Roughly 30 people from the Service Employees International Union and grassroots political party the Working Families Party descended on a Wall Street sidewalk on Wednesday, as their leaders told a handful of journalists that private equity should have greater accountability for social issues plaguing America.
Volunteers from each group held up posters with the SEIU’s “Behind the Buyouts” campaign slogan and gave flyers to passers-by – approximately five of whom stopped briefly to listen to each organization discuss their stance on private equity and their associated campaigns.
“The Wall Street Journal is hosting the Deal and Dealmakers conference [at the nearby New York Stock Exchange] and it’s where the private equity buyout guys are all gathered together. I guess they’re figuring out which part of the economy to buy next, so we thought it was a good opportunity to come out and talk about their impact,” said Stephen Lerner, director of the SEIU’s private equity campaign.
“Private equity people are the iconic figures of the inequality that characterises American life today,” said Dan Cantor, executive director of the Working Families Party. “So we are determined to shine a light on this. They like operating in private and we need them to operate in public because the number of workers whose lives are being affected is enormous.”
The private equity industry, Lerner said, made $45 billion (€33 billion) in profits last year. “What are we going to do to make sure this incredible wealth reaches more people?” Lerner asked. “With their profits from last year, we could have paid for health insurance for 40 million people.”
In addition to PE firms showing greater transparency in their dealings, the SEIU wants to increase public discussion about the industry’s responsibility to grow America’s middle class by reducing the income divide and providing better benefits.
“First, they should take steps, since they have so much money, to make sure all their workers have health insurance. Second, since they’re so proud of saying they have good returns for the pension funds that invested in them, they need to take steps to make sure all their workers have pension plans,” Lerner said. “And third, the private equity companies should support workers and not get in the workers’ way of the right to have a union.”
Income disparity is typically dealt with in the US via labour unions that negotiate wages, or with tax legislation, he noted.
“These guys are playing both ends against the middle and trying to avoid both [union negotiations and changes to tax structures],” Cantor alleged. “They want to screw people and they don’t want to pay.”
The WFP aims to get the New York City Council and state legislature to hold hearings on private equity, and officially launches its “Private Equity Accountability Campaign” on 18 July with a tour of New York’s Times Square.
In Times Square, “most of what you see – Dave and Busters, AMC, Madame Tussaud’s, Dunkin Donuts – these are all owned by private equity”, Cantor said.
The SEIU, which already launched its “Behind the Buyouts” campaign, plans to disseminate information on specific deals it finds worrying and representative of the industry. It will hold field hearings with students on the buyout of student loan company Sallie Mae, which it thinks will monopolize the market and adversely affect students. It is also planning to hold a prayer vigil with community, environmental and religious groups outside the ServiceMaster shareholder meeting in Chicago tomorrow, in the hopes of convincing proposed buyer Clayton Dubilier & Rice of doing away with the company’s production of toxic chemicals.
“The other interesting thing we’re going to do is a report on Bain Capital,” Lerner said.
It has chosen Bain as the first individual firm to analyse because it takes 30 percent carry on deals as opposed to the industry standard 20 percent, and because of Bain’s penchant for club deals, Lerner said.
Multi-party deals and initial public offerings of private equity firms raise conflict of interest questions, he said. The SEIU finds it concerning that many banks seem to be taking part in every aspect of these transactions, he said.
But the bigger issue, he said, is ensuring the firms have a broader social responsibility to “do something good”, and increase public discussion. As people better understand private equity, they can ask tougher questions about its impacts, said Lerner.