Teamsters Union Confronts Airgas Over Shareholder Rights

At a Jefferies investor conference in New York City on Aug. 11, a representative of the International Brotherhood of Teamsters stood up after a presentation from Airgas President Andrew Cichocki and excoriated the firm for its lack of accountability to shareholders.

While the Teamsters’ representative spoke, two of his aides passed around a handbill to the few dozen attendees in the room. “Stop blowing smoke” and “listen to your investors,” the handbill said.

The representative argued that the industrial gas firm should move to annual election of all board directors like many other firms rather than the staggered system it has now. Had such a system been in place in 2010, Airgas shareholders could have elected directors who would have favored a $5.8 billion takeover bid by rival industrial gas maker Air Products & Chemicals. Shareholders would have netted a 60% premium on the value of their shares, he said.

Cichocki politely explained Airgas was considering changing the way directors are elected. Contacted after the event, Airgas declined to comment further on the conference incident or the issues the Teamsters had raised.

Raising the specter of a takeover fight that ended four years ago was an unusual tactic for a union to take. The forum the Teamsters used to raise that criticism was unusual too.

Investor conferences are usually staid events at which a large number of companies make 30-minute presentations, answer a few questions, and then go about their business. Such was the case for chemical companies at the conference, including Celanese, Trinseo, and LyondellBasell Industries.

An observer might expect a union representative to pressure Airgas over wages and benefits. The Teamsters have a number of ongoing wage disputes with Airgas and have been actively organizing delivery workers at the company’s industrial gas distribution sites. But the Teamsters representative took on the persona of an aggrieved shareholder.

The incident shows that shareholder rights can be a rallying call for unions as much as they can be for activist investors such as Nelson Peltz, who recently sought seats on DuPont’s board to break up the firm, or William Ackman, who agitated for change at Air Products. It also illustrates how, as shareholders, unions can bring pressure to bear on behalf of their workers.

Many unions invest members’ pension funds in stocks, points out Kate Bronfenbrenner, director of labor education research at the Cornell University School of Industrial & Labor Relations. Often the stocks include companies for which union members work, she says.

By using their right to vote as shareholders, unions can let companies such as Airgas know that “they are big and have a lot of power,” Bronfenbrenner says. It is also a way to tell firms “not to be so aggressive in opposing the unions” because the unions are shareholders that are not going away.

Teamsters affiliates have more than $100 billion in pension money invested in equities, says Carin Zelenko, director of the Teamsters Capital Strategies Department. Annual election of directors would give all shareholders a greater voice in important corporate matters, she says, adding that the director issue is not tied to any union organization efforts.

The Teamsters aren’t the only ones calling for annual director elections. The shareholder advisory firm Institutional Shareholder Services has called for Airgas to allow it. And at the firm’s Aug. 4 annual meeting, shareholders seemed to express the same opinion: 53% of them withheld support for three directors up for reelection, although they were seated again anyway.

Shareholders’ concerns are being ignored just like workers’ concerns are being ignored, Zelenko asserts. However, by bringing up the Air Products takeover deal, the union raised the prospect that a board more responsive to shareholders might have sold Airgas. The irony is that resulting corporate consolidation likely would have meant the loss of union jobs.

“The company has made that point to us,” Zelenko acknowledges. “But the fact of the matter is that the annual election of directors is just an issue of good corporate governance.” What Zelenko didn’t say is that the Air Products takeover attempt is ancient history now, so arguing its impact on the Teamsters is a moot point.

Cornell’s Bronfenbrenner points out that unions have a fiduciary responsibility to invest their members’ pension funds wisely. Backing what they see as a good corporate governance issue, she says, is another tool unions can use to give workers a voice in the affairs of the companies their members work for.