EMPOWERS Act Allows Retirement Savers to Set Binding Proxy Voting Guidelines
WASHINGTON – U.S. Representative Pramila Jayapal (WA-07) and U.S. Senator Tammy Baldwin (D-WI) introduced bicameral legislation today that would reverse a final rule from the U.S. Department of Labor (DOL) to limit retirement plans from voting on corporate proxies and undermine workers’ voices in the public companies where they invest.
Baldwin first announced this bill last Congress following the Trump Labor Department finalizing a rule to discourage ERISA plans from voting their proxies. It is clear that the Trump DOL wrote this rule to prevent workers from using their collective voices to influence public companies. While President Biden’s DOL has said it would not enforce the new rule, statutory changes remain necessary to protect the voices of workers.
This legislation would reverse this rule and make it easier for workers to control how their shares held for retirement are voted on. The Encouraging More Proxy voting by Organized Workers, Employees, and Retirement Savers (EMPOWERS) Act would allow workers to elect representative trustees who would manage their ERISA plan jointly with the employer’s trustees and set voting guidelines that investment managers would be required to follow.
“When workers hand over their hard-earned retirement savings to Wall Street money managers, most workers don’t have a voice in how they want their shares to be voted on at annual meetings. Despite the trillions of workers who have invested in stocks, their voices are not being heard in board rooms across America,” said Senator Baldwin. “Trump’s DOL rule allows special interests and big corporations, who already have too much power in Washington, to continue to put short-term profits and their own paychecks ahead of workers and their retirement savings. We must take action to give workers and retirees a seat at the table and their rightful voice in board rooms across America, and that’s what my legislation will do.”
“Donald Trump and his cruel administration spent four long years attacking workers, weakening their right to organize, and enriching corporations while putting profits over people every step of the way,” said Congresswoman Jayapal. “The EMPOWERS Act will begin to reverse the damage done while putting power back into the hands of people, helping level the playing field, and giving workers and retirees the powerful voice they deserve in board rooms across America.”
ERISA plans invest over $11 trillion in assets on behalf of workers and retirees. The public company stocks are held by the plan’s investment manager, not by the workers and retirees who have built those retirement savings. That proxy voting power is also held by the investment managers—not workers. The investment industry has become increasingly concentrated and today the “Big Three” investment funds, BlackRock, Vanguard, and State Street, manage assets for over half of all ERISA plans. One of the Big Three is the largest shareholder in 9 out of 10 companies in the S&P 500, giving them the power to influence almost every vote, at almost every public company in the nation, using workers’ retirement savings to do it. The EMPOWERS Act would restore the ability of ERISA plan participants—not large asset managers—to determine how their shares are voted.
Specifically, the EMPOWERS Act will:
- Allow workers to nominate and elect trustees to represent them and allow these trustees to jointly manage the retirement plan as equal partners with the employer’s trustees;
- Provide these worker representative trustees the authority to set their ERISA plan’s proxy voting guidelines jointly with employer trustees;
- Require fund managers to vote the workers’ shares in accordance with the plan’s guidelines and provide annual voting reports to the plan;
- Require plan fiduciaries to set proxy policies in accordance with the ERISA plans’ inherently long-term investment horizons in contrast with other short-term market actors; and
- Reverse the DOL’s rule discouraging proxy voting and make it easier for workers to control how their shares held for retirement are voted.
The legislation is cosponsored by Senators Bernie Sanders (I-VT), Elizabeth Warren (D-MA), Jeff Merkley (D-OR), Ed Markey (D-MA), Cory Booker (D-NJ), and Richard Blumenthal (D-CT). The legislation is supported by: American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), Majority Action, Public Citizen, Service Employees International Union (SEIU), Communication Workers of America (CWA), International Brotherhood of Teamsters (IBT), American Economic Liberties Project, Stop The Money Pipeline, Rapid Shift Network, Catholic Network US, Call to Action CO, Connecticut Citizen Action Group, American Federation of State, County and Municipal Employees (AFSCME), and Sierra Club.
“The AFL-CIO is pleased to support Senator Baldwin’s and Congresswoman Jayapal’s EMPOWERS Act. Pension plan assets are the deferred wages of working people, and appointing worker representatives to boards of trustees will give workers a voice in the companies that we invest in,” said AFL-CIO President Richard Trumka.
“Research by Majority Action has shown that the world’s largest asset managers have used their tremendous voting power to rubber-stamp corporate boards and undermine initiatives to address climate change. As its name suggests, Senator Baldwin’s and Congresswoman Jayapal’s EMPOWERS Act will empower retirement savers to set their own proxy voting guidelines—reversing the recently proposed Department of Labor rule aiming to silence them—and enable workers to collectively make their voices heard in boardrooms across the country,” said Eli Kasargod-Staub, Executive Director of Majority Action.
“The EMPOWERS Act would help rein in the dominant role played by a small group of giant asset managers in determining the outcome of corporate elections and restore the decision-making authority to the true shareholders — workers and retirees. We have seen time and again that the outsized footprint of a few large financial companies in the governance of corporate America results in an excessive deference to management and the needs of wealth and well-connected being put ahead of the public interest. The EMPOWERS Act is an important step toward breaking the new version of the old money trust,” said Graham Steele, senior fellow with American Economic Liberties Project.
More information on the EMPOWERS Act is available here.
An online version of this release is available here.
Issues: Government Reform & Ethics