Union upset over investments

By Brad Shannon | The Olympian • Published July 17, 2008

The Service Employees International Union filed a citizen initiative to the Legislature on Thursday that could limit the state's investment in major private equity companies, specifically those getting questionable tax breaks or with poor records of treating workers and the environment.

The filing and a rally at the Capitol coincided with other events in 25 countries, according to the SEIU.

Activists were sharply critical of private investment behemoths such as Kohlberg Kravis Roberts & Co., described as the second-largest U.S. employer after Wal-Mart with 800,000 workers at companies it invests in.

But how well the union can win public support for putting limits on the State Investment Board's investment of public-pension funds is far from clear. SIB executive director Joe Dear said the initiative is troubling and would "destroy our ability to invest in our highest-returning asset class. If it's approved, it will cost taxpayers and beneficiaries millions in higher taxes and contributions."

Corporate conduct

As proposed, the measure would let state pension-fund managers at the State Investment Board consider corporate conduct when deciding investments, but it would not automatically curtail investment in controversial firms.

The SIB would be authorized to take into account "additional investment risks posed by lack of transparency, poor employment practices, environmental impacts, and other indicators of irresponsible corporate behavior," the text of the measure says.

But Dear said, "No private equity firm that we want to do business with will do business with us under these terms."

That would harm pensioners, he said, because $13.9 billion of the pension system's $62.2 billion is invested in private equity, which has returned 12.6 percent over the past decade compared with about 7.9 percent for pension holdings as a whole.

Dear, the SIB executive, acknowledged that interest groups have asked the board at various times over the years to limit investments in tobacco, apartheid-era South Africa, Iran and Sudan, but the requests always were turned down.