The SEC has been considering the issue of increased shareholder access to the corporate proxy and director elections. Labor union pension funds have been among the more vocal proponents of increased access, arguing that such access will lead to improved financial performance. Business groups, such as the Business Roundtable, have argued against increased access on the grounds that such access would encourage special-interest shareholders and would decrease shareholder value. The desirability of increased shareholder access, then, depends to a large degree on the extent to which labor unions (and other politically minded shareholders) pursue the interests of shareholder value rather than their own self-interest.
One of our Ph. D. students, Ashwini Agrawal, has written one of the first papers that addresses this issue. Ashwini noticed that in 2005, the AFL-CIO (the central federation of labor unions in the U.S.) split into two groups. Several of its member unions, representing roughly 35% of its members, left to form a new organization–the Change To Win (CTW) coalition. This exogenous shift in AFL-CIO membership allows Ashwini to examine changes in the voting behavior of AFL-CIO affiliated shareholders toward management and director nominees.
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