Ashwini Versus the A.F.L.-C.I.O.
A modern variant of David versus Goliath is unfolding in academic economics.
Ashwini Agrawal is David. He is a graduate student getting a Ph.D. at the University of Chicago Graduate School of Business.
The A.F.L.-C.I.O. is Goliath.
Here is the background, as I understand it:
The A.F.L.-C.I.O. manages huge pension funds for its members. These pension funds are invested in publicly traded companies. When it comes time for shareholder votes on issues like who to appoint to the board of directors, the A.F.L.-C.I.O. pension fund managers get to cast votes just like any other shareholder.
The question Ashwini asks is: how do the A.F.L.-C.I.O. pension fund managers vote? To answer that question, Ashwini exploits a neat natural experiment.
In 2005, the A.F.L.-C.I.O. splintered, with a big chunk of the members leaving to form the Change To Win coalition. Ashwini looked at whether the shareholder votes cast by the A.F.L.-C.I.O. pension fund tended to differ when the union workers at the firm were no longer A.F.L.-C.I.O. workers.
In his dissertation, Ashwini found that the behavior of the A.F.L.-C.I.O. pension fund did seem to change. In particular, it looks like the A.F.L.-C.I.O. pension funds were voting in ways that might help workers when they were A.F.L.-C.I.O. union workers, but not after they switched union affiliations.
My own reaction to the findings is that they make sense. Why shouldn’t the A.F.L.-C.I.O. pension fund use its clout to try to make things better off for A.F.L.-C.I.O. workers?
I guess some would argue that the responsibility of the pension fund managers is to maximize the value of the pensions, although I don’t really see why. I would think the goal of the A.F.L.-C.I.O. would be to maximize the welfare of the union members. Sacrificing a little on the portfolio returns to help workers in other ways makes good sense to me.
The A.F.L.-C.I.O. doesn’t seem to share my view.
When Ashwini’s results got discussed not once but twice in the Wall Street Journal and on a Harvard Law School blog, the A.F.L.-C.I.O. had an angry reply.
Ashwini responded, as did his advisor Steve Kaplan.
Which led the A.F.L.-C.I.O. to fire back again.
Now, I have to confess I’m not a completely unbiased party to all of this — to begin with, I like underdogs. Secondly, Ashwini took one of my classes, and I first found out about this when he came to my office terrified that the A.F.L.-C.I.O. was going to sue him and find ways to ruin his career (hopefully not the way the Teamsters ruined Jimmy Hoffa‘s career).
I told him that as long as the university would pay his bills, getting sued by the A.F.L.-C.I.O. would be the best thing that could ever happen to his career.
Having read through this mess, I think the A.F.L.-C.I.O. just isn’t being very smart about this. If you want to show that an academic paper is wrong, saying that a graduate student is lying about contacting your organization — as the A.F.L.-C.I.O. said — is completely the wrong approach.
What the A.F.L.-C.I.O. needs to do is hire an economist to reproduce what Ashwini has done. If he made some mistakes, then the A.F.L.-C.I.O. can make these public and the issue will go away.
If he didn’t make mistakes, then either the A.F.L.-C.I.O. has to admit that they use their formidable power in every way possible to help workers, or they need to institute a different set of rules about how they vote on shareholder issues.
Round one goes to David.