Unions respond to private equity
My article on organized labor’s response to the rise of private equity is now online at TCSDaily. Private equity presents a unique challenge for unions, since it makes it harder for them to pressure companies through shareholder resolutions, which are key to broader pressure strategies known as corporate campaigns.
When planning corporate campaigns, unions and activist groups research their target and identify its weaknesses. One key pressure point is a company’s need for capital. Because they often have great influence over pension funds, many unions are able to pressure companies by having the funds offer shareholder resolutions at corporate annual meetings.
However, the enactment of the 2002 Sarbanes-Oxley Act, in the wake of the Enron and WorldCom scandals, has had an unintended consequence. To avoid burdensome government regulation, some companies are deciding not to list their shares on American stock exchanges—a trend that is leading to more stock listings in overseas financial centers like London and Hong Kong. In some cases, companies have even de-listed their stock shares in the U.S.
This has created great asset shopping opportunities for private equity firms, which are buying up publicly owned companies. Because they do not trade publicly, private equity firms are not directly exposed to the kinds of shareholder pressure that publicly traded companies face. However, organized labor isn’t about to sit idly by and let this development go on unchecked.