Last week, Thomson’s Buyout East featured a panel that included Robert Stewart of the Private Equity Council, which represents the top ten PE firms, as well as Stephen Lerner from the Service Employees International Union, a frequently noisy irritant to the mega funds.
Stewart yielded no ground on the carried interest issue, or on any other.
Lerner, on behalf of the SEIU, challenged the industry to redirect the focus from the tax treatment of carried interest to the larger issue of responsible partnering with workers to assure benefits for employees of firms that do business with them. “Let’s reach common ground on responsible leadership,” seemed to be his tack. As an example, he suggested PE firms skirt their social responsibilities by not requiring their cleaning and catering contractors to provide benefits and adequate wages.
I must say this appeal got scant attention from the panel or from the assembled crowd. One panelist went so far as to say rather smugly that the pension fund investors were not interested in anything but their returns. I wonder. Given that corporate America is beating a fast retreat away from pension funds it is hard to imagine that the remaining pension funds and large LPs – often teachers and state workers – are deaf to the idea of a living wage with the opportunity for health benefits. Think the “no sweatshop garments” pledge from large retailers when importing from overseas.
Interestingly and perhaps not coincidentally, the next day Fortune’s feature article was on Indra Nooyi, CEO of Pepsi. Nooyi, a thought leader at Pepsi for many years, now has the bully pulpit as CEO and is perhaps onto something in regard to corporate responsibility. Creating a motto “Performance with Purpose,” she reportedly told Secretary of State Condoleezza Rice how critically important it was that “we use corporations as a productive player in addressing some of the big issues facing the world.” Fortune reports, “And a CEO had better be taking the moral high road…There is no longer a free pass for the ugly American company…”
Nooyi and Pepsi seem to be onto something, a heartfelt desire to emphasize ethical capitalism and the recognition that doing good is good business.
Although it wasn’t Pepsi that taught the world to sing in perfect harmony, perhaps it might just teach some in the private equity industry how to dance to a new tune.
I, for one, hope they take the Pepsi challenge.
Gail Long is CEO of ACG Boston, a chapter of the Association for Corporate Growth. She previously was an Executive Vice President of specialized banking at Citizens Bank of Massachusetts, and, previously President of Citizens Capital, that company’s $500 million private equity subsidiary. In these roles, she directed lending to technology, professional, not-for-profit and healthcare companies, as well as companies receiving private equity capital.