At the begin­ning of this year, in an In These Times cov­er sto­ry, we report­ed on what union activist Stephen Lern­er has called ​“labor’s assist­ed sui­cide”: invest­ment by pub­lic employ­ees’ pen­sion funds in pri­vate equi­ty (PE) and hedge funds, which make many of their prof­its through job-destroy­ing, union-bust­ing ​“effi­cien­cies.” We’re hap­py to note that in the wake of the recent blood­let­ting at Toys ​‘R’ Us, accord­ing to the Finan­cial Times, some state pen­sion sys­tems are now rethink­ing this reck­less and anti-sol­i­daris­tic practice.

Volatile invest­ment strate­gies have not only con­tributed to the cur­rent insta­bil­i­ty in pub­lic pen­sions, they’ve also fund­ed the evil work of PE. The busi­ness mod­el typ­i­cal­ly works like this: Buy a com­pa­ny, load it up with debt to pay your­self div­i­dends and fees, then squeeze labor with pay cuts, lay­offs and work speed-up in order to cov­er the inter­est and prin­ci­pal pay­ments. Investors get rich and work­ers get nothing.

Toys ​‘R’ Us was tak­en pri­vate by PE giants KKR, Bain Cap­i­tal and Vor­na­do Real­ty Trust and then dri­ven into bank­rupt­cy, clos­ing for­ev­er on June 29. The toy chain’s 30,000 work­ers lost their jobs. The three PE firms extract­ed over $470 mil­lion in fees and inter­est pay­ments out of the com­pa­ny before ren­der­ing it a corpse. Employ­ees were far less lucky. Many low-lev­el work­ers have protest­ed their lack of sev­er­ance pay, par­tic­u­lar­ly appalling giv­en the gen­er­ous bonus­es paid out to executives.

The Min­neso­ta State Board of Invest­ment decid­ed in late June to stop invest­ing in KKR while it reviews the PE firm’s role in the icon­ic toy retailer’s col­lapse. The Wash­ing­ton State Invest­ment Board severe­ly ques­tioned KKR offi­cials over the company’s treat­ment of Toys ​‘R’ Us work­ers. The fund decid­ed to con­tin­ue one of their planned invest­ments in the com­pa­ny, but referred anoth­er back to its board for fur­ther review.

Some of the store’s employ­ees gave tes­ti­mo­ny last month to CALPERS, California’s pub­lic pen­sion fund, the largest in the Unit­ed States (though also last month, CALPERS dis­cussed expand­ing its invest­ment in the sec­tor since the returns are so high). Pres­sure from the funds — and par­tic­u­lar­ly the deci­sive action by Min­neso­ta — along with con­fronta­tion­al protests from the work­ers and a group called Rise Up Retail, may already be lead­ing to more gen­er­ous treat­ment of the Toys ​‘R’ Us work­ers; KKR announced last week that it would ​“help” its laid-off employees.

Pub­lic pen­sion funds pro­vide near­ly a fifth of all assets con­trolled by PE, so if they were to divest, a deeply anti-labor and par­a­sit­i­cal sec­tor would be sub­stan­tial­ly weak­er. It’s good to see labor ques­tion­ing this rela­tion­ship. Whether or not our arti­cle helped inspire this out­burst of sol­i­dar­i­ty and good sense, it’s a much need­ed vic­to­ry for workers.