Organized labor is making itself heard in private equity quarters today.
First, the United Auto Workers have rejected a new wage offer from Delphi Corp., General Motors and the private equity firms seeking to take Delphi out of bankruptcy. A UAW executive called the latest proposal “insulting,” and vows to strike if Delphi makes good on threats to void existing labor contracts. In other words, not a good development for Cerberus Capital, Appaloosa Management and Harbinger Capital – the three firms whose $3.4 billion buyout offer is contingent on a labor agreement.
Perhaps more interesting was word that the Service Employees International Union has launched a blog dedicated to The Blackstone Group’s proposed IPO.
It is the SEIU’s first-ever blog dedicated to anything besides organizing campaigns (although it once had a website called GTCRwatch.com), and promises to keep tabs on an offering that SEIU spokeswoman Renee Asher says “could have a huge impact on the economy and workers.”
Asher says that SEIU has no positive or negative opinion on the IPO, but a quick blog skim indicates a giant dose of worry. For example, SEIU expresses accusatory concern about how Blackstone does not plan to offer quarterly financial guidance.
I’m not quite sure when SEIU became a shareholder advocacy group, although it claims to have always taken an interest in “capital stewardship.”
Leaving that aside, this particular provision is perhaps the best thing possible for the average union worker. Maybe not for the average SEIU worker – who won’t be impacted one bit by Blackstone going public or staying private – but certainly for teachers, state employees and others whose pension funds invest in private equity funds like Blackstone. Why? Because it means that Blackstone still plans to put LP interests ahead of Wall Street etiquette.
But let’s return to my claim that SEIU workers will not be affected by the Blackstone IPO. SEIU must disagree, or else it wouldn’t have launched the blog, sent out a press release, etc.
Stephen Lerner, assistant to the president at SEIU, agrees that the Blackstone IPO is not designed to impact SEIU members, but argues that it should have an impact. More specifically, a positive impact.
Lerner says that Blackstone has made much of its fortune on the backs on company employees, and that its IPO should not just be used to continue consolidating wealth for the privileged few. Instead, it should partially be a mechanism for kicking some cash down the employment food chain.
After all, Lerner points out that Blackstone execs are going to make a fortune on fees and carried interest from the Equity Office deal. But what about the janitors who literally clean those assets? Do they get a cut? Even a tiny one?
How to sugar-coat this? Ummm… the answer is “no” (but with a charitable foundation on top). I wish it were different – and that one or two points of carry would be allocated to company employees. But I’m also a realist, and reiterate that this IPO will be a curiosity for workers in Blackstone-owned companies, but not one of consequence. Unless the consequence you’re talking about is that certain workers will continue to be poorer by comparison…