The UAW continues its descent into obsolescence today with an announcement that it will offer more concessions to help the Big Three bosses secure a safe and happy retirement.
At the heart of the latest offer, however, appears to be a violation of the fiduciary obligations owed to retired auto workers.
Last year, the UAW allowed the Big Three to shift retiree health care off its balance sheets into a new entity called a Voluntary Employee Beneficiary Association, or VEBA. The companies were obligated to fund the VEBA’s with billions in cash, securities and other obligations. Some of the money made it in before the current crisis.
But now the New York Times is reporting that the UAW, without any right to do so, is offering to allow the Big Three to delay the much needed future financial flows to the VEBA’s. These are the same VEBA’s that were sold as “secure for 80 years” by the UAW when it wanted rank and file ratification of the most recent collective bargaining agreements.
In theory, the VEBA’s are independent trusts, controlled by a board of trustees that owes a fiduciary duty to the beneficiaries of the trust, current and future UAW retirees.
The fiduciary obligations of a trustee are the strongest known in American law. In the landmark case of Meinhard v. Salmon in 1928, then Judge Cardozo described this solemn obligation thus:
“Many forms of conduct permissible in a workaday world for those acting at arm’s length, are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior. As to this there has developed a tradition that is unbending and inveterate.”
There is no evidence that the trustees of the Big Three VEBA’s have met this long established obligation in the unilateral decision by UAW President Gettelfinger to announce delays of funding to the VEBA’s. Current and future retirees should be outraged.
If this is the way in which the private sector deals with retiree health care at our most important corporations, what chance is there for a genuine national solution to the health care crisis?