Labor in the Age of Finance

“The 1970s and 1980s were a disaster for America’s labor movement,” as Jacoby begins his chronicle of that movement’s efforts to recover in the decades afterward, by bending the “financialization” of the U.S. economy toward labor’s interests. The results, in his telling, may not have been disastrous, but they were, at best, mixed. One foundation for Jacoby’s account is historical—the “postwar system” of industrial relations. In it, American “corporations balanced the interests of diverse stakeholders—executives, employees, and shareholders—without privileging any one of them.” Another foundation is disciplinary. Jacoby views corporations not as networks of contracts, or as “principal-agent” problems, as many scholars did in the era under study, especially those influenced by financial economics. Rather, drawing from a more interdisciplinary “industrial relations” orientation, Jacoby sees corporations as fields of power, “riven by conflict,” in which three blocs—managers, shareholders, and workers—always contest for primacy.Undoubtedly, in the United States, the era since 1980 has been one of shareholder primacy. Maximizing “shareholder value” became the great single metric of corporate success. Under the “postwar system,” organized labor rarely viewed shareholders as their primary foe. The target was managers. After managers failed to the solve a profitability crisis during the 1970s, activist shareholders during the 1980s, ranging from colorful figures like Carl Icahn to institutional investors like CalPERS, took advantage of increasingly deregulated financial markets to wrest control over corporations. They aligned managerial interests with their own, often short-term goal of shareholder value (namely, stock price). Maximizing shareholder value often meant shedding labor costs. Whether in employment or wage rates, the results for industrial workers, and their unions, were indeed disastrous.How, then, did labor respond? Among the new tactics was an attempt to leverage the financial power of union pension funds, legacies of the postwar system. As shareholders themselves, unions could attempt to exercise voice in corporate governance—not as they had in the past, through organizing or the collective bargaining process (including strikes) but through voting their shares. This tactic, Jacoby demonstrates, often joined with another new one, the “corporate campaign,” by which unions attempted to pressure corporations outside the workplace through the channels of publicity.In the chapters, which are roughly chronological, Jacoby’s method is to recount a dizzying number of shareholder campaigns by leading U.S. labor unions, including the largest umbrella organization, the afl-cio. At times, readers may feel overwhelmed by the sheer details of the great number of campaigns, but labor’s chief preoccupations emerge across the pages. They include support for shareholder “say on pay” for corporate officers, “proxy access” (meaning the ability of shareholders to nominate board candidates directly), and majoritarian rather than pluralist voting in corporate board elections.Jacoby does not underscore the point much, but apparently unions, while tactically adapting to the new world of shareholder primacy, kept their eyes set on their old foes, the managers. That strategy makes sense, since managers still directly employed workers, determining their wages and working conditions. But Jacoby does note that, as unions attempted to wield power as shareholders, they did nothing to push back against the trend toward shareholder primacy itself. Through pensions, labor might have owned some finance capital, but relatively not so much. In the end, corporate payouts to shareholders increased returns to property owners but did not—almost by definition—involve increasing wages for labor. Wealth transferred from labor to capital, suppressing wages and fueling inequality.In their shareholder campaigns, labor often sat with some strange bedfellows, including many state pensions plans that sought only to maximize their financial yields, regardless of what it meant for workers on the ground. In the age of finance capital, a truly labor-friendly, mass- shareholder movement never came close to fruition. In principle, it was possible, but Jacoby notes that in 2019, “6 percent of corporate employees belonged to a union, fewer than in 1929.”The point is not that labor had no success with shareholder advocacy, especially during the 2000s in the wake of the Enron scandal. Jacoby concludes that it made “a pretty good showing for an alleged dinosaur.” Indeed, most U.S. corporations today use majoritarian voting and offer proxy access (however diluted). This provision and others bolstering shareholder voice in corporate governance have recently been promoted by laws, including the Dodd-Frank Act of 2010, which labor influenced, and which ends Jacoby’s history. At this point, little evidence suggests that any of these changes have much benefited workers, although time will tell

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