Friday 29 August 2008

UNI report on private equity investment

UNI has put out a useful little report (PDF) looking at pension fund investment in private equity as an asset class. It helpfully points out where the labour movement has representation in the funds that are investing in PE (actually this is quite common).

It's another sign that unions are developing another element to their engagement with private equity. So far we've had the air war - the 'fat cat' media campaigning - and policy engagement (ie lobbying for changes to taxation, for TUPE to apply to PE takeovers etc). But the next stage looks to be developing the capital stewardship role - finding out which of our pension funds invest in PE, and where we have trustees involved in the decision-making process.

The UNI report is good as it suggests ways that trustees can constructively engage, rather than firing them up to distrust PE as an asset class. And they've produced the set of principles below as a framework.

Global Principles for Private Equity
1. The goal of private equity deals should be to create economic opportunities that align the long-term interests of everyone and that build the value of a company.
• For customers this means a commitment to maintaining good quality services or products.
• For owners it means a fair and reasonable return on capital investment by means of increasing the efficiency and productivity of the company rather than cuts in jobs and benefits.
• For employees it means protection of wages and conditions, decent work and working conditions and fair treatment free of discrimination.
2. Private equity firms must recognize the role of the Global Union Federations in their respective membership areas UNI calls upon them to undertake to develop a global dialogue with the Global Unions.
3. UNI Global Union will endeavour to negotiate global framework agreements with the relevant private equity companies.
4. In these agreements, private equity firms will commit to abide by the core labour standards of the ILO, in particular Conventions 87, 98 and 135, the ILO Tripartite Declaration on Multinationals, and the OECD Guidelines.
5. Where a private equity firm is buying a company, existing union recognition must continue. Such union or unions must be consulted and be able to negotiate the terms of the workers’ participation in the deal and its effects.
6. Such consultations and negotiations should take place, whenever possible, prior to the deal being announced, but in every case prior to the deal being closed. The private equity firm will provide the union with details of the business plan for the company, including equity and debt levels, investment plans, earnings expectations, risks, and other information necessary for the union to be an informed negotiating partner with the company and its new owners.
7. Private equity firms, companies and unions must abide by existing collective bargaining agreements, whether national, industrial, company-wide, or plant-specific. There shall be no unilateral changes or elimination of terms without collective bargaining.
8. Where employees are not already represented by a trade union, companies will recognize their right to organize. The company will allow the union access to the employees. The company will not act in any way to discourage or prevent employees from joining or creating a union.
9. As part of a global agreement the private equity company will agree the most expedited, legally-permitted means for determining employees’ wishes to be represented for purposes of collective bargaining.
10. Private equity portfolio companies will sign up to UNI’s responsible contractor policy and only hire contractors that have a demonstrated record of responsible labour practices, including abiding by all applicable labour laws; honouring the right of workers to organize into a union; ensuring workers fair and decent wages and benefits; maintaining safe and healthful working conditions; maintaining a policy of no-tolerance for discrimination; and providing adequate training to workers.
11. Prior to exiting or ceding control of a portfolio company, private equity firms shall ensure that collective bargaining agreements and related agreements, including outsourcing arrangements and organizing procedures, shall be continued or assumed by the new corporate entity, owner or owners as a condition of sale.

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