December 2013 Newsletter
Fighting for Pay Ratio Disclosure
The Securities and Exchange Commission recently proposed a new rule to require companies to disclose their ratio of CEO-to-worker pay. Pay ratio disclosure is important because over the past 30 years, the ratio of CEO to worker pay increased from 42:1 to a shocking level of 354:1 according to the AFL-CIO’s Executive Paywatch website.
High levels of CEO pay relative to other company employees hurts company performance by reducing employee morale and productivity. That’s why the trustee of the AFL-CIO Equity Index Fund recently wrote the Securities and Exchange Commission, explaining that the pay ratio disclosure rule “would be of great benefit to the Fund and its shareholders as it will provide better disclosure of public companies’ entire workforce compensation practices, and be a valuable metric for evaluating executive compensation issues.”
When voting on CEO pay, the AFL-CIO Proxy Voting Guidelines take into consideration what the company pays its other employees. That is why now, more than ever, union pension fund trustees, managers, and consultants need to consider the AFL-CIO Equity Index Fund. It has very low fees and proxy votes in line with the AFL-CIO Proxy Voting Guidelines 100% of the time.
Now is the time.
The fund is already at more than $4 billion in committed funds in less than three years since inception. But with trillions more dollars in union pension funds across America, we need to exponentially grow to fully maximize our capacity to create change at boardrooms and shareholder meetings across the country.
Please ask your consultant to set up a meeting with us to discuss the funds and let’s continue to grow!
President & Managing Director
AFL-CIO Investment Trust Corporation (ITC)
Brandon’s CornerBrandon Rees is Acting Director of the AFL-CIO Office of Investment
CEO-to-Worker Pay Ratios Are Material To Investors
Recently the Securities and Exchange Commission has proposed rules to require public companies to disclose the median pay of all employees, and the ratio of pay between the median employee and the CEO.
The SEC has received over 100,000 comments that are overwhelmingly in support of this disclosure provision. Many of these investors’ letters express concern that existing CEO pay practices are flawed. At most companies, CEO pay levels are set based on a peer group analysis of what other CEOs are paid.
The problem is that peer group benchmarking leads to CEO pay inflation. While peer group data is relevant for setting CEO pay levels, it shouldn’t be the only factor taken into consideration.
Pay ratio disclosure will help constrain further growth of CEO pay levels. Over the past two decades, average CEO pay at large U.S. corporations has increased at twice the rate of average worker pay. Had CEO pay grown at the same rate as worker pay, the average large company would have paid its CEO $5 million less in 2012.
Pay ratio disclosure gives investors an additional metric to consider when voting on “say-on-pay” votes and other executive compensation matters. This is important because the siren song of high pay can tempt CEOs to take on excessive risks.
SEIU Healthcare – Illinois & Indiana
Eighty-five thousand workers are members of SEIU Healthcare Illinois and Indiana. These members work in the home care, childcare, and healthcare industries caring for patients, seniors, people with disabilities, and children.
Healthcare Illinois and Indiana was formed as a merger of three local unions. In May 2009, Locals 4, 20, and 880 merged to be able to coordinate campaigns and membership services more effectively.
They are also investors in the AFL-CIO Equity Index Fund because they understand the high stake of corporations being unchecked and the dangers of not holding them accountable on issues such as executive pay.
“Investment vehicles like the AFL-CIO Equity Index Fund are all about the principle of ‘investing in ourselves,” said Keith Kelleher, President of Healthcare Illinois and Indiana. “Why not leverage our pension assets in a way that helps build worker power and strength?”
This sentiment is echoed by members of SEIU Healthcare.
“Why should a banker or corporate executive making over a million dollars each year pay the same flat income tax rate as a single mom making $15,000 a year? It’s simply not fair,” said Tiki Tunstall, a child care provider in Metro East, Illinois on the SEIU Healthcare website. “When the rich and corporations don’t pay the fair share, our programs go unfunded, and working families have to pay the price.”
SEIU Healthcare Illinois and Indiana are standing up for all workers, including recently participating in support of immigration reform; fighting to assure that all Americans have access to affordable, quality care; and demanding that the CEOs of Walgreens, Walmart, and McDonald’s pay their fair share in taxes.
Shep’s CornerShepard Burr is President of ASB Investment Management division of ASB Capital Management, LLC.
When it comes to an S&P 500 Index Fund, why would a Taft-Hartley or Public pension plan not consider the AFL-CIO Equity Index Fund?
The Fund closely tracks the S&P 500 Index, and has provided top 11% performance in the Lipper US/All Share Classes/S&P 500 Index Universe in every period measured (beating the Lipper average by 61 bps in the one-year period at 9/30/13).
The Fund has the lowest-known investment management fee of any index fund, at 1.5 bps.
The Fund offers responsible proxy voting and shareholder activism, geared to improving corporate governance, which is 100% in line with AFL-CIO Office of Investment guidelines. It is a well-hidden fact that the AFL-CIO Equity Index Fund’s biggest competitors vote against these guidelines most, if not all of the time.
MARTA/ATU Local 732
More than 3,000 transit workers are members of the Amalgamated Transit Union Local 732 in the City of Atlanta, Fulton, DeKalb, Cobb, and Gwinnett counties. It is the largest ATU local in the Southern United States and workers are mostly part of the MARTA system, which is Metropolitan Atlanta Rapid Transit Authority, providing bus and rail service in the Atlanta, GA area.
In addition to being investors in the AFL-CIO Equity Index Fund, the Amalgamated Transit Union nationally, as well as Local 732, are vocal and leading supporters of the Robin Hood Tax campaign.
The Robin Hood Tax refers to financial transaction taxes (FTT), which will change how financial transactions are taxed and how the new tax revenue is spent. The taxes will only target speculators, since the tax would be refunded to average investors, pension funds and health savings accounts.
“The AFL-CIO Equity Index Fund is a key program, allowing us the right use of our investments to proxy vote as shareholders in support of workers’ interests,” said Lawrence J. Hanley, International President, ATU.
“Investment vehicles like the AFL-CIO Equity Index Fund provide a critical opportunity for unions to leverage pension dollars as shareholders,” said Curtis Howard, President of ATU Local 732 and current Co-Chair of the ATU/MARTA Defined Benefit Pension Plan in Atlanta, Georgia.
The Colorado Labor Movement Speaks Out in Support of the AFL-CIO Equity Index Fund
“When money is invested in the AFL-CIO Equity Index Fund, unions will have the peace of mind that those assets will always be voted 100% with the AFL-CIO Office of Investment. No other fund provides that sort of guarantee.”
– Cindy Kirby, President, Colorado AFL-CIO
“The AFL-CIO Equity Index Fund is a great way to invest our dollars to win a voice in the form of proxy voting, which allows unions to support important shareholder initiatives on corporate accountability, responsible business practices, and executive compensation.”
– Mike Cerbo, Executive Director, Colorado AFL-CIO
– Howard Arnold, President, Colorado Building and Construction Trades Council