Finance and labor: Perspectives on risk, inequality, and democracy

Labor in the Era of Globalization

Volumn , Issue , 2009, Pages 94-150

  Jacoby, Sanford M ^a  

^a UNIVERSITY OF CALIFORNIA   (United States)

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[No Author keywords available]

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EID: 84871102134     PISSN: None     EISSN: None     Source Type: Book    
DOI: 10.1017/CBO9780511809798.004     Document Type: Chapter

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73. Andrei Shleifer&Lawrence H. Summers, "Breach of Trust in Hostile Takeovers," in Alan J. Auerbach (ed.) (1988), Corporate Takeovers: Causes and Consequences. Chicago: University of Chicago Press.
74. Andrei Shleifer & Robert Vishny (2003), "Stock Market Driven Acquisitions," Journal of Financial Economics 70.
75. William W. Bratton (2007), "Is the Hostile Takeover Irrelevant? A Look at the Evidence," Working Paper, Georgetown Law Center.
76. Lynn Stout (2002), "Do Anti-Takeover Defenses Decrease Shareholder Wealth?," Stanford Law Review 55.
77. Regarding the effect of takeovers on labor's share of value-added, see Andrei Shleifer & Lawrence H. Summers, "Breach of Trust in Hostile Takeovers," in Alan J. Auerbach (ed.) (1988), Corporate Takeovers: Causes and Consequences, Chicago: University of Chicago Press.
78. Jagadeesh Gokhale, Erica Groshen, & David Neumark (1995), "Do Hostile Takeovers Reduce Extramarginal Wage Payments?," REStat 77.
79. Martin J. Conyon et al. (2001), "Do Hostile Mergers Destroy Jobs?" Journal of Economic Behavior & Organization 45: 427-440. The claim also is made that high pay for private-equity and hedge-fund managers is a return to skill and to risk taking. Bear in mind, however, that hedge and private-equity principals - regardless of their skill or lack thereof - are guaranteed 2 percent in management fees. Compensation of fund managers also derives from a guaranteed 20 percent of any earnings (i.e., "carried profit"), which is taxed not as income but rather as capital gains, a favorable provision that also applies to venturecapital and real-estate partnerships.
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82. New York Times, Aug. 28, 2006.
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114. Connie Bruck (1988), The Predators' Ball, New York: Penguin Books, p. 261.
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117. Sanford M. Jacoby (2003), "Economic Ideas and the Labor Market: Origins of the Anglo- American Model and Prospects for Global Diffusion," Comparative Labor Law & Policy 25.
118. J. P. Heinz, A. Southworth, & A. Paik (2003), "Lawyers for Conservative Causes," Law & Society Review 37: 5-50.
119. USA Today, May 3, 2006. Many of the governance reforms spawned by agency theory and pressed by shareholder activists turn out to have little or no relationship to performance, some even have negative effects. One explanation is that optimal governance is endogenous to a firm's idiosyncratic characteristics, the activists' formulaic approach ignores this fact.
120. Jacoby, "Convergence by Design," pp. 250-254.
121. Sanjai Bhagat, Brian Bolton, & Roberta Romano (2007), "The Promise and Peril of Corporate Governance Indices," draft, University of Colorado.
122. Note that multiple games can be played in the same country at the same time, although one game is likely to be more prevalent than others. This has caused endless debates in the Varieties of Capitalism literature over how to classify a nation. Peter Gourevitch & James Shinn (2005), Political Power and Corporate Control: The New Global Politics of Corporate Governance, Princeton, NJ: Princeton University Press.
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127. Gregory Jackson & Hideaki Miyajima (2007), "Varieties of Capitalism, Varieties of Markets: M&A in Japan, Germany, France, the UK, and USA," RIETI Working Paper. In 1999, AFL-CIO President John Sweeney issued a statement opposing Vodafone's hostile bid for Mannesman and endorsing the CME approach to governance: "The AFL-CIO," he said, "believes value is created over the long-term by partnerships among all of a corporation's constituents - workers, investors, customers, suppliers, and communities.
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132. J. Fred Weston & Juan Siu (2002), "Changing Motives for Share Repurchases," UCLA Anderson Working Paper. Data on labor's share and on corporate payouts that are derived for roughly comparable companies are a more reliable indicator of distributional outcomes at the firm level than aggregate measures of labor's share of value-added, which comprise a changing mix of firms and have the added problem of including income from self-employment.
133. Angus Maddison (2006), The World Economy, vol. 2, Paris: OECD, p. 362.
134. Barry Eichengreen (1996), Globalizing Capital: A History of the International Monetary System, Princeton, NJ: Princeton University Press.
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138. Larry Neal (1971), "Trust Companies and Financial Innovation," Business History Review 45.
139. Emmanuel Saez, "Income and Wealth Concentration in a Historical and International Perspective," in Alan Auerbach, David Card, & John Quigley (2006), Public Policy and the Income Distribution, New York: Russell Sage Foundation.
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142. Thomas Piketty, Gilles Postel-Vinay, & Jean-Laurent Rosenthal (2006), "Wealth Concentration in a Developing Economy: Paris and France, 1807-1994," AER 96.
143. Jeffrey Williamson & Peter Lindert (1980), American Inequality: A Macroeconomic History, New York: Academic Press, p. 50.
144. Kevin Phillips (2002), Wealth and Democracy, New York: Broadway Press, p. 43.
145. Kopczuk & Saez, "TopWealth Shares".
146. Cedric B. Cowing (1965), Populists, Plungers, and Progressives, Princeton, NJ: Princeton University Press, p. 170.
147. Adolf A. Berle & Gardiner C. Means (1932), The Modern Corporation and Private Property, New York: Commerce Clearing House, p. 106.
148. Robert A. Gordon (1945), Business Leadership in the Large Corporation, Washington, DC: Brookings Institution Press.
149. Dennis Leech (1987), "Concentration and Control in Large U.S. Corporations," Journal of Industrial Economics 35.
150. Gardiner C. Means (1930), "The Diffusion of Stock Ownership in the U.S.," QJE 44: 599.
151. Thomas Piketty & Emmanuel Saez (2007), "Income Inequality in the United States," in A. B. Atkinson & T. Piketty (eds.), Top Incomes over the Twentieth Century, New York: Oxford University Press.
152. Irving B. Kravis (1959), "Relative Income Shares in Fact and Theory," American Economic Review 49. In 1914, Scott Nearing, a socialist economist then teaching at the Wharton School, found similarity of labor's share in France, Germany, Switzerland, the United Kingdom, and the United States, it was about 60 percent, which is close to Kravis's figures.
153. Nearing (1914), "Service Income and Property Income," Publications of the American Statistics Association 14.
154. Krueger, "Measuring Labor's Share."
155. C. Canby Balderston (1935), Executive Guidance of Industrial Relations, Philadelphia: University of Pennsylvania Press.
156. Polanyi, Great Transformation, p. 137.
157. Lawrence Goodwyn (1978), The Populist Movement, New York: Oxford University Press, pp. 278-284.
158. Phillips, Wealth and Democracy, p. 239.
159. Bensel, American Industrialization, passim.
160. Gabriel Kolko (1963), The Triumph of Conservatism, New York: Free Press.
161. J. Lawrence Broz (1997), The International Origins of the Federal Reserve System, Ithaca, NY: Cornell University Press.
162. James Livingston (1986), Origins of the Federal Reserve System, Ithaca, NY: Cornell University Press, p. 228.
163. Emily S. Rosenberg (1982), Spreading the American Dream, New York: Hill and Wang.
164. Horwitz, Transformation, p. 90.
165. Louis Hartz (1948), Economic Policy and Democratic Thought, Cambridge: Cambridge University Press.
166. Mark Roe (1994), Strong Managers, Weak Owners: The Political Roots of American Corporate Finance, Princeton, NJ: Princeton University Press, p. 68.
167. David Montgomery (1967), Beyond Equality: Labor and the Radical Republicans, 1862-1872, Urbana, IL: University of Illinois Press, p. 445.
168. Goodwyn, The Populist Movement, pp. 278-284.
169. Phillips, Wealth and Democracy, p. 239.
170. Bensel, American Industrialization, passim.
171. Kim Voss (1994), The Making of American Exceptionalism: The Knights of Labor and Class Formation in the Nineteenth Century, Ithaca, NY: Cornell University Press.
172. Louis D. Brandeis (1914), Other People's Money and How the Bankers Use It, New York: Stokes.
173. Brandeis (1914), Business: A Profession, Boston: Small, Maynard & Co.
174. Samuel Haber (1964), Efficiency and Uplift: Scientific Management in the Progressive Era, Chicago: University of Chicago Press.
175. Horwitz, Transformation, passim.
176. Lloyd Ulman (1955), The Rise of the National Trade Union: The Development and Significance of Its Structure, Governing Institutions, and Economic Policies, Cambridge: Harvard University Press.
177. James Weinstein (1966), "Radicalism in the Midst of Normalcy," Journal of American History 52.
178. Cedric Cowing (1959), "Sons of the Wild Jackass and the Stock Market," Business History Review 33.
179. Melvin C. Shefitz (1967), "The Trade Disputes and Trade Unions Act of 1927: The Aftermath of the General Strike," Review of Politics 29.
180. Michael Huberman & Wayne Lewchuk (2003), "European Economic Integration and the Labour Compact," European Review of Economic History 7. Did social-insurance expenditures have a redistributive effect on top shares? For the three Northern European countries shown in Table 3.1 (i.e., Germany, the Netherlands, and Sweden), social spending as a share of national income rose from an average of 0.61 percent of national product in 1900 to 2.9 percent in 1930, a nearly five-fold gain, top shares declined after 1920. In France, social spending rose but only two-fold and top shares did not change. In the United States, social spending did not change at all between 1900 and 1930, and top shares rose after 1920. The big changes in welfare expenditure and top shares did not occur in Europe or the United States until after World War II, however. In 1965, social expenditures in the three Northern European countries stood at 21 percent of GDP, an expenditure that required substantial redistribution of pretax incomes.
181. Peter Lindert (1994), "The Rise of Social Spending, 1880-1930," Explorations in Economics History 31.
182. Jens Alber (1988), "Is There a Crisis of the Welfare State?," European Sociological Review 4: 190.
183. According to the AFL, between 1927 and 1928, capital gains rose by 70 percent, dividends by 7 percent, and wages by 1.5 percent. At International Harvester - a bellwether corporation in its day - wages barely budged during the 1920s despite the firm's record profits. American Federationist 36 (May 1929): 535.
184. American Federationist 37 (March 1930): 339-341.
185. Cowing, Populists, Plungers, pp. 155-186.
186. Robert Ozanne (1968), Wages in Practice and Theory, Madison, WI: University of Wisconsin Press, p. 49.
187. Roe, Strong Managers, p. 42.
188. Said Coughlin, "God wills it - this religious crusade against the pagan of gold. Silver is the key to prosperity - silver that was damned by the Morgans."
189. William E. Leuchtenberg (1963), Franklin D. Roosevelt and The New Deal, New York: Harper & Row, p. 101.
190. Daniel J. B. Mitchell (2000), "Dismantling the Cross of Gold: Economic Crises and U.S. Monetary Policy," North American Journal of Economics & Finance 11: 77-104.
191. Alan Brinkley (1982), Voices of Protest: Huey Long, Father Coughlin, and the Great Depression, New York: pp. 140, 150, 171.
192. Leuchtenberg, Roosevelt, pp. 54-56, 60.
193. Cowing, Populists, Plungers, p. 223.
194. Geisst, Undue Influence, p. 68.
195. Paul Studenski & Herman E. Kroos (1952), Financial History of the United States, New York: McGraw-Hill, p. 363.
196. Herbert M. Bratter (1938), "The Silver Episode: II," Journal of Political Economy 46.
197. Ellis Hawley, The New Deal and the Problem of Monopoly, Princeton, NJ: Princeton University Press, p. 307.
198. NYT, Dec. 13, 1937.
199. Mitchell, "Cross of Gold," p. 101.
200. Vincent Carosso (1970), "Washington and Wall Street: The New Deal and Investment Bankers," Business History Review 44.
201. Barry Eichengreen (1992), Golden Fetters: The Gold Standard and the Great Depression, 1919-1939, New York: Oxford University Press.
202. Steve Fraser (2005), Every Man a Speculator: AHistory of Wall Street in American Life, New York: Harper Collins, pp. 444-447.
203. John G. Ruggie (1982), "International Regimes, Transactions, and Change: Embedded Liberalism in the Postwar Economic Order," International Organization, 36: 387.
204. NYT Jan. 1, 1945, April 13, 1945, Feb. 13, 1945.
205. Nelson Lichtenstein (1995), Walter Reuther: The Most Dangerous Man in Detroit, New York: Basic Books.
206. Patrick Renshaw (1986), "Organized Labor and the U.S. War Economy," Journal of Contemporary History, 21.
207. NYT April 8, 1943, Feb. 12, 1943, April 8, 1943, Feb. 12, 1943, April 22, 1944.
208. Studenski & Kroos, Financial History, p. 471.
209. William L. Cary (1955), "Pressure Groups and the Revenue Code," Harvard Law Review 68.
210. Boris Shiskin (1945), "Organized Labor and the Veteran," Annals of the American Academy of Politics and Social Science 238.
211. Robert M. Collins (1996), "The Economic Crisis of 1968 and the Waning of the 'American Century,'" American History Review 101.
212. Daniel J. B. Mitchell (1970), "Labor and Tariff Question," Industrial Relations 9.
213. Robert Ozanne (1959), "Impact of Unions on Wage Levels and Income Distribution," QJE 73.
214. Sumner H. Slichter (1954), "Do the Wage-Fixing Arrangements in the American Labor Market Have an Inflationary Bias?," American Economics Review 44.
215. Harry C. Katz (1985), Shifting Gears: Changing Labor Relations in the U.S. Automobile Industry, Cambridge: Cambridge University Press.
216. Frank Levy & Peter Temin, "Institutions andWages in Post-World War II America," Chapter 1 in this volume.
217. Baskin & Miranti, History of Corporate Finance: p. 232.
218. Blair, Ownership and Control, p. 46.
219. Gordon, Business Leadership, pp. 38, 157.
220. Marco Becht & J. Bradford DeLong (2004), "Why Has There Been So Little Blockholding in America?" Working Paper.
221. Philip Burch (1972), The Managerial Revolution, Lexington, MA: Lexington Books.
222. Maurice Zeitlin (1974), "Corporate Ownership and Control," American Journal of Sociology 79.
223. Francis X. Sutton et al. (1956), The American Business Creed, Cambridge: Cambridge University Press, pp. 64-65.
224. E. Merrick Dodd (1941), "The Modern Corporation, Private Property, and Recent Federal Legislation," Harvard Law Review 54: 924.
225. Sutton et al., American Business Creed, pp. 64-65.
226. G. W. Schwert (1990), "Indexes of U.S. Stock Prices from 1802 to 1987," Journal of Business 64.
227. Mary O'Sullivan (2006), "Living with the U.S. Financial System: The Experiences of General Electric and Westinghouse in the Last Century," Business History Review 80.
228. Carola Frydman&Raven Saks (2005), "Historical Trends in Executive Compensation," MITWorking Paper.
229. Kalman Cohen & Richard Cyert (1963), Theory of the Firm, Englewood Cliffs, NJ: Prentice Hall.
230. Nitin Nohria & Ranjay Gulati (1996), "Is Slack Good or Bad for Innovation?" Academy of Management Journal 39.
231. Charles Maier (1977), "The Politics of Productivity: Foundations of American International Economic Policy afterWorld War II," International Org. 31.
232. Fred Foulkes (1980), Personnel Policies in Large Nonunion Companies, Englewood Cliffs, NJ: Prentice Hall, p. 325.
233. C. W. Kim & A. Sakamoto (2008), "Does Inequality Increase Productivity?" Work & Occupations, 35.
234. Sumner H. Slichter (1929), "The Current Labor Policies of American Industries," Quarterly Journal of Economics, 43: 393-435.
235. Richard Freeman & James Medoff (1982), What Do Unions Do?, New York: Basic Books, p. 53.
236. Sanford Jacoby & Daniel J. B. Mitchell (1988), "Measurement of Compensation: Union and Nonunion," Industrial Relations, 27.
237. Slichter, "The Current Labor Policies of American Industries," p. 398.
238. Daniel J. B. Mitchell (1980), Unions, Wages, and Inflation, Washington, DC: Brookings Institution.
239. Sumner H. Slichter, James Healey, & E. Robert Livernash (1960), The Impact of Collective Bargaining on Management, Washington, DC: Brookings Institution. In the 1970s, SUBs covered 10 percent of unionized workers and none in the nonunion sector.
240. Robert Hart & James Malley (1996), "Excess Labour and the Business Cycle," Economica, 63.
241. Robert J. Flanagan (1984), "Implicit Contracts, Explicit Contracts, and Wages," American Economics Review, 74.
242. David M. Gordon, Richard Edwards, & Michael Reich (1982), Segmented Work, Divided Workers, Cambridge, UK: Cambridge University Press. In the mid-1970s, pension coverage among union workers was 91 percent, for nonunion workers, it was 47 percent. Union workers were 14 percent more likely to have medical insurance and their benefit levels were more generous.
243. Freeman & Medoff, What Do Unions Do?
244. However, labor complained in the late 1960s and early 1970s that conglomerate acquisitions were causing layoffs and the transfer of jobs to nonunion regions. There is evidence to support the charge. NYT, Feb. 16, 1961, Feb. 13, 1970, July 1, 1973.
245. Anil Verma & Thomas A. Kochan, "The Growth and Nature of the Nonunion Sector within a Firm" in Kochan (ed.) (1985), Challenges and Choices Facing American Labor, Cambridge MA: MIT Press.
246. Ruggie, "Embedded Liberalism".
247. NYT, Feb. 16, 1961, Feb. 13, 1970, July 1, 1973.
248. Daniel J. B. Mitchell (1986), "Union vs. Nonunion Wage Norm Shifts," American Economic Review, 76.
249. Teresa Ghilarducci (1992), Labor's Capital: The Economics and Politics of Private Pensions, Cambridge: Cambridge University Press.
250. P&I, Feb. 6, 1989.
251. Jacoby, "Convergence by Design," p. 249. Note that one reason SLPFs could become equity-holders in LBOs was that they were, and are, exempt from ERISA, which continues to afford them greater investment flexibility than UAPFs.
252. P&I, Feb. 6, 1989.
253. NYT, April 1, 1996.
254. Paul Jarley & Cheryl Maranto (1990), "Union Corporate Campaigns," ILRR, 43.
255. Stewart Schwab & Randall Thomas (1998), "Realigning Corporate Governance: Shareholder Activism by Labor Unions," Michigan Law Review 96.
256. P&I, April 4, 1994.
257. P&I, Sept. 29, 2003.
258. Teresa Ghilarducci et al. (1997), "Labour's Paradoxical Interests and the Evolution of Corporate Governance," Journal of Law & Society 24.
259. Interview with Carin Zelenko, March 24, 2008.
260. Boston Globe, Sept. 26, 2002.
261. The Deal, April 30, 2007.
262. In the waning days of the Bush administration, the U.S. Chamber of Commerce and its friends stepped up pressure on the Department of Labor, which regulates UAPFs. A Wall Street Journal column by Eugene Scalia, former general counsel of the department, alleged that UAPF shareholder activism does not maximize shareholder value. He urged the Labor Department to increase its investigations of and bring federal court actions against UAPFs found in violation of their fiduciary obligations. In October 2008, the department issued two separate interpretive bulletins that proscribed types of shareholder activism associated with but not limited to UAPFs. Eugene Scalia, "The New Labor Activism," WSJ, Jan. 23, 2008, available at www.dol.gov/federalregister/HtmlDisplay.aspx?DocId=21630&AgencyId=8.
263. On the relationship beyween human resource policies and firm performance, see Alex Edmans (2007), "Does the Stock Market Fully Value Intangibles?," Working Paper, Wharton School.
264. "Pro-Labor Mutual Funds Not Sacrificing Profits" (2007), available at www.thestreet.com/pf/mutualfundinvesting/10381202.html.
265. P&I April 5, 1993.
266. Interview with Damon Silvers, March 26, 2007.
267. Thomas Kochan, Harry Katz, & Robert McKersie (1986), The Transformation of American Industrial Relations, New York: Basic Books.
268. Schwab & Thomas, "Realigning."
269. Schwab&Thomas, "Realigning," Houston Chronicle, April 17, 1994.
270. P&I, April 3, 1995.
271. NYT, March 12, 1996.
272. P&I, April 23, 1998.
273. Trumka in Washington Post, April 11, 1997.
274. Business Week, Sept. 29, 1997, Dec. 8, 1997.
275. Interview with Richard Trumka, AFL-CIO, March 26, 2007.
276. IRRC Corporate Governance Bulletin, April 2001.
277. P&I, March 23, 1998.
278. AFL-CIO (2003), AFL-CIO Proxy Voting Guidelines: Exercising Authority, Restoring Accountability; Business Week, April 15, 1993.
279. Ron Blackwell & Bill Patterson (March 2003), "The Crisis of Confidence in American Business," Draft Working Paper.
280. The Economist, July 14, 2007. Long-term measures of performance make intuitive sense but many economists reject the claim that the long term is more than a concatenation of multiple short terms and that a focus on the long-term necessarily results in better long-term performance. They may be wrong, but research contesting their claims is scanty at best - a problem that plagues not only pension activism but also social investing more generally.
281. Financial Times (hereafter FT), Jan. 26, 2002.
282. Damon A. Silvers, Testimony, to the U.S. Senate Commission on Banking, Housing, and Urban Affairs, "Hearing on Accounting and Investor Protection Issues Raised by Enron and Other Public Companies," 107th Congress, 2nd. Session, March 20, 2002.
283. Skeel, Icarus, p. 175.
284. Blackwell & Patterson, "Crisis of Confidence".
285. John C. Coates (2007), "The Goals and Promise of the Sarbanes-Oxley Act," Journal of Economics Perspectives 21.
286. Business Week, March 18, 2002.
287. Schwab & Thomas, "Realigning".
288. Damon Silvers, William Patterson, & J. W. Mason, "Challenging Wall Street's Conventional Wisdom," in Archon Fung, Tessa Hebb, & Joel Rogers (eds.) (2001), Working Capital: The Power of Labor's Pensions, Ithaca, NY: Cornell University Press.
289. San Diego Union Tribune, Jan. 31, 2007.
290. Business Week, Dec. 28, 2006.
291. NY Times, April 8, 2007.
292. Brandeis, Other People's Money, p. 92.
293. AFL-CIO (2006), "Key Votes Survey: How Investment Managers Voted in the 2006 Proxy Season".
294. L.A. Times, April 21, 2007.
295. Atlanta Constitution, June 6, 2007.
296. FT, April 1, 2007.
297. Business Week, June 11, 2007.
298. NYT, March 7, 2008.
299. WSJ, April 14, 2008.
300. Lucian Bebchuk (2007), "The Myth of the Shareholder Franchise," Virginia Law Review 93.
301. Silvers interview.
302. Daily Deal, Oct. 20, 2003.
303. Damon Silvers & Michael Garland, "The Origins and Goals of the Fight for Proxy Access," in Lucian Bebchuk (ed.) (2005), Shareholder Holder Access to the Proxy Ballot, Cambridge: Cambridge University Press.
304. Interview with Daniel Pedrotty, AFL-CIO, March 26, 2007.
305. Trumka interview.
306. Interview with Ron Blackwell, AFL-CIO, March 26, 2007.
307. Bebchuk, "The Myth".
308. L.A. Times, Feb. 17, 2003.
309. FT, April 1, 2007.
310. Conference Board, "2007 Report".
311. NYT, Nov. 29, 2007.
312. Trumka interview.
313. AFSCME (2007), "Failed Fiduciaries: Mutual Fund Proxy Funding on CEO Compensation," Washington, DC: AFL-CIO.
314. Gerald F. Davis & E. Han Kim (2007), "Business Ties and Proxy Voting by Mutual Funds," Journal of Financial Economics, 85.
315. Boston Herald, Dec. 3, 2002.
316. AFL-CIO, "Key Votes".
317. AFL-CIO, "Retirement Security: How Do Investment Managers Stack Up?," May 11, 2006.
318. FT, March 8, 2005.
319. NYT, March 17, 2005.
320. P&I, Sept. 9, 2006.
321. WSJ, March 3, 2003.
322. Patrick A. Gaughan (2007), "How Private Equity and Hedge Funds Are Driving M&A," Journal of Corporate Accounting and Finance.
323. Economist, Feb. 10, 2007.
324. Business Week, Feb. 10, 2007.
325. Washington Post, April 4, 2007.
326. WSJ, July, 25, 2007.
327. World Economic Forum, Globalization.
328. CalPERS used to earn 20 percent on its PE investments but the return rate sank in 2008 when PE funds, including large ones, suffered badly. One of them is the Carlyle Group, a controversial PE fund, 6 percent of which is owned by CalPERS. Carlyle's main holdings are in the defense industry, where it is alleged to have profited from inside information about the planning of the Afghanistan and Iraq invasions. Other CalPERS investments also are controversial. In 1993, it placed $250 million in Enron's Joint Energy Development (JEDI) limited partnership. After selling the investment back to Enron (actually, Chewco) for a large profit, CalPERs made a second investment in 1997 of $156 million. These were the off-book entities that helped cause Enron's collapse. San Francisco Gate, Dec. 2, 2001.
329. The Nation, April 1, 2002.
330. San Francisco Chronicle, March 21, 2004.
331. P&I, May 4, 1998, Dec. 25, 2000, Sept. 29, 2003, Aug. 21, 2006, Dec. 11, 2006.
332. WSJ, Feb. 28, 2007, Aug. 27, 2007.
333. Bloomberg News, Sept. 5, 2007.
334. AFL-CIO (2002), "Investment Product Review: Private Capital".
335. Business Week, Oct. 30, 2006.
336. Economist, Feb. 10, 2007.
337. FT, Aug. 28, 2006.
338. Business Week, Sept. 17, 2007.
339. Daily Telegram, Feb. 27, 2007.
340. The Guardian, March 27, 2007.
341. P&I, May 14, 2007.
342. TUC (May 2007), "Private Equity: TUC Evidence to the Treasury Committee Inquiry."
343. NYT, Sept. 18, 2005.
344. Washington Post, June 10, 2007.
345. IHT, May 15, 2007.
346. Labor Notes, June 2007.
347. World Economic Forum, Globalization; Workforce Management, May 7, 2007.
348. The Independent, April 2, 2007.
349. SEIU (April 2007), "Behind the Buyouts: Inside the World of Private Equity".
350. Andrew L. Stern to U.S. House, Committee on Financial Services, May 16, 2007.
351. Washington Post, April 4, 2007.
352. Washington Post, 18 April 2008. The Chinese government recently purchased a $3 billion stake in Blackstone.
353. Richard L. Trumka to John White (SEC) and Andrew Donohue (SEC), May 15, 2007, and June 12, 2007.
354. NYT, May 17, 2007.
355. Investment News, May 29, 2007.
356. Financial News, May 28, 2007.
357. Washington Post, April 4, 2007.
358. Silvers interview.
359. NYT, Sept. 6, 2007. The AFL-CIO is demanding that the SEC classify publicly held PE and hedge funds as investment companies, which means that they would face corporate, not partnership, tax rates, and asking Congress to tax a PE manager's carried interest as ordinary income instead of capital gains.
360. NYT, Nov. 14, 2007. Hedge funds own 55 percent of Stelco, a unionized steel producer in Canada. Stelco's CEO is a former associate of Wilbur Ross, causing the union to fear that the funds will cut jobs and pensions.
361. Around the same time as Amaranth came another hedge-fund scandal - share lending - in which investors loan their shares to hedge funds seeking to throw a proxy contest in the direction of their bets. It emerged that CalPERS had earned $130 million in a single year through this practice. NYT, Aug. 24, 2007.
362. Richard L. Trumka to Senators Richard C. Shelby and Paul Sarbanes, Senate Banking Committee, July 25, 2006.
363. WSJ, Jan. 26, 2007.
364. NYT, March 15, 2007.
365. L.A. Times, July 12, 2007.
366. Henry T. C. Hu & Bernard Black (2006), "The New Vote Buying," USC Law Review, 79.
367. NYT, April 15, 2008.
368. Kaplan & Rauh, "Wall Street and Main Street".
369. Rajan & Zingales, Saving Capitalism.
370. Marco Pagano & Paolo Volpin (2001), "The Political Economy of Finance," Oxford Review of Economic Policy, 17.
371. NYT, Oct. 20, 2006.
372. Albert O. Hirschman (1991), The Rhetoric of Reaction: Perversity, Futility, Jeopardy, Cambridge: Cambridge University Press.
373. Adair Morse (2007), "Payday Lenders: Heroes or Villains?" SSRN Working Paper 999408.
374. Rajan & Zingales, "Great Reversals," p. 92.
375. Cowing, Populists, Plungers, pp. 177-180.
376. Claessens & Perotti, "Finance and Inequality".
377. Susan Dynarski & Jonathan Gruber (1997), "Can Families Smooth Variable Earnings?," Brookings Papers on Economic Activity, pp. 229-303.
378. David Cutler & Lawrence Katz (1991), "Macroeconomic Performance and the Disadvantaged," Brookings Papers on Economic Activity, 2: 1-74.
379. Enrico C. Perotti & Ernst-Ludwig von Thadden (2006), "The Political Economy of Corporate Control and Labor Rents," Journal of Political Economy, 114, 169.
380. Mishel et al., Working America, p. 261.
381. Rajan & Zingales, Saving Capitalism, p. 18. After 2001, subprime mortgages also were touted as a democratizing force that would bring homes within the reach of those who previously could not afford them.
382. Rajan & Zingales, Saving Capitalism, Ch. 11.
383. Henry C. Simons (1941), "For a Free- Market Liberalism," University of Chicago Law Review, 206.
384. Pontusson, Inequality and Prosperity, 5.
385. A new realism is emerging in legal scholarship that challenges shareholder primacy and supports a more balanced approach. The neo-realists are at pains to point out that under law, shareholders are not the corporation's sole residual claimants. They observe that corporations are cooperative teams rather than a nexus of arm's-length contracts. To produce wealth, team members invest in firm-specific assets that are worthless if the firm goes bust. Hence, all team members - not only shareholders - bear residual risk. With illiquid investments and low diversification, employees have strong incentives to monitor agents and may be best placed to do so. See, for example, Margaret Blair & Lynn Stout (1999), "A Team Production Theory of Corporation Law," Virginia Law Review, 85.
386. Lynn LoPucki (2004), "The Myth of the Residual Owner," Washington University Law Quarterly 82.
387. Dani Rodrik (1997), Has Globalization Gone Too Far?, Washington, DC: Institute for International Economics, pp. 62-63.
388. Geoffrey Garrett & Deborah Mitchell (2001), "Globalization, Government Spending, and Taxation in the OECD," European Journal of Political Research, 39.
389. Kenneth Scheve & Matthew Slaughter (2007), "A New Deal for Globalization," Foreign Affairs. Concerned about declining support for financial and trade openness, the Financial Service Forum, representing the nation's twenty largest financial institutions, issued a report urging the government to do more to reduce risk and inequality in U.S. labor markets.
390. Peter Gosselin, L.A. Times, Aug. 20, 2007.
391. Daron Acemoglu & James Robinson (March 2008), "Persistence of Power, Elites, and Institutions," AER 96.
392. LA Times, March 21, 2008.
393. NYT, July 15, 2007, March 23, 2008, April 11, 2008.