AFL-CIO Releases Worker Friendly’ Criteria –

The AFL-CIO has finalized a list of criteria by which it will evaluate private equity firms that market funds to the Taft-Hartley market, the group of labor union pension plans.

Among the list’s criteria are requirements that private equity firms show a history of partnering with workers, provide for labor representation on advisory boards and insure that no jobs are lost after a buyout is completed before unions can consider a firm worker friendly.

The list was developed by the Investment Product Review Working Group, a unit of the AFL-CIO formed last year to evaluate the growing range of private products marketed to union pensions, many of which advertise investment strategies that benefit union workers (BUYOUTS May 3, p. 1). An introduction to the list advises pension managers to consider rate of return, risk and diversification as the main criteria for evaluating any fund, and that the list is meant only to evaluate which funds may provide “collateral benefits to workers.”

Shawn Wooden, a legal advisor to the AFL-CIO, said the Working Group now will begin using the criteria to evaluate private equity offerings that bill themselves worker friendly and will issue a final report-a kind of “report card”-in the Fall.

In addition to setting guidelines for worker friendly investment practices, the Working Group’s criteria list also calls for co-investment opportunities, dispute resolution mechanisms and no fault divorce provisions, which allow a limited partner to opt out of a fund without penalty. The criteria also allow for “temporary job loss” at companies where restructuring is needed, but does not elaborate the Working Group’s definition of temporary.

A source at the AFL-CIO said the criteria may eventually be used to evaluate any private equity vehicle, not just funds targeting Taft-Hartley money, which union consultants estimate to total approximately $350 billion.