Legal Commentary

To those who imagine unions as backwards, naive advocates of workers' rights, the SEIU is here to readjust your perception.  Larry Ribstein discusses SEIU's latest efforts to put pressure on private equity funds: a California bill that would have restricted state pension fund allocations to private equity firms who have certain sovereign wealth funds (SWFs) as investors.  The bill had a human rights spin to it, as it targeted sovereign wealth funds from countries with troubling human rights records.  But as the WSJ points out:

[A] list of human rights violators that included Singapore and Abu Dhabi but not China raised eyebrows. It turned out that Mr. Stern included Singapore and Abu Dhabi because they invest with Carlyle [Group, a private equity firm locked in tough negotiations with SEIU]. China got a pass because its sovereign wealth fund invests with the Blackstone Group private equity firm, and the SEIU has negotiated janitorial agreements with Blackstone real-estate companies.

Larry Ribstein treats this as another example of labor attacking capital -- in this case, fruitlessly.  He argues that since unions can't use the corporate governance  techniques they use on public companies, they are to some extent stymied by private equity, and that this may cause additional problems down the road.  He closes: "It seems that in coming years labor may increasingly have to decide whether to 'overcome' the capitalists or join them. "

I don't see the contradiction that Larry sees here.  In fact, I think the SEIU bill is evidence that labor has already "joined" the capitalists -- at least when it comes to negotiating based on economic interests, rather than ideological principles.  If the California SWF bill had really been about human rights, its list of targeted countries would not have had the internal contradictions.  More importantly, the bill was not simply a case of labor attacking private equity -- a familiar, time-worn narrative.  Instead, the bill was targeted at companies that have been intransigent in negotiations with SEIU.  It was a case of SEIU attempting to hurt certain private equity firms -- and, by extension, to help others.  Blackstone -- perhaps the most notorious private equity firm of this era -- was kept off the restricted list because it has a better bargaining relationship with SEIU.

Thus, I see this latest political effort by SEIU as evidence that unions are joining the capitalists, rather than trying to "overcome" them.  The bill was not really part of a political struggle against capital.  It was a continuation of SEIU's efforts to increase its membership and secure better terms for its members.  It was no different that Sun and Netscape encouraging the government to sue Microsoft, or corn producers pushing for ethanol subsidies.  Sure, there are principles at stake, but at root it is really economic competition and negotiation through another means.

I discuss these developments further in Mother Jones Meets Gordon Gekko: The Complicated Relationship Between Labor and Private Equity (forthcoming in the Colorado Law Review).  I hope to have the article up on SSRN soon, once I have incorporated these most recent developments.  If you are interested in a more general discussion of "unions as businesses," you can check out this In Brief forum on the subject.