corporate pay disclosure, golden parachutes, and excessive perks for executives.
As the pay gap between CEOs and workers continues to widen, it is important that we make the best use of the hundreds of billions of dollars that union affiliated pension plans currently have invested to encourage executive compensation reform.
AFL-CIO Investment Trust Corporation
Heather Slavkin Corzo is Director of the AFL-CIO Office of Investment.
As an investor in the AFL-CIO Equity Index Fund, you are an owner of 500 of the largest and most successful companies in the country. Unfortunately, the companies that you are invested in are free to spend millions of dollars on elections, promoting candidates and policies that may undermine your interests. And, they don’t even have to tell you about it.
The AFL-CIO is stepping up pressure on the U.S. Securities and Exchange Commission to require companies to disclose their political contributions to investors. On September 4, the AFL-CIO and other members of the Corporate Reform Coalition announced that the SEC had now received more than 1 million comments from the public—a record—urging it to act immediately to shine a light on corporate political spending.
The efforts by the Corporate Reform Coalition, a group of dozens of labor unions, public pension funds, consumer organizations, public interest groups and academics, date back to the U.S. Supreme Court’s 2010 decision in the Citizens United case, which opened the floodgates to billions of dollars in political spending by individuals and organizations.
“The American labor movement proudly joins the chorus of one million Americans demanding the SEC require publicly traded corporations disclose their currently hidden ‘dark money’ political spending,” AFL-CIO President Richard Trumka said in a statement that day. “A true democracy values transparency, it does not let corporations exert dramatic influence on elections while hiding in the shadows,” he added.
Despite the overwhelming public interest in having companies disclose how they spend their resources on political efforts, SEC Chair Mary Jo White has so far declined to act on the petition on political spending disclosures.
Add your voice to the growing chorus of investors insisting the SEC propose a rule requiring corporations disclose political spending.
Shepard Burr is President of the ASB Investment Management division of ASB Capital Management, LLC. ASB Capital Management, a registered investment manager, is the manager of the AFL-CIO Equity Index Fund.
Word seems to be spreading fast, among trustees and consultants of qualified pension plans, about the attractiveness of the AFL-CIO Equity Index Fund. Strong performance, ultra-low fees, and proxy voting and shareholder activism that promote good corporate governance, are features that have no doubt contributed to the Fund’s significant growth.
The AFL-CIO Equity Index Fund’s capital-raising momentum is impressive. In fact, the Fund has already added almost 30% more in new investment in 2014 than in all of 2013, with almost four months left to go in this year. With all it offers, more than 75 qualified pension plans with an allocation to indexed large cap equity (represented by more than 20 consulting firms) have made the choice to invest in the AFL-CIO Equity Index Fund.
S&P 500 CEO Pay Is Now 331 Times Average
The AFL-CIO recently launched the 2014 edition of its Executive PayWatch website (www.paywatch.org) which draws attention to the nation’s widening income inequality. The gulf between what the typical chief executives of the nation’s largest companies receive and what rank-and-file workers earn is simply unconscionable.
In 2013, CEOs of the S&P 500 companies received, on average, $11.7 million, according to PayWatch. That compares with $35,239 for the typical rank-and-file worker. In other words, CEOs made 331 times what the typical worker earned in 2013, and 774 times more than those receiving the federal minimum wage.
As AFL-CIO President Richard L. Trumka said at the PayWatch launch, “CEOs make a ridiculous amount of money. The workers who create those corporate profits barely make enough to take care of the basics.”
This year’s PayWatch website highlights high-paid CEOs at low wage employers. For example, at Wal-Mart, former CEO Michael Duke received $20.7 million in total compensation for fiscal 2013. Meanwhile, more than half of the hourly workers at the company earn less than $25,000 a year. Other companies profiled on PayWatch include Kellogg’s, Reynolds American, Darden Restaurants and T-Mobile.
Why does the pay gap at these and other companies matter?
“These companies are run by short-sighted business leaders. How are they short-sighted? Well, people who earn minimum wage can’t afford cell phones or dinner at Red Lobster or the Olive Garden, both of which are owned by Darden Restaurants,” President Trumka explained. CEOs of American companies are “cannibalizing their own consumer base,” he added.
This year, PayWatch highlights the AFL-CIO’s efforts to push for an increase in the federal minimum wage to $10.10 an hour for all workers, including those who survive on tips. Increasing the minimum wage would boost our economy.
Between 1979 and 2012, productivity increased 74.5 percent, while a typical worker received only a 5 percent raise in wages. If the federal minimum wage had kept pace with productivity growth, it would be $18.67 today instead of $7.25
Investor Spotlight: AFL-CIO Staff Retirement Plan
The AFL-CIO is the umbrella federation for U.S. unions, with 56 unions representing 12.5 million working men and women. The Federation helps ensure that all people who work receive the rewards of their work—including decent paychecks and benefits, safe jobs, respect and fair treatment.
“The success of the AFL-CIO Equity Index Fund shows that the pension plans of union workers have a strong interest in pooling their investment dollars and demonstrates their belief in low investment management fees and investments that promote good corporate governance.”*
– Richard L Trumka
“In less than four years, the AFL-CIO Equity Index Fund has raised an astonishing $5 billion, making it the fastest growing AFL-CIO fund in our history. Pension plans understand — now more than ever — the importance of generating good returns and making sure those investments provide for the retirement security of their participants and beneficiaries.”*
— Liz Shuler
“The labor movement can be proud that the AFL-CIO Equity Index Fund has one of the lowest known management fees and consistently strong performance, while also having the peace of mind that it will vote 100 percent in accordance with AFL-CIO Proxy Voting Guidelines.”
— Tefere Gebre
Executive Vice President, AFL-CIO
What AFL-CIO State Federation Presidents are Saying About the AFL-CIO Equity Index Fund:
— Al Henley
“On average, an S&P500 CEO is earning 331 times the average worker. In other words, these CEOs are making $11.7 million a year on average. The AFL-CIO Equity Index Fund is a critical way the labor movement can have a large voice to ensure more fairness in executive compensation.”*
— Vince Beltrami
Alaska State AFL-CIO
“Through low management fees, low expenses, and careful, full-replication management, the AFL-CIO Equity Index Fund is among the best performers in its class, and it allows pension plans to have a united voice on key shareholder proposals.”*
— Don Berry
— Mike Louis
“While CEOs are negotiating golden parachutes for them selves, wages for workers remain stagnant. The AFL-CIO Equity Index Fund is a critical vehicle to help make sure that workers’ pension plans have a real voice in executive pay through proxy voting.”*
— Al Ekblad
Montana State AFL-CIO
*Testimonials may not be representative of the experience of other customers. Testimonials are no guarantee of future performance or success.