Sanford Jacoby has achieved a truly rare feat: taking a narrow, specialized, and somewhat obscure topic and shaping it into a magisterial narrative that provides true understanding of the players and the drama involved. Labor in the Age of Finance is a tour de force that captures the labor movement’s efforts to muddle through during the ascendance of corporate finance without losing its way. This story has been told in bits and pieces, but never so comprehensively and never so completely. Jacoby marshals a mammoth number of news events, legal theories, political struggles, and vivid characters to recount how unions and their associated pension funds sought to advance their interests in a world hostile to–yet dependent upon–their participation.
For many decades now, the narrative for the labor movement has been one of pessimism and desolation. Since the 1960s, unions have represented a smaller and smaller percentage of private-sector employees, now hovering around six percent of the workforce. The fields of labor law and labor history have ruefully captured the movement’s downfall, with macro analyses and small portraits alike portraying the twilight of labor’s role in society.
At pretty much the same time, corporate shareholders began their ascendancy, as finance theory, corporate law, and a restive investor class combined to buoy shareholder fortunes. The notion that a corporation exists to maximize shareholder wealth went from a somewhat tawdry economic idea to the organizing principle of corporate governance. It should not be a surprise that workers’ wages and corporate profits have diverged significantly ever since, despite ongoing gains in workplace productivity.
In the 1980s, labor unions took a fairly pro-management and anti-shareholder approach to corporate governance issues. Labor supported the passage of state constituency statutes, which gave corporate leaders the freedom to consider the effects of their decisions on all company stakeholders, rather than just their shareholders. But in the 1990s, labor approached corporate and securities law with a new perspective. And that is the story that Jacoby tells in his book.
It’s impossible to provide a succinct and complete overview of Labor in the Age of Finance, as the accumulated material is truly astounding. Jacoby begins in the late 1800s, touching on the nascent labor movement’s relationship to finance and investing, and moves steadily but comprehensively through the New Deal, the birth of corporate governance, the Wall Street of the 1980s, and then on to the last 30 years, which occupies the bulk of the book. Jacoby situates unions and their affiliated pension funds within the evolving landscape of contemporary corporate governance, including mutual funds, private equity firms, shareholder consulting firms, and government regulators. He explains how unions attempted to find their footing as corporate governance advocates, wending their way through existing debates and starting new ones.
Between the early 1990s and the early 2000s, labor perspectives on finance took an almost 180-degree swing: from defending management against shareholder primacy and corporate raiders, to siding with shareholder activists who policed executive malfeasance and pursued shareholder value. Labor groups and pension managers switched sides to lend their support to pro-shareholder policies such as majority voting, non-staggered boards, say-on-pay, and proxy access. Jacoby documents the shift with incredible thoroughness. He brings alive the ideological debates, the internal struggles, the policy successes and failures, and the ultimate result: an approach to corporate governance that cracked down on executive misbehavior but also put shareholders in the catbird seat.
Labor in the Age of Finance is a comprehensive primer on the role that the labor movement and union-backed pension funds have played in shaping corporate governance over the past thirty years. It is jam-packed with so much information that at times, the narrative of a particular chapter can get lost in the details. But Jacoby is also careful to use certain concepts as organizing devices, especially the so-called corporate governance “cookbook:” a set of reforms that labor leaders supported during the 2000s as a series of scandals and crises rocked corporations and the economy. This idea of a policy cookbook assists in understanding labor’s change in perspective, as well as illustrating the limitations of that approach as it drifted further away from labor concerns and deeper into shareholder value.
Jacoby’s book should be considered essential reading for scholars in both labor and employment law, and corporate and securities law. It makes an excellent companion piece to David Webber’s 2018 book, The Rise of the Working-Class Shareholder: Labor’s Last Best Weapon. Webber makes a much more optimistic argument for the role of union-side pension funds in corporate governance, pointing out labor’s successes in fighting Wall Street fraud, reining in CEO power and pay, and blunting the power of hedge funds and private equity. His book demonstrates how labor’s capital fought against entrenched executives and short-sighted speculators to make a meaningful difference in policy. Even Webber must admit, however, that some pension funds adopted the “shareholder primacy” ideology too blindly, disregarding the interests of their own members to ensure stronger financial returns. Jacoby is more neutral on this point, concluding that unions adapted to a harsh climate to make the best of a bad situation. “The financial turn wasn’t heroic,” he acknowledges, leading to troubling tradeoffs and “the messy compromises of realpolitik.” (P. 224.)
This past year has been one of the most promising for the labor movement in quite some time, with strong popularity in public opinion polls and organizing successes at Starbucks, Amazon, Chipotle, and high-profile media companies. The ideology of shareholder primacy has taken significant flak, as millennial investors assert their interests in climate change, racial justice, and other social concerns beyond short-term wealth maximization.
It’s important to understand where we have been going for the last thirty years and how we’ve gotten to this point. I strongly recommend Labor in the Age of Finance and its compelling exploration of the labor movement’s efforts to stay afloat during more difficult and complicated times.
