Will SAG Pension Fund Crisis Stop the SAG-AFTRA Merger Process?

As I have suggested in recent posts, one of the potential pieces of collateral damage that could emerge from the governance crisis at the SAG Pension Fund is its impact on the push to merge SAG with its sister guild AFTRA.

Most readers of my blog are familiar with the background but just to refresh quickly:

SAG was formed in the heat of class conflict that spread across the country in the 1930s and while it has always thought of itself as a guild not just as a union, it has always retained a link to that past when figures like Boris Karloff, James Cagney or Lyle Talbot  stood up in defense of those trying to make it in Hollywood.

While actors were always at its core, the Guild expanded somewhat over the years to include stunt persons, background actors, dancers and others. Yet it retained a coherence and homogeneity that I think gives it a unique position in the creative and business world. While SAG leaders have struggled in recent years to map out a strategy for improving the position of actors in a changing financial and technological environment, that unusual culture remains a potential weapon. It was on display in the 2000 commercial strike and in the solidarity SAG showed striking Southern California grocery workers in 2004 and the Guild’s fellow writers on strike in 2008.  And that solidarity has been returned by labor when, for example, the Nashville branch of SAG was able to get support from auto workers during the commercials strike.

AFTRA has a different history, and culture, more akin to a narrowly focused business union having been cobbled together from the older radio world and then engaging in direct conflict with SAG in the 1950s when television emerged. AFTRA lost its attempt to take jurisdiction away from SAG in films for TV.  But over time AFTRA has been able to eat away at certain aspects of the acting business so that there is some overlap, particularly in television, between the two unions.  Somewhat suspiciously, the latest example has been the near unanimous signing of cable TV pilots by AFTRA, an arena that SAG used to dominate.

In addition a very significant part of AFTRA membership is made up of broadcast journalists and musical recording artists, who of course face very different working conditions than most actors.  More militant SAG activists maintain that AFTRA has weighed SAG down in contract negotiations and while the facts are difficult to sort out, it is the view of many that a merger should take place but that it should be done by moving AFTRA’s 40,000 actors to SAG with the broadcast journalists joining a more relevant union for them, perhaps the Newspaper Guild that is now part of the Communications Workers of America.  I wrote about that approach here.

However, missteps and poorly designed strategy by these same militants during the 2008 contract talks led to their ouster after a lengthy period of dominating the Guild’s governance, particularly in the Hollywood wing of the union. A new moderate coalition, made up of some in Los Angeles and other longstanding moderate groups in New York and SAG’s regional branches, now dominate the National Board and the staff of the Guild.

Unfortunately, they have no more strategic sense of how to build the power of actors than the militants and so have lighted upon the merger idea like moths to a flame. And now the SAG Pension Fund blow up threatens to burn them.  At a minimum it may alter the balance of power in the negotiations now underway between the two guilds.

First, of course, is the problem that while the unions are in active face to face merger negotiations right now in Los Angeles, none of the people at the table can talk in any detail about the Pension Fund issue. Several at the table may have more facts but if they do it is because they are trustees or staff who owe a fiduciary obligation to the Pension Fund.  That means they may face some liability for either participating in the crimes that some allege have been committed or may face liability for failing to put in place effective controls to detect and prevent those crimes.

Second, since the facts are not known then neither is the scope of the potential problem. An earlier scandal just two years ago at the fund led to a multi-million dollar lawsuit and the fund had to recover stolen funds from its insurer. Some claim that improved controls under the current board of trustees and staff of the fund were put in place but the whistle blower letter from ousted Fund executive Craig Simmons suggests that this was not the case. The LA Times reported today that the scope of the scandal is growing with an active Department of Labor investigation underway.

Third, the implication is that a merger partner like AFTRA has to ask itself what level of risk it may be absorbing if merger goes forward.  At a minimum AFTRA will want to be indemnified against that risk and that may require some form of set aside or other deal term.

That in turn puts SAG on the defensive in the negotiations over the merger and may lead AFTRA to demand other concessions in the negotiations. To this point, there has been remarkably little transparency about the terms on the table – a marked contrast to the kind of openness that prevailed during contract talks with the employers when there was wide public understanding of the key issues. (It is always painful when I find such examples of organized labor not practicing in its own house what it preaches to corporate America.)  So SAG members are mostly in the dark about the deal terms under discussion.

In sum, the SAG Pension Fund crisis could not have come at a worse time from the standpoint of SAG’s position in the merger process. It is entirely possible that the process will have to be put on hold until the parties have a clearer picture of the situation. It would certainly be in SAG’s interest to consider such a delay because the uncertainty only gives AFTRA greater leverage in the bargaining process.