Category Archives: Corporate Governance

Private Equity and Public Good

Source: Stephen F. Diamond, Dissent, Winter, 2008

The collapse of the credit markets over the last year has hit more than just the homebuilding and mortgage sectors of the economy. As interest rates increased, private equity, or “PE,” an important new form of financial capital, was also rocked on its heels. … Trade unions have an ambivalent attitude toward the rise of private equity. On the one hand, many American labor unions have representatives on the boards of the same pension funds that are largely responsible for the steady flow of capital into PE funds, and, of course, that means some union members have benefited handsomely from the funds’ above-average returns. On the other hand, over the last decade, organized labor has developed a relatively sophisticated program of investor activism through the Office of Investment at the AFL-CIO, the Capital Strategies Group of Change to Win, and similar groups at key affiliates. This effort relies on labor’s pension-fund investments in public companies to raise concerns about corporate social responsibility, excessive CEO pay, workers’ rights, and internal corporate governance. But labor does not seem to have made up its mind whether or not PE funds raise or lower corporate standards of behavior.
See also:
The Modern Corporation and Private Property
Adolph Berle and Gardiner Means

Private Equity’s Broken Pension Promises: Private Equity Companies’ Links
To Insolvent Pension Funds

GMB, a Central Executive Council Special Report, 2007

A Workers’ Guide to Private Equity
International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers Associations

Health Care Costs Affected by Corporate Conflicts of Interest

Source: Alliance for Retired Americans, Friday Alert, October 19, 2007

A recent report by the AFL-CIO Office of Investment reveals directors at major corporations often have serious conflicts of interest, influencing the cost of health care. While companies would be expected to cut benefit costs through policies such as including generic drugs as part of prescription coverage, executives at big health insurance and pharmaceutical companies who are also board members at some of the country’s largest non-health care related companies may affect plans. Many have much greater financial stakes in the health firms, suggesting outside motives that may influence benefits policies of these other businesses. The report shows that 21 Fortune 500 companies with substantial health costs for retirees, employees and dependents have significant conflicts of interest, with leaders also executives or directors at a major health or pharmaceutical company. In one case, the prescription drug Nexium was actively protected and maintained as part of a health plan by General Motors, while other corporations substituted less expensive generics. Percy Barnevik, retired CEO of AstraZeneca, was a board member and chair of GM’s Policy Committee at the time.

See also:
Press release
Letter to the SEC

IUF: A Workers’ Guide to Private Equity

Source: The International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers’ Associations (IUF), May 2007

The IUF first drew the attention of the international trade union movement to the growing scale of private equity buyouts in the context of the “financialization” of corporate investment to deliver maximum short term financial returns to shareowners. The secretariat has briefed UK and European parliamentarians on the threat of private equity, established a unique website on private equity in the IUF and other sectors and assisted affiliates in responding to private equity buyouts.

The IUF secretariat has now published a A Workers’ Guide to Private Equity, a 36 page A5 brochure, aimed at IUF affiliates and trade unions and their members around the world.

Available in English, and shortly in French, German, Spanish and Swedish, the publication sets out in accessible language what private equity is, how it operates and the dangers it represents to workers and unions. It points to possible strategies in bargaining with the private equity funds who are becoming increasingly significant players as owners and employers in many IUF sectors. It explains how a specific political environment (deregulation) has made it possible for the funds to expand globally, and how political action can contain the funds.

Conflicts Over Corporate Control: The Role of Labor and Employment Relations

Source: Stephen R. Sleigh, Perspectives on Work, Summer 2006, Volume 10, no. 1

The theme of LERA’s Annual Meeting in 2006 was “Labor and Capital in the Twenty-First Century: Human, Social, and Financial Contributions to Creating Wealth.” In a wide variety of settings— including formal sessions and informal discussions in the hallways—lively debate was the order of the day….

… Despite the positive role large unionized companies play in American society, a fundamental conflict exists between the short-term financial focus of many in the investment and management communities and the longer-term focus of others, including employees who value job security and long-term investors who seek consistent growth. Conflicts over corporate control revolve around this tension. From a strategic union perspective, developing an action plan around making large companies more accountable to employees and other stakeholders, including long-term shareholders, must involve a number of new approaches.

Given the track record of labor’s success in trying new approaches, we have our work cut out for us. Still, unions represent employees in nearly 80 percent of the largest publicly traded companies in the United States. Perhaps more significant is the fact that nearly half the assets in American equity markets are held by the pension funds and savings plans of organized workers and union-represented employers. Taken together, unions have the potential to exert considerable leverage on capital markets.