Unions Seek Law to Guard Labor Contracts in Buyouts

Union officials asked Congress Wednesday to go beyond legislation being considered for curbing corporate takeovers and to forbid Wall Street raiders from breaching labor and other contracts of companies they acquire.

Testifying before the Senate Banking Committee, AFL-CIO officials endorsed an agenda by top executives to curb raids on their companies, but said added measures are needed to protect workers from “the ravages of corporate reorganizations.”

The committee’s chairman, Sen. William Proxmire (D-Wis.), said legislation he is developing will address recent abuses by requiring quicker and fuller disclosure of pending takeovers and “community impact” statements on the effects the deals will have.

Proxmire cited several hostile attempted takeovers since 1985 in which nearly 70,000 jobs were lost as companies borrowed billions of dollars to either finance raiders or defend themselves against them.

“U.S. corporations may drown in debt,” he said. “Some of these numbers are difficult to comprehend, but each unemployed person constitutes a tragedy.”

The chairman said he will introduce his bill later this month and hopes to take it to the Senate floor by the end of May or early June.

In addition to requiring raiders to honor existing labor contracts of acquired companies, Congress should prohibit raiders from dipping into the employee pension plans of targeted companies as a source of financing for the deals, the union officials said.

They called for the effective abolition of so-called “golden parachutes” that sometimes provide entrenched managers with million-dollar severance payments while leaving “working men and women and their communities the ultimate losers.”

And they said the duties of fiduciaries in the nation’s securities and pension laws should be redefined so that they can balance short-term gains from stock transactions with the long-term effects on jobs, communities and the future of the business itself.

AFL-CIO Secretary-Treasurer Thomas R. Donahue said recent takeover attempts have eliminated 80,000 jobs of his federation’s members, and he cited estimates by others that nationwide job losses from the deals have totaled 500,000 in the past three years.

“We recognize and have lived with the economic realities of our industries,” he said. “The problem is the totally new circumstance in the past 10 years in which you’ve had a growth of hostile takeovers by a group of adventurers who seek nothing more than a short-term profit at whatever the social costs to the company, its employees and the community.”

Proxmire said his bill would require corporate raiders to declare their attempts before acquiring 3% of a company’s stock. Current law requires no public disclosure until 10 days after a raider buys 5% of a company.

The committee chairman said he would make raiders keep their tender offers open for 60 days rather than the currently required 20 days, giving targeted companies more time to contest attempted takeovers.

The labor federation also said any legislation should:

- Prohibit two-tiered tender offers where raiders offer a premium price to get a controlling interest of a company and then a reduced price for the remaining shares.

- Deny raiders any profit from stock acquired in a takeover unless than hold it for more than a year.