Monday, 17 November 2008

Study: Strong union able to cope with private equity

In July, unions around the world protested against private equity (PE) firms such as KKR, claiming that these firms make huge profits at the expense of workers. However, PE lobby groups have called the unions’ criticism ‘hysterical’.
A new academic study by Andrew Watt of the European Trade Union Institute finds that unions are largely right. While some criticism of PE may be exaggerated and one-sided, there is evidence suggesting that PE takeovers tend to result in job losses, lower pay, increased hostility towards trade unions and more ‘tax efficiency’ (which basically means that taxpayers subsidise PE profits).
Watt emphasises that PE firms are not intrinsically anti-union, but tend adopt a pragmatic approach. Strong unions will be in a better position to negotiate with the new owners. When a PE firm wants to buy a company, unions should try to organise more workers by addressing concerns these workers may have about the takeover.
Over the past years, there has been a huge increase in PE. The European leaders are Sweden, the Netherlands and the UK.
Andrew Watt (2008), The Impact of Private Equity on European Companies and Workers: Key Issues and a Review of the Evidence. Industrial Relations Journal 39(6): 548-68.

1 comment:

Ian Manborde said...


I have not had a chance to look at Watt's article but wanted to comment on your post whilst I was passing by.

I appreciate that Watt may have addressed the points I want to raise but from a UK perspective I am not sure that he is entirely right.

My first query is what he means by a 'strong' trade union. Is it just simply density within the workforce about to the transferred to a PE or that they may have a better bargaining position beacuse of existing bargaining arranagements.

I am also unsure about the idea that PE firms are not 'intrisically anti-union' but are 'pragmatic'. PE firms asset trip and seek to maximise profit through destructing previous terms and conditions of employment. If this is pragmatism that it is also anti-union.

Many of the campaigns waged by 'strong' unions in the UK against PE takeovers have evidenced how poor the track record of the firms are generally following the takeover. Please have a look at the campaign of the GMB against the PE takeover of the roadway assistance company The AA.

Much of my work in this area is with unions resisting the transfer of public sector work to the private sector and on occasion to PE firms.

What is interesting about your comment that 'when a PE firm wants to buy a company, unions should try to organise more workers by addressing concerns these workers may have about the takeover' is that is exactly what UK trade unions attempt to do and exactly what new firms undermine and avoid.

The overwhelming experience of UK trade unions is that emploee transfers that take place and are subject to the TUPE regulations end up in a situation of reduced trade union density, altered if not deteriorated terms and conditions of employment, a lessening of public scrutiny and a reduction in value for money.

Most of the recent scandals in the UK for example where significant, sensitive data has been lost or mislaid involve private sector or PE firms.

Sorry to be negative here as I welcome the value of research in any area like this. My comment is only that the research deserves some scepticism and scrutiny.

Best wishes

Ian Manborde