The New Internationalist Capitalists

Back this morning from annual meeting of the “Committee on Workers Capital” (CWC) held in the International Labour Organisation’s headquarters (ILO) in Geneva. A superb one

day conference for international labour movement activists, who are involved on workers capital issues.

The chair of CWC is Ken Georgetti, who is President of the Canadian Labour Congress. Canada seems to be taking the lead on worker’s capital. John Maitland, from the Australian Council of Trade Unions (ACTU) chaired the actual meeting.

There were nearly 40 participants from all round the world. Australia, Brazil, Canada, Denmark, France, Netherlands, Iceland (who was also an MP), UK and USA. I went to the meeting in London in 2005 and there was probably nearly twice as many people present this year as then. From UNISON there was also national officer for Capital Stewardship, Colin Meech, and from the TUC senior Policy Officer, Janet Williamson. Janet gave two presentations on the TUC response to Private Equity in the UK. Also present was David Russell from the Universities Superannuation Scheme (USS) and Donald McDonald who is a BT pension scheme trustee (and Chair of PRI).

Some of the pension schemes represented even dwarfed the £125 billion invested (collectively) in the British local government pension scheme (LGPS).

Check out the CWC link for the full picture on the Labour movement and investments (I’ll do a further post on this issue later). The themes for this year meeting were a “Trustees approach to the UN Principles for Responsible Investment “ (PRI - we must get all British schemes to sign up to this campaign). There was than a lot of good stuff on trade union approaches and initiatives on Private Equity (PE); assessing its risk and market distortions, making PE work for us, and PE “due diligence”. There was a very wide ranging discussion. Finishing off with debate on common problems and issues.

Potentially one of the most significant things that the CWC does is to operate a “clearing house” for international trade unions to post requests for assistance or information about international companies who are operating in their country. Recently we had a fairly successful campaign in the UK by the T&G and the Teamsters to try and persuade First Group not to practice anti-trade union activities in the US.

It was good to meet Mike Musuraca from the New York City Employees Retirement System (NYCERS). He is also an official with the American Public sector union (AFSCME). They appear to be far more proactive with their pension fund than we are in London with the LGPS. It would be good to keep in contact so we can get share some ideas.

Private Equity Fights Back

In response to my “Casino Capitalists” or “Amoral Asset-Strippers”. Private Equity: What should trade union Pension Trustees do? - Terry has sent me a copy of an article he wrote on this issue. Cicero Policy Briefer Issue 10, March 2007

"The Camel, The Needle, The Rich Man And The Kingdom Of Private Equity"
By Terry Paul
“The Labour Party’s deputy leadership election has transformed itself from being an internal, navel-gazing exercise, to casting light on the rather closed world of private equity”

As the light of public scrutiny starts to shine on the world of private equity, I am sure that many of you are watching closely, and wondering what exactly is going on behind the scenes. The pro and cons of the private equity debate itself have been hashed out many times already, but the circumstances in which it is being framed are particularly interesting.

You might not have been aware that in May last year, Gwyn Prosser, the Labour MP for Dover, tabled an Early Day Motion (EDM) condemning on the actions of Permira over its actions towards a major local employer, the AA. But, as you’ve probably guessed, this EDM didn’t set the world alight.

So what turned a rather specialist section of the finance industry into front page news? The GMB trade union launched its campaign against Permira last year outside the Holy Trinity Church in Clapham—Permira managing partner Damon Buffini’s place of worship—with a placard bearing the New Testament quote from Matthew 19:24, “Again I tell you, it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God.” To emphasise the point, they brought along an actual, live camel (although this backfired when Animal Defenders International criticised the union for "exploiting the poor animal").

The subsequent media campaign has so far culminated in Damon Buffini appearing on the BBC Radio 4 Today programme and the GMB trade union picketing the February private equity conference Super Return 2007 in Frankfurt. But, in the jargon, what was the "tipping point" which transformed the situation?

The Labour Party’s deputy leadership election has transformed itself from being an internal, navel-gazing exercise, to casting light on the rather closed world of private equity. The GMB is asking the candidates to set out their positions in their individual election platforms; quite an interesting situation, since the trade unions are large financial backers of the Labour party. For those of you not immersed in the bureaucracy of Labour party leadership elections, the process is likely to continue well into the summer; therefore, the intense scrutiny on private equity is also likely to remain until then—and possibly beyond, since policy commitments on private equity reform might well be promised by an eventual winner.

It is easy to lambast private equity firms, and there are many people—including MPs—who I suspect were blissfully unaware that private equity even existed. In the recent press, there are consistent daily calls for reform of current financial arrangements and greater transparency. The sector needs to be mindful that a new administration under Brown might be forced by internal Labour Party pressure to consider increased regulation and alteration of the current private equity regime. Indeed, just this week the Treasury Select Committee announced that it intends to undertake new inquiries into private equity funds.

Therefore, the industry must emerge fully from the ‘shadows’ and into the daylight of public scrutiny, parliamentary investigations and so on. A better-informed general public, media, members of parliament and trade unions will make for better, more constructive feedback for the private equity industry.

It is an industry which plays a vital role in the UK economy and greatly contributes to London’s reputation as a global financial services centre; its task now is to ensure that this contribution is recognised.

Terry Paul can be contacted on +44 (0)20 7665 9533 or click here to email.

“Casino Capitalists” or “Amoral Asset-Strippers”. Private Equity: What should trade union Pension Trustees do?

Thanks to Tom at “Labour and Capital”. He seems to be the only person consistently pushing this issue. There has been a fair amount of justifiable fuss about Private Equity (also hedge funds and venture capital) investors. These investors have been accused of using tax breaks on interest payments to buy companies and saddle them with massive debts. They pay for these debts by sacking staff and attacking the terms and conditions of those they don’t sack. See the GMB campaign over the AA and the T&G over Sainsbury.

There is also the issue of accountability. After decades of hard slog, British companies are finally adopting some good governance practices. We are starting to get transparency and the acceptance that companies should act in a responsible manner (there is a long way to go). However, most PE investors are utterly unaccountable and secretive.

There is also the risk to workers pensions and insurance policies. The TUC's Head of Economic and Social Affairs, Adam Lent, 'The rapid growth of hedge funds and private equity poses real dangers to the stability of the international financial system. There is a real danger that the growth of highly geared investments, coupled with a demand for high short-term returns, is unsustainable and may even be stoking up a speculative bubble.

This should not be an attack on all forms or private equity or venture capitalism. Since many new jobs and even industries in the UK have been created via these types of investments. This is also a global problem which will need a global response.

However, the question I am asking is what can those of us who are employee nominated Pension trustees or representatives (many are trade union appointed) doing to stop our money being used to sack fellow trade unionists, stop tax breaks being used to pay “grotesque” and “ridiculous” bonuses and prevent a possible financial crash?