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Private Equity workers and unions

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

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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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