Private-equity funds - Invisible Employers?
A crucial part of the challenge that food workers’ unions face is that the private-equity funds that own and control the workplaces that employ their members do not see themselves as employers. In many systems of jurisprudence they are not defined as employers and do not incur the legal obligations binding on employers.
Confronted by unions over layoffs or closures, they can plausibly deny responsibility. Gate Gourmet stridently denies that the management decisions which led to the Heathrow and Düsseldorf confrontations have anything to do with Texas Pacific Group - while acknowledging its "fiduciary obligation" to the investor company. Texas Pacific Group, for its part, emphatically rejects all responsibility for industrial relations within Gate Gourmet or any other company in its portfolio (consisting of companies with aggregate employment of a quarter-million workers). As the NGG learned at Düsseldorf airport, they are attempting to negotiate with an employer disguised as a financial entity free of the constraints, laws and obligations which formerly bound employers to operate within the negotiated systems of industrial relations established over many years of struggle.
Private-equity funds are missing from the data and publications produced by UN agencies on growth, investment and employment.
Even those programs specializing in areas such as world investment, transnational corporations and employment have not taken full account of the role of private-equity funds, either quantitatively or qualitatively. Yet up to one-fifth of non-public sector workers in the UK, for example, are now employed in companies controlled by private-equity funds.’ These powerful financial interests simply do not figure in UNCTAD’s Statistical Handbook ,Trade and Development Report or its World Investment Report series. UNCTAD’s Trade and Development Report 2005, which addresses the issue of "new forms of global interdependence”, fails to recognize the global impact of financialization. Its analysis is based on the assumption that: “Overly restrictive monetary policy may lead investors to prefer investing in financial assets over extending productive capacity.” This fails to take into account the reality illustrated in the above examples and directly experienced by our union members that the preferences of investors and decisions to shift away from productive capacity is driven by the imperatives of financial markets and the power exercised by new forms of financial capital.
If these private-equity funds were recognized as TNCs (given their extensive control over manufacturing and service companies globally) and included in UNCTAD’s top 100 non-financial TNCs, they would easily displace the top 10 corporations.’ General Electric, ranked first in UNCTAD’s list, controls less foreign assets and employs fewer workers overseas than either Blackstone, Carlyle Group or Texas Pacific Group. Even UNCTAD’s new list of the top 50 financial TNCs (included for the first time in the World Investment Report 2004) only examines financial TNCs in terms of a narrowly defined financial service sector and limits employment data to that sector. This neglect of the role of investment trusts as employers is also evident in the ILO’s World Employment Report series. The World Employment Report 2004-05 explores the impact on productivity of labour and capital mobility, and the relationship between employment stability and productivity, without taking into account the financial imperatives that drive this flexibility and the growing impossibility of employment stability in a financialized world. Elsewhere in ILO publications and programs, explicit reference to private-equity trusts and venture capital is made only in connection to financing employment creation.
The ‘vanishing employer’ as a politico-legal and institutional phenomenon arising from financialization in turn poses serious questions about the foundations on which social policy is developed in organizations such as the ILO.
Click the following link to read the full article, FINANCIALIZATION: NEW ROUTES TO PROFIT, NEW CHALLENGES FOR TRADE UNIONS.