Private Equity on collision course
Watch the video! High and low-res available here:
UNI's PE group conisders the next step in the campaign
verdi with a locust alert
Group photo at the Munich lobby
Taking the message to private equity
Conference centre staff trying to move off the lobby
|UNI global union and its unions took the campaign against the greed of private equity on to their home territory on 26 February - PE’s “Super Returns Summit” in Munich.
The PE elite attending the Summit was urged to change direction to accept corporate social responsibility and transparency, to take a longer-term view of the companies they buy and to respect labour rights and collective agreements.
One target of the four-day Summit was to attract more cash for their buyouts from Europe’s pension funds as other sources of funding dry up in the credit crunch. In the US at least one pension fund already has 29% of its fund invested with PE.
“We are here to warn pension funds to proceed with the utmost caution - this is not a normal investment,” UNI General Secretary Philip Jennings told a press conference.
A Titanic banner complete with iceberg made the point - private equity is on a collision course. Highly indebted, bought out companies may not survive a global recession, jobs are often the first casualties of a buy-out and tax privileges are under scrutiny from governments across the world.
“Debt lies at the very core of the highly profitable game,” says a critical report on PE giant KKR, which was unveiled in Munich by SEIU, United States. “KKR has the companies it is going to buy borrow a large proportion of the money necessary to finance the purchase - frequently tripling the debt of the companies it buys.”
In France one in eight workers is in a company owned by PE, in the UK one worker in ten and in the USA more than four million workers.
Philip Jennings offered to speak to the Summit - he has already challenged the orthodoxy of private equity at the World Economic Forum in Davos over the last two years and has helped drive PE groups out of the shadows, where they feel most at home.
Summit organisers turned down this offer and conference centre staff and the police eventually moved the demonstrators away from the arriving delegates
But the Titanic banner sailed only across the car park to greet surprised PE representatives as they arrived in their taxis and shuttle buses.
“Private equity is here to put on its best public face and we are here to expose their real face with examples from across Europe,” Philip told the Munich journalists. “In this global economy there is no longer any hiding place for Private Equity anywhere.”
Verdi’s Jörg Reinbrecht called on the German coalition government to end tax advantages for PE, to create a level playing field. “Why should these companies pay less than other companies because the State needs the money to carry out their functions and to finance public services?”
The SEIU estimate that tax advantages will cost the US Treasury up to $1.2bn during the period of KKR’s investment in just two companies - SunGuard and Biomet.
Jörg also called for greater transparency and regulation. ”There is no control at the moment. The financial authorities should regulate them alongside banks and insurance companies,” he said.
Verdi wants a recent German law permitting pension funds to invest with private equity scrapped and a European independent rating agencycreated to avoid a repeat of the subprime boom - and bust.
There is growing anger and militancy in the United States over the excesses of private equity, reported Stephen Lerner from SEIU, USA. Top PE owners are worth billions after what he called “an extraordinary wealth transfer from workers to a handful of obscenely rich people”.
The SEIU report is critical of the record of KKR (the second biggest private employer in the world with portfolio companies that employ 800,000 workers around the world) with workers, consumers, government and the environment as the losers.
Bo Larsen from Danskmetal, Denmark reported on the dire effects of a buy-out of Danish telecom company TDC by private equity. In spite of promises of a growth strategy the new owners sold off operations and buildings (it even tried to sell the holiday homes for workers) and TDC is no longer a national leader in fibre optics and broadband.
He also raised a question mark over the role of the old management who negotiated the sale. The chief executive got 12 million euro. “Who were the chief executive or the board serving - workers and society or serving the funds and forgetting about stakeholders?”
Herman Leisink of FNV Bondgenoten from the Netherlands reported on the take-over of media company PCM by UK-based APEX group and told journalists “money has infected the company”.
In just a few years the PE owners took 138m euro from the company - 25% of the company’s wealth. The union took the company to the Special Chamber Court in their campaign to investigate the behaviour of the new owners. The court concluded that PE took out more money than the company could ever pay - to the detriment of the company and workers.
“Capital is essential for capitalism, the economy has ups and downs, we have life and death - but with Private Equity sudden death is not acceptable,” said Herman.
Download the movie of the UNI protest in Munich:
High resolution -
Low resolution -