AFT Report Exposes Labor Risks in Private Equity, Guides Pension Trustees

New Report Reveals Labor Practices of Private Equity Funds

HOUSTON—The American Federation of Teachers (AFT) has released a report highlighting concerning labor practices among 10 private equity funds. These funds, which manage billions in pension savings, are criticized for driving down labor standards in the companies they invest in.

The report, titled Managing Labor Risks in Private Equity: Empowering Pension Trustees to Navigate Workforce Risks and Drive Long-Term Value, was unveiled at the AFT’s national convention in Houston. It serves as a guide for AFT trustees managing over $3 trillion in assets, emphasizing the fiduciary risks posed by the labor practices of these private equity firms.

“The AFT fights every day to uphold workers’ retirement security. But that future and our investments cannot be dependent upon practices that harm fellow workers in the name of profit,” stated AFT President Randi Weingarten. “That is why we wrote this report and why we share the Biden-Harris administration’s concern that far too many private equity funds treat their employees as expendable, hurting them and the economy. On the other hand, if firms promote collective bargaining and uphold labor and workforce standards, everyone benefits: the firms, their portfolio companies, their workers, our pension funds and the country as a whole.”

The AFT Trustee Council, which includes over 50 members from 27 public pension funds, convened this week to discuss the report. The firms under scrutiny include Advent International, Apollo Global Management, Ares Management, Blackstone Group, Brookfield Asset Management/Oaktree, Carlyle Group, CVC Capital Partners, KKR, TPG, and Warburg Pincus.

The report assesses the labor records of these firms and discusses labor principles adopted by other institutional investors and labor organizations, such as the California Public Employees’ Retirement System and the New York State Common Retirement Fund. These principles encourage a consistent approach to managing labor risks.

The private equity sector has faced criticism for various workforce issues, including child labor, forced labor, restriction of freedom of association, mass layoffs, and compromised workplace health and safety. The report argues that addressing these labor-related risks is within the responsibilities of pension fiduciaries.

An in-depth case study within the report focuses on Steward Health Care and Cerberus Capital Management. Cerberus acquired Steward in 2010, later engaging in financial maneuvers that devalued the company and ultimately led to its bankruptcy. While Cerberus and its investors profited, the workers, patients, and communities experienced negative repercussions.

The AFT has long advocated for pension funds and private equity firms to prioritize transparency, fairer fees, and a business model that fosters strong businesses and good jobs. Despite some progress, many firms have not fully adopted these practices, necessitating strategic guidance for trustees.

The report also proposes a Labor Standards Platform for fiduciaries to consider, addressing issues like freedom of association, mass layoffs, and the impact of privatization on worker access to healthcare and education.

This release is part of the AFT’s ongoing efforts in capital strategies and pension advocacy, building on previous reports like Ranking Asset Managers, and investigations into private prisons, Russian assets, and hedge funds.

Download the full report here.

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The AFT represents 1.8 million pre-K through 12th-grade teachers; paraprofessionals and other school-related personnel; higher education faculty and professional staff; federal, state and local government employees; nurses and healthcare workers; and early childhood educators.

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