Conclusion

The buyout deals and money-generating strategies that are generating immense wealth for the private equity buyout industry and many of its investors can have harsh consequences for workers and the companies they buy and sell.

For the artists and other clients of Warner Music, the corporate restructuring driven by the Thomas H. Lee buyout hollowed-out a once-proud music company, harming its image in the music industry and potentially reducing its long-term value.

For the retirees at Intelsat who spent their careers building the value of that company, for the 4,000 KB Toys employees laid off after the company declared bankruptcy under the weight of a crushing debt load, and for the Hertz employees laid off in the wake of a lucrative quick flip, private equity corporate strategies uprooted lives and negatively impacted hardworking families.

In every case, the workers themselves had almost no voice in the process, little information about their new employers, and no role in developing the plans that were going to change their lives for the worse.

The biggest missed opportunity, however, may be that for all the hundreds of millions of dollars in fees and profits taken out in these deals, the workers who remain at Hertz or Warner Music received no increases in pay or benefits, or even a more generous 401(k) contribution from their company as part of these deals. The same goes for the contract workers—the janitors, security officers, food service workers, and others—who provide valuable services every day and whose jobs are controlled by these companies, but who are paid mostly poverty level wages and more often than not have no affordable health care, sick days, or retirement benefits of any kind.

In an industry where millions, even billions, are changing hands on a daily basis, enriching a small group of executives, the hundreds of thousands of portfolio company employees and contract workers have no seat at the table in these deals and do not receive any of the benefits, despite their everyday hard work that contributes to building the value of these companies.

Examples such as the Onex buyout of the Boeing plants, however, show that private equity firms, if they do choose to work together with workers and other stakeholders, can use their business model to increase economic benefits for workers, while still turning healthy profits.

And while no reliable quantitative data exists to adequately evaluate the impact of private equity buyouts on overall job creation, it is clear that the growing influence of the private equity buyout industry on the American economy calls for a much closer look at the impact that its business practices have, not only on workers, but on communities and other stakeholders affected by corporate buyouts.

With little information and a lack of transparency surrounding the buyout industry, there are few available avenues for workers, community organizations and others to engage with the private equity firms that increasingly control the companies that provide important services in our communities, sell consumer goods to our families, and employ millions of Americans.

Private Equity: The Opportunity

At the same time, the incredible wealth that exists in the private equity buyout industry presents a historic opportunity to help create real opportunities for the millions of working people who are being shut out of the American Dream.

There is more than enough wealth in the buyout business for the buyout firms to continue to prosper while also adapting their existing business model to expand opportunities to benefit workers, communities, and the nation.

Improving the jobs of millions of Americans whose companies are involved in corporate buyouts will have a major impact on reducing the income inequality that is weakening our country and undermining our democracy.

With these concerns and opportunities in mind, SEIU proposes principles for the private equity buyout industry: