Working Capital: The Power of Labor's Pensions

Rating:
Summary: Interesting
Review: Although I do disagree with the direction that contributors' conclusion, this is an interesting and important little text and well worth a read.

Rating:
Summary: Very pro-shareholder analysis of a potential better future
Review: I wonder if the reviewer from Illinois read the same book I did. If so, I think that he must have read it exclusively to knock it down. He takes things completely out of context. I found this book to be very interesting, and very pro-shareholder power. It raises significant questions on who makes the money decisions and how they make them, and offers some intriguing possibilities for the future.

Sometimes it seems like companies have become focused on "shareholder value" as if shareholders weren't human beings with many interests. For example, "shareholders" want airlines to keep prices down, to pay security checkpoint staff the bare minimum ... unless, of course, the shareholder is also flying on the airplane, in which case, they might feel that security is a more important value than thrift.

Some of these articles are a tad dry and academic, but the points they raise are really important. If you're a pension fund trustee, or a pension recipient, I urge you to read this book.

Rating:
Summary: Politicizing Investment Decisions
Review: The premise of this book is that pensions are being mismanaged by companies and investment managers to worker's detriment. The facts are misrepresented and the solutions offered are chilling. Here are some examples:

The writers believe that a company's management should not make pension investment decisions, even thought by law, most plans are required to be maintained for the exclusive benefit of participants. (Notable exceptions to this rule are public plans and union-sponsored plans!)

Several chapters also state that workers themselves are not capable enough to manage their own pensions ' they should not be allowed to make decisions as to current vs. future spending and make 'mistakes' in asset allocation.

The alarming conclusion is that only 1) union leadership or 2) the government is equipped to make decisions on the $7 trillion invested in pensions.

Pensions investment decisions have not been speculative and are not short-term in nature. The Asian crisis in 1997 and tech decline 2000-present are often cited in the book as examples of mismanagement. However, almost all pension plans were under-weighted (relative to the total market) and extremely few were over-weighted in these sectors at the time of their drop. In other words, plan fiduciaries recognized some of the speculation involved in the inflated prices, and adjusted portfolios accordingly. Had this book been written in 1975, they would decry the 'Nifty Fifty' market decline.

Instead of using professional investment managers that seek (and are incented for) the highest possible return given a risk profile, the authors would like to use other factors in making investment decisions. For example, will any investment decisions result in layoffs, plant closings or job flight overseas?

In other words, we must keep all our existing industries and refuse to re-train workers for the better jobs of tomorrow. This approach didn't work too well for the Soviet Union.

Yes, it is painful when worker lose their jobs, but the growth of the US economy in the last 20 years has been due, in part, to the fact that we have exited low-skills industries, and we adapt to changes faster than any other country.

The exciting fact is that over 50% of households now own stock, and the majority of us are now owners, as well as workers. We have an opportunity to manage companies better. I agree with the foreword that CEO compensation is too high, and vote my proxies on that basis.

This book is very anti-individual and anti-shareholder.