A Summer Internship with the AFL-CIO
Author’s note: My summer internship focusing on immigrant worker programs at the AFL-CIO was supported with a grant from CORPS Fellowship Program. My heartfelt thanks go out to all of my fellow students who made this unusual internship possible. If any of you are interested in further discussing organized labor in the context of business leadership, just let me know. Both Ms.Leslie Tolf and Mr. Michael Garland of the AFL-CIO Office of Investment will visit Columbia for the Net Impact conference in November, and will be happy to discuss their work in more detail.
How in the world does a Columbia MBA student end up spending his summer with Big Labor? It started with a question: what about the workers? In all of our courses, we learn to see organizations through the eyes of CEOs, CFOs, COOs, investors, and customers. But what about the workers? Often, as business school students, all we see of workers is a single line item in the financial statements labeled direct labor. In my area of focus, manufacturing for the construction industry, labor unions have long been the driving force in setting terms in the workplace. To be an effective leader in that environment, shouldn’t I have a clearer understanding of worker impact than simply direct labor?
AFL-CIO stands for American Federation of Labor and Congress of Industrial Organizations. It is the umbrella organization for 60 trade and labor unions and the largest labor organization in the U.S. Many people associate "The Union" with large and politically prominent organizations like the United Auto Workers or the Teamsters (both AFL-CIO affiliates), but it’s actually hard to find a more diverse organization. The 13 million AFL-CIO members include janitors and engineers, laborers and nurses, even Hollywood actors and NFL players.
My unusual internship with this organization came about in a common fashion: through an alumni connection. To learn about the current state of the unions, I contacted Ms. Leslie Tolf (MBA ’84). She’s the president of Union Privilege, the consumer benefits branch of the AFL-CIO. Her group creates and manages a wide range of products for union members, from discounted computers to life insurance and mortgages. The flagship program is the Union Plus credit card, which has competitive terms and special features for members. Ms. Tolf invited me to spend the summer with her group in Washington, DC to experience the labor movement first-hand.
Union Privilege is separate from each affiliate union but works with them all providing me with a great vantage point from which to see the similarities and differences in how unions work in a broad range of industries. The focus of my work was strategic development of benefit programs designed for low-wage immigrant workers. That segment of the workforce is over-represented in tough jobs with poor working conditions and few benefits, so unions promising improvements in the workplace have an attentive audience. For me and Union Privilege, applying analytical marketing strategy techniques to financial products for this "market segment" was an interesting challenge. The concerns of mainstream union members and low-wage immigrant workers are quite different. For example, if you live paycheck-to-paycheck and you’ve never had a bank account, a competitive credit card rate isn’t particularly compelling. But a payroll debit card, which accepts direct deposits from your employer as a "virtual account," that might be useful. And what if you could get an additional card tied to the same deposits, allowing your parents in El Salvador to withdraw money from a local ATM, without the hefty transfer fees charged by money-wiring services? Now, that would make a difference in your life!
The big picture is that overall union membership has declined over the last few decades, while membership among immigrant workers is rising. The reasons are complex but include changes in workforce activities and political climate, as well as slow union response to those changes. Meanwhile, businesses have honed their skills at blocking unionization. Nevertheless, as immigrant workers provided the back-office foundation for the economic boom our services-based society has enjoyed over the last decade, forward-thinking organizations like the Service Employees’ International Union (SEIU), recognized their importance and mobilized highly successful membership drives.
At the opposite end of the financial sophistication spectrum, the AFL-CIO has embraced the idea that successful corporate and financial management is a necessary element of union prosperity, both directly and indirectly. Directly, unions benefit from corporate leadership that leverages the benefits of unionized operations to achieve stable, long-term profitability. On a quarterly basis, unionized operations are more costly than nonunion production, but with a long-term perspective, gains from union advantages such as a high skill base and low employee turnover can frequently overcome that cost difference. Indirectly, AFL-CIO affiliate unions benefit from sound management when their pension funds invest in prosperous companies. Combined, union investments are currently worth around $400 billion, making organized labor a significant participant in capital markets. Union fund trustees naturally wish to protect their investments and therefore use their proxy voting rights to promote responsible management.
In 1997, the AFL-CIO created the Office of Investment to assist its affiliates with their fiduciary efforts. I met with this team of shareholder activists to learn more about their campaigns to raise investor awareness on corporate governance issues, which of course are central to MBA studies. Over the last few years, the Office of Investment has brought increasing attention to particularly questionable management practices at shareholder meetings and in the media. In addition, the Office of Investment directly lobbies the Securities and Exchange Commission (SEC) for regulatory reform toward greater transparency in financial and corporate management. The group was instrumental in bringing about the recent SEC rule change that now requires mutual funds to disclose the proxy votes they make for the stocks they own. Another proposal currently under review would, under particular circumstances, increase shareholder access to proxy ballots for director elections and thus improve shareholder democracy in the boardroom.
The development of immigrant worker programs at Union Privilege and the ongoing efforts of the Office of Investment are only two specific initiatives that the AFL-CIO is undertaking on behalf of a vast range of American workers. All kinds of interesting and controversial issues arise when considering the role of organized labor in our information economy in broader legal, political, and philosophical terms. But together, these two examples underscore how worker affairs are interwoven with business concerns at every social and economic level. My summer with the AFL-CIO was a great learning experience, and I look forward to integrating these new perspectives into my management education and career.