The challenge (to unions) of pension fund 'socialism'

The Unseen Revolution by Peter Drucker is (like the Modern Corporation and Private Property) one of those books that has had a big influence on the world in which I inhabit, but also which is often misunderstood. Lots of people have probably heard the basic idea - that through the equity held by pension funds workers essentially "own" companies, and therefore we have a form of latent "socialism" if people would just wake up to it.

There are some obvious problems with even the outline - shareholders own shares not companies; not all pension schemes hold equity; pension fund coverage in many countries is skewed by class, gender and so on, so not everyone is a meaningful shareholder in practice; and day to day many pension funds act like any other financial market participants and aren't really friends of labour.

Nonetheless the basic idea is one that many on the Left are interested in and many people (me included) have spent years trying to make something like it meaningful.

But back to Drucker. Because a lot of people only know the outlines of the argument, they miss a lot of the really insightful stuff he wrote about the challenges that pension fund equity ownership creates. One of the most interesting bits is about the dilemma faced by trade unions, and to me Drucker seems to find this dilemma quite enjoyable. So here are some chunks of it.

Whatever the role of the labour union under pension fund socialism, it has to decide among equally dangerous alternatives, each challenging its cohesion.
The employees - the people whose organisation the labour union asserts itself to be and whom it claims to represent - are now increasingly both "employees" and "owners". Increasingly, they have an interest both in their job and its wage or salary, and in the performance and the profitability of enterprise. And increasingly, they stand in two relationships to the "system", which according to union logic and union rhetoric are mutually exclusive.
The labour movement can choose to ignore pension fund socialism. This would be the normal reaction for an American union leader - who does not challenge the "system" as such, but demands that one interest in it, that of the employee as employee, be given pride of place... The second alternative for labour is to try to use pension fund socialism as a means to expand union power by becoming the representative of the employees in their role as principal owners...
If America labour chooses to ignore the emergence of pension fund socialism, it runs therefore the one risk no trade union can possibly afford: the risk of a competing organisation's claiming to represent the employee. For if the union does not assume responsibility for the employee as owner, some other organisation will do so sooner or later. Such an organisation might take half a dozen different forms, but in any form it would be a competitor to the labour union. It would be an organisation of "labour" - not representing the employee as an employee against management, but ownership against management and employees alike...
The second alternative is equally risky: to accept pension fund socialism and to assert the labour union's role as representing the employee as owner. This would force the union into taking enterprise's even even management's side against the employee. The interest of the employee as an owner is by no means identical, at least not in the short run, with the interest of the employee as an employee. To an "employee", "profits" are something that is being "taken away from the worker," always seen as enormous and surely "excessive." To an "owner," on the other hand, profits are absolutely necessary; they are, in effect, the foundation of his future security. Instead of being excessive or exorbitant, they will almost always been seen as inadequate. To the employee, "productivity" is a dirty word... To an owner, "productivity" is what he pays management for.

Well, we know how this turned out. Unions have generally not sought to represent employees as "owners". No rival organisations have materialised to fill the gap, rather the influence that derives from equity ownership has largely accreted to financial intermediaries (asset managers). Overall the balance of power has significantly shifted since Drucker was writing away from labour and towards capital (and it is the latter interest that is given pride of place in today's corp gov). But the the power of capital is not utilised by those to whom it belongs. Both companies and asset managers act as if the capital belongs to the latter, and its influence is used to advance the interests of capital, not labour.

As I regularly argue, we would be better off acknowledging the conflicts here, and thinking about how they should be worked through. I know very few investors who are anywhere near this yet, but I think this is where the hard work will need to be done in the coming years.

PS - the thing that people often overlook about the Modern Corporation and Private Property is that Berle and Means conclude that the diffusion of share ownership (and thus control) means that corporations should be accountable to 'the community'. Yet the book is often cited in support of the need for companies to be accountable to shareholders.