Pushing for a higher minimum wage, looking for ways to protect workers from the pain of globalization: that's the stuff of American organized labor today. And with Democrats controlling congress, some say the labor movement is going to get what it wants. The AFL-CIO, the nation's largest labor group with 10 million members, on Tuesday made a bold move. It asked the Securities and Exchange Commission to stop the $40 billion Blackstone IPO.
The Financial Times reports that the request will stir political heat on private equity firms and threaten efforts by other buy-out groups to go public. In a letter, seen by Financial Times reporters, the union argues that Blackstone's executives are trying to evade the coverage of the Investment Company Act of 1940. The article explains that the labor attack points up new concern among union leaders and elected officials over the wealth of executives who run private equity funds in a time of increased wage inequality. They argue that private equity firms apply their generous tax status to wildly enrich an elite few while taking away jobs from millions of American workers.
The article fails to point to examples of politicians who have publicly come out against private equity chiefs. It does, however, report that the newly formed Private Equity Council is preparing to fight. Today its CEO Doug Lowenstein is scheduled to testify on Capitol Hill to defend Blackstone and other founding members of the association --private equity giants such as Carlyle, KKR, and Texas Pacific Group among them -- against labor's claims.
The AFL-CIO's letter comes on the heels of another labor push. The Service Employees International Union is also launching a campaign to encourage private equity firms to change their ways or at least, in their works, become more worker friendly. The union says it is meeting with private equity execs to helped them understand the ramifications of their actions on workers. There is some evidence of labor's success. Some Congressional Democrats are already talking about amending rules to tax fund managers' investment profits at higher rates. And that may be just the start.
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