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Private Equity workers and unions. Michael Fisher Australian Council of Trade Unions. 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.

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Private equity workers and unions

Private Equityworkers and unions

Michael Fisher

Australian Council of Trade Unions


Why important to unions
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


Source of social panic
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


  • 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


The evidence
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%)


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’


In sum
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)


Union responses
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


Union pe principles
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


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.’


Conclusions
Conclusions

  • Enormous variety

  • High-profile ‘scandals’

  • Wages, job losses, new management techniques

  • Scope for improvement & union intervention


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