Leading trade unionists have used the World Economic Forum in Davos to attack the private equity industry for its “corporate greed”.
Phillip Jennings, general secretary of the UNI, a global union with 15 million members worldwide, suggested the industry was heading for trouble. “Private equity is fuelling insecurity but is insensitive to this, to people and to communities. It is bending rules in a way that will provoke a backlash,” he said, in an interview quoted on the organisation’s website.
“It’s like a slasher movie – you slash jobs, health, pensions and working conditions. This in turn impacts on communities, services and customers – for whom you care little,” argued Jennings.
He said his organisation wanted buyout firms to face more public scrutiny. “They are like a global vacuum cleaner hoovering up assets any place, anywhere, any time and we want to bring them out of the shadows. At a time when we are looking for companies to be more transparent you are taking corporate governance underground,” he said.
He also poured scorn on the idea that private equity ownership is good for companies. “Your philosophy is buy it, strip it and flip it, “ he told delegates. “It’s all about value extraction and not value creation.”
Jennings suggested that union pressure could be brought to bear through the pension schemes that provide much of the industry’s financial muscle. “Unions need to be aware that the money they are paying into pension funds is feeding the beast that may devour them,” he added.
It is the second time this week that the industry has come under fire from trade unionists. The GMB, a UK trade union, staged a protest at the Wednesday night launch of the Private Equity Foundation, a new charitable venture designed to channel the industry’s money to worthy causes.
John Thain, chief executive of the New York Stock Exchange, also expressed doubts in Davos that the rise of private equity would continue. He suggested that rising interest rates would stop buyout firms raising enough debt finance to buy listed companies, which would then come back to the public markets.