Pension plans and pension funds have emerged as an important element of industrial relations. Pension plans and pension funds are the product of the industrial relations paradigm, both historically and economically. As this paradigm has evolved, particularly with the rise of the finance paradigm and the long decline of private sector unionism (in North America at least), so too has the role of pension plans and pension funds. Pension plans and pension funds have emerged as an important element of industrial relations. Pension plans and pension funds are the product of the industrial relations paradigm, both historically and economically. As this paradigm has evolved, particularly with the rise of the finance paradigm and the long decline of private sector unionism (in North America at least), so too has the role of pension plans and pension funds.
Pension funds have evolved from passive investment vehicles into much more active "owners" of investments. This active ownership has manifested itself most visibly in pension funds' use of shareholder rights - sometimes called shareholder activism - to influence management of their investments, through either proposals, divestments or securities litigation. Sometimes these activities are conducted by policy of the fund itself, and sometimes as part of a broader capital management strategy of collectivities - typically unions - related to the management of pension funds. The most robust experience with pension fund shareholder activism has occurred in the U.S., although these owner behaviours are thought to be spreading to Canada, the U.K. and other OECD and similar jurisdictions.
However, pension plans are also significant influence on firm decision-making in other contexts, notably in corporate restructuring transactions. Within these restructuring transactions (e.g., CCAA in Canada, Chapter 11 in the U.S.), pension funds have a status somewhere between employee creditor and bondholder, often with implicit or explicit state support of these positions, as a result of the relationship to public insurance or ad hoc government subsidies required to effect transactions.
Most recently, pension funds, particularly large public and quasi-public pension funds, have been active investors and co-investors in some of the major M&A activity around the world. Pension funds are forming consortia along with investment banks, private equity houses and hedge funds in the privatization of public companies.
These multiple roles of pension plans and funds create tensions in and between the stakeholders in these plans and their investments. One long-standing school of thought has identified various forms of "pension fund socialism" (Druker, 1978; Blackburn, 2004), in which these pools of capital provide influence and even a voice for employee stakeholders in the firm. This position has been criticized as insufficiently attentive to the limitations imposed on this influence by the channeling of it through the requirements of capital markets themselves (Henwood, 2002). Another school of thought identifies these plans as pools of "patient capital", in effect, a replacement for state funding of certain industries.
This study will survey the legal, political and economic fields in which pension plans and funds operate, and evaluate their changing role and influence in these fields. The project will contribute to current theory of pension plans and pension funds, and provide a foundation for further discrete theoretical and empirical inquiries. Specific areas of research and papers will include: (i) an overview of the issues (ii) the tensions for pension funds as investors and the fiduciary paradigm, (iii) the implications of pension funds for dispersed share ownership, (iv) an empirical study of pension fund activism in Canada, and (v) an analysis of the modern theory of pension plans in Canada.
Email: sarcher@kmlaw.ca
Leader Profile: Simon Archer