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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

slide4
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%)

slide6
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

slide10
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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