By Mike Aguirre
Over fifty years ago John and Robert Kennedy exposed collective bargaining and pension abuses and pushed through effective legislative reforms. The Labor Management Reporting and Disclosure Act and the Welfare Pension Plan Disclosure Act prohibit management and union officials from making or accepting pay offs, protect pension and union assets from theft or misuse, require annual financial disclosures, and guarantee the democratic rights of union members and pensioners.
The Kennedy investigation found: (1) There was a significant lack of democratic procedures in the unions studied; (2) Certain managements had extensively engaged in collusion with unions including paying high union officials to obtain favored treatment; (3) There has been widespread misuse of union funds; (4) Members of the legal profession had played a dubious role in their relationships with union officials of some unions.
The Senate Committee investigation that produced the reforms also exposed abuses in the private pensions similar to what we find today in the public pensions. Pension and union officials who served on pension boards were paid to make decisions in violation of their fiduciary duties, pensions were organized on unsound actuarial practices, union and pension members had no right to question decisions or receive information about how their unions and pensions were managed. The Kennedy investigation found labor and management abused collective bargaining with deals that disregarded the independence and actuarial requirements of employee pension plans. This abuse is rampant in public sector collective bargaining.
The federal union reform legislation was based on the principal that union officers were themselves only the servants of the broader membership. Union officials had a special responsibility to the members they represented to administer the union’s financial affairs judiciously and economically. Under federal law those who headed unions were subject to fiduciary principles.
Senator Hubert H. Humphrey during the Senate floor debate on the pension reform legislation told his fellow senators: “As a friend of organized labor I wish to see the American labor movement clean, strong, and responsible. The few who abuse their power or are guilty of corruption, misuse of funds, or any other form of unethical conduct serve only to bring discredit upon the good name and reputation of organized labor. Unions are part of the American political, social and economic structure. It has taken courage, steadfastness of purpose, sacrifice, and great leadership to build the American labor movement. There is no room within its organization for those who would violate their trust.”
The Kennedy led committee found private pension plans were susceptible to waste, abuse, and unnecessary losses to the beneficiaries, the same abuses voters have discovered in public pensions. A high wall was needed to make sure pensions were administered based on sound actuarial science not collective bargaining horse-trading. The federal pension law was adopted because of the national interest in protecting the well-being and security of millions of employees and their dependents who were directly affected by their union pensions. The federal pension reform law was based on the principal that the pensions should be managed under fiduciary principles.
Unfortunately, public sector collective bargaining and public sector pensions were exempted from the federal reform laws. Predictably the abuses the Kennedy brothers uncovered in the private sector are prevalent in public pensions and collective bargaining today. Pension and union members have inadequate rights to information about the finances of their unions and pensions. Elected officials, management and union leaders, investment advisors and lawyers who provide services to public unions and pensions have engaged in disgusting and costly practices that have left the public sector in bankruptcy across the state. Public sector collective bargaining is shrouded in secrecy and subject to wide spread abuse. The separation between pension administration and collective bargaining has not been respected.
Voters in Wisconsin recognized the problem and imposed the ultimate sanction; they ended public sector collective bargaining altogether. John Kennedy argued that when it came to unions and their pension funds there were three groups: labor can do no wrong, labor can do no right, and labor needs to be reformed. The Kennedy brothers were in the third group. The lesson of Wisconsin for Democratic: reform public sector collective bargaining and public sector pensions or you will lose them.
Democrats can get ahead of the demand for pension and collective bargaining reform by drawing upon the work product of the Kennedy brothers. Democrats can save collective bargaining for public workers and their pensions by reforming them. The powerful tools of reform the Kennedy brothers developed for private sector collective bargaining and pensions can be adapted to regulate public sector collective bargaining and pensions and those who serve them.
Democrats do not need to stand on the sidelines of public sector collective bargaining and pension reform; they need to urge Kennedy federal pension and union reforms laws be extended to public sector pensions and public sector collective bargaining. Those laws have worked to keep private collective bargaining and private sector pensions in line.
The time has come for Democrats in Congress to expand reform laws that govern private sector collective bargaining and private pensions to public sector collective bargaining and public pensions.
Michael J. Aguirre is a lawyer in a private practice at Aguirre Morris & Severson LLP, and is the former City Attorney for the City of San Diego.