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Dealmakers have long been used to activist hedge fund investors trying to force a company to break up, fire a chief executive or win over a board seat. Now Wall Street rainmakers have a new player to contend with: trade unions.
US unions have leveraged growing popularity to make their voices heard beyond traditional battles over higher pay and working conditions. Workers’ representatives are now making new demands ranging from thwarting unwanted mergers to blocking activist investors from winning board seats. “We have, as a movement, been strategic when it comes to leveraging our strength,” Liz Shuler, leader of the American Federation of Labor and Congress of Industrial Organizations, told the FT. “There are many examples where we’ve been able to influence whether perhaps a potential merger happens or not.”
Wall Street titans are having to engage like never before. “Unions are experiencing a bit of a resurgence in the US and are flexing their muscles, including weighing in on transactions that they believe could threaten their members’ interests,” said Frank Aquila, a veteran M&A partner at law firm Sullivan & Cromwell. “This new trend is something boards are looking at closely.”
US unions have a long history of confronting corporations on pay and working conditions, threatening strikes to extract what they want from management. But recently they have openly adopted strategies used by activist hedge fund investors such as Carl Icahn and Paul Singer, who agitate boards to demand changes that enhance stock value.
Starbucks recently made concessions to labour groups advocating for improved contracts for workers, as part of a deal to end the barista union’s campaign to secure three board seats at the coffee chain. United Steelworkers has been pivotal in urging Joe Biden to block the nearly $15bn acquisition of US Steel by Japan’s Nippon Steel in an effort to protect American jobs and national security. And the AFL-CIO sided with management at Norfolk Southern railway to fend off Ancora, an activist investor seeking board seats. The Teamsters’ union, meanwhile, is backing Ancora against Norfolk’s existing board.
Lane Windham, associate director of the Kalmanovitz Initiative for Labor and the Working Poor at Georgetown University, said unions began taking an active shareholder approach in the 1970s. “What is different right now is that the public’s ideas about labour and workers have changed and are far more favourable,” said Windham, who is also an organiser.
A Gallup poll shows that unions have enjoyed a steady revival ever since the 2009 recession, when approval ratings hit an all-time low at 48 per cent. Union popularity is now back up to 67 per cent — close to the level recorded in the mid-1960s. Windham said that following the pandemic, when millions were cheering essential workers risking their lives to support people in need, many returned to jobs where they felt under appreciated, prompting them to organise and support unions.
The US political environment has also been supportive towards unions as both Biden and Donald Trump have tried to win over working class support ahead of the presidential election. Biden has been particularly outspoken, joining picket lines as well as standing side by side with USW workers in Pittsburgh, declaring that US Steel should stay “American-owned, American-operated by American union steelworkers — the best in the world”.
“Probably the single biggest factor that has helped unions of late is an administration that’s much more favourable to organising,” said Brian Dunn, a visiting lecturer in the School of Industrial and Labor Relations at Cornell. “That has given them the encouragement to go out and put pressure on companies.”
Windham said there would be growing demands from unions to have a permanent seat on corporate boards, as is the case in Germany. Progressive senator Elizabeth Warren has previously proposed legislation to allow employees to be represented on boards but, given the fierce division in Congress, few believe that is achievable any time soon. An alternative, according to Dunn, is that companies voluntarily find ways to make sure workers are regularly consulted on strategic matters. This would be seen favourably by consumers as well as socially conscious investors.
Aquila at Sullivan & Cromwell said that “ultimately the shareholders will make the decision whether or not the transaction gets done”. But what everybody seems to agree on is that unions are unlikely to be sidelined as they were in the 1980s, where profit maximisation was the only mantra on Wall Street.
Twitter: @JFK_America
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