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Private Equity workers and unions

This analysis explores the relationship between private equity (PE) firms and labor unions, highlighting key challenges such as job restructuring, wage stagnation, and hostility toward unions. It discusses the complex dynamics of employment changes, with a significant percentage of jobs lost in the UK and US due to PE ownership. Examined case studies illustrate the consequences of PE strategies on labor conditions, including increased job insecurity and reduced benefits. The paper emphasizes the necessity for unions to advocate for worker voices and equitable practices in PE dealings.

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Private Equity workers and unions

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  1. Private Equityworkers and unions Michael Fisher Australian Council of Trade Unions

  2. Why important to unions? • Employment: 20% UK, 7% US • Restructuring: jobs & job design • Image: high-risk, short-term, anti-union • ‘…in many ways a superior model of capitalism’ The Economist

  3. Source of ‘social panic’ • Automobile Association & Permira - 3,400 jobs lost in first year - work intensification - 1000 performance-related sackings - increased ‘unfair dismissals’ - new staff ‘union’ - less generous redundancy & pensions - industrial action

  4. Gate Gourmet & TPG - work intensification - employ more low-wage casuals - 670 sacked by megaphone - sympathy action by BA workers - flights grounded at Heathrow - company lost $50m, BA lost $100m - further disputes across Europe

  5. The evidence • WEF-Harvard (US) - 5000 US PE owned 1980-2005 (+ control) - employ ‘shrinks more rapidly’ (7% & 10%) - gross destruction ‘substantial’ (0.34m) - finance, services, retail - 24% more employees faced ‘uncertainty’ - twice as likely to go bankrupt - strong Greenfield job creation (15% / 9%)

  6. 2. Work Foundation (UK) - MBOs: 2% cut in 1st yr  create after - MBIs: ‘cut jobs quite drastically’ - 10% in 1st yr  18% by 6th yr  then create - MBI wage bills grow ‘substantially lower rates’ - performance related pay - job re-design (‘flexibility’ & ‘empowerment’) - temporary workers - union recognition: 34%  29%  34% - MBO: 40% managers ‘hostile’

  7. In sum… • Poor public image in some countries • Job destruction followed by some job creation • Wages grow more slowly • New management methods • Hostility to unions (but bargaining recovers)

  8. Union responses North American unions: ‘capital stewardship’ Key concerns: - short-termism - labour as too easy source of gains - high-debt  uneven distribution of high-risk - high fees & rewards to dealmakers Legitimate trustee & union interest in outcomes

  9. Union PE principles Key: workers should have a voice (risk burden) - prior to deal closure - independent unions & willingness to bargain - ILO conventions (esp. 87, 98, 135) - continuity of pay and conditions - focus on retraining & redeployment

  10. SEIU Pension Fund Guidelines: ‘Without compromising return or increasing the risk of the portfolio, the Manager shall make a special effort to find partnerships that have an explicit objective of investing in businesses that are committed to treating employees fairly and/or have an explicit strategy of creating shareholder value through labor force enhancement.’

  11. Conclusions • Enormous variety • High-profile ‘scandals’ • Wages, job losses, new management techniques • Scope for improvement & union intervention

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