Workers Gaining Leverage by Becoming Owners
There they were, representatives of Drexel Burnham Lambert Inc., mingling in a most friendly, non-predatory manner with hundreds of union officials at a recent labor-management conference in Las Vegas.
The Drexel people were not officially on the program about new trends in labor relations, but it gave them three days to informally try to sell their services, particularly to union leaders at the conference.
Drexel, you see, is trying to drum up business for a planned new division that will help unions get more involved in leveraged buyouts, employee stock ownership plans and other high-finance transactions.
Like other Wall Street investment bankers and a steadily growing number of corporate executives, union officers and government officials in many states, Drexel has realized the value of having workers deeply involved in the way companies are run.
One increasingly popular way to get worker involvement is to give them a role in company decision-making processes. Another, going hand in hand with joint decision making, is for workers to own enough stock to give them a major influence on company policy, as pilots are trying to get at United Airlines.
California may soon join eight other states that already have special agencies set up specifically to speed the trend.
And a coalition of 53 unions representing 4.5 million workers will soon announce the creation of a new financial institution designed to increase labor’s involvement in the financial side of the corporate world.
Drexel tried but failed to become managers of the new institution, but that failure may have encouraged it to intensify its efforts to solicit clients among union people, including those at the conference in Las Vegas.
None of the participants in those sessions seemed surprised to see the smiling Drexel faces making their soft-sell sales pitch, even though one former company officer who was not there, Michael Milken, is facing a racketeering and securities fraud indictment and the company itself has agreed to pay $673 million for allegedly manipulating stock prices and allowing insider trading.
Drexel has an image problem, but those approached by the company reps seem more interested in what the company can do to further labor’s increasing role as a player in corporate ownership.
To aid its drive for union clients, Drexel has hired the Kamber Group, a nationally known Washington-based company specializing in public relations for unions.
Drexel may be interested in promoting workers’ stock ownership plans and leveraged buyouts involving unions partly to try to improve its public image.
Remember, the company has been an active participant in corporate raids, often serving as an ally of financial manipulators whose leveraged buyouts and hostile takeovers forced many companies to take on so much debt that they had to be “restructured.”
That frequently meant closing some parts of the companies and putting thousands of workers out of jobs to help pay down the debt.
Now Drexel says it is truly concerned about workers, not just corporate executives and financiers, although, of course, the company expects to make money from the deals that it helps unions and workers put together.
The number of junk bond deals that Drexel and others are making these days has diminished, so those financial wheeler-dealers are seeking new sources of income, such as unions and their members.
Unions want to get into the act to help protect their members from the sometimes devastating effect of those financial games, and several large unions also want to increase the role of workers in corporate life, as some have already done in a limited way.
On Feb. 17, the 53-union coalition will formally announce creation of a multimillion-dollar “employee partnership fund” that will be engaged in leveraged buyouts, employee stock ownership plans and other financial transactions.
The fund, approved two weeks ago by the AFL-CIO Industrial Union department, will perform many of the functions of companies like Drexel, but on a much smaller scale and from the workers’ viewpoint, says Jack Sheinkman, president of the Amalgamated Clothing & Textile Workers Union, who helped create the new program.
It will be managed as a limited partnership by two former executives of Lazard Freres & Co.--Eugene Keilin and Ron Bloom--and will provide some competition to the high-priced services of the profit-oriented investment bankers and lawyers.
Not all union leaders are enthusiastic about the proposed labor fund. Brian Freeman, a financial consultant for the International Assn. of Machinists, among other unions, rejected a request by the union coalition to bid for the job of managing the fund, saying “the plan has too many pitfalls.”
Freeman warned that bitter fights could erupt between unions over the use of the fund, as happened, for example, when the machinists denounced the pilots for their badly overpriced $300-a-share buyout offer made for United last summer.
Keilin was the financial consultant for the pilots, Freeman for the machinists.
More than 10 million workers are already in stock ownership plans in 10,000 companies, and Corey Rosen, director of the National Center for Employee Ownership, estimates that workers own or will own a majority of the stock in nearly a third of those companies.
The California Legislature last week held hearings on a proposal to make this state one of nine that, among other things, assist workers in the formation of employee-owned corporations and encourage worker participation in corporate decision making.
The California proposal is modeled on the successful 3-year-old New York Industrial Cooperation Council, by far the largest in the country.
The interests of workers and company owners appear to be in conflict. But workers may be able to improve their sagging fortunes if they can get a significant piece of the financial action in the corporate world.
