Updated after jump: The Service Employees’ International Union (SEIU) has just released a 44-page report that asks buyout firms to share their prosperity with the workers at their portfolio companies. I just got my copy and am about to hop on an SEIU media call, but here are its three basic points:
1. The buyout industry should play by the same set of rules as everyone else.
2. Workers should have a voice in the deals and benefit from their outcome.
3. Community stakeholders should have a voice in the deals and benefit from their outcome.
You can download the entire report here:
SEIU Behind the Buyouts April 2007 FINAL.pdf
SEIU also has launched a website with additional information on the report. You might remember that SEIU also is the group behind a website that is keeping tabs on Blackstone Group in the run-up to its IPO.
During the media call Q&A, there were a bunch of questions related to buyout firm transparency. I asked for specific items that SEIU believes should be made public. To be kind, let’s call it a wishlist: GP income, company-specific restructuring plans, specifics about debt plans and risks associated with that debt.
Why a wishlist? Because LBO firms consider their company-specific plans to be trade secret. For example, imagine that Blackstone is bidding $25 per share for a company, while KKR is bidding $27 per share. The discrepency is caused by KKR having spotted an operational inefficiency that Blackstone did not. If forced to disclose that item, Blackstone might raise its bid — thus negating KKR’s competitive advantage.
I raised this scenario with the SEIU guys, who responded that if correcting the “operational inefficiency” would result in the loss of thousands of jobs, then they don’t have much sympathy for this type of trade secret.
They also took great pains to say that this report is “the beginning of a conversation” — and that SEIU is currently just endorsuing a set of guiding principles, not specific policies.
SEIU is the nation’s largest labor union, with around 1.8 million members. It does not directly invest in private equity funds, but many of its members do so via smaller unions or corporate pension funds.