Public Pension Funds Increase Oversight of Private Equity Labor Practices

Trustees at U.S. public pension funds, managing over $3 trillion, are intensifying their scrutiny of labor practices at companies owned by private-equity firms. This move follows a report from the American Federation of Teachers (AFT), which highlighted concerning labor conditions at ten major firms' acquired entities. The AFT, representing 1.7 million educators and public employees, presented its findings during its annual convention in Houston, emphasizing the need for pension fund trustees to advocate for better treatment of employees at these companies. The report, titled “Managing Labor Risks in Private Equity,” specifically mentions troubling incidents at Packers Sanitation Services Inc., owned by Blackstone Group. Blackstone, which appointed executives to the PSSI board post-acquisition, claimed ignorance regarding the employment of children in cleaning operations. The AFT's findings also reference the bankruptcy of Steward Health Care, a hospital system previously owned by private equity, underscoring the potential risks associated with such investments. Among the ten private-equity firms cited are industry leaders like Apollo Global Management and KKR. In response to the report, Blackstone reiterated its commitment to employee welfare, stating that it opposes child labor violations and believes in the importance of employee well-being for business success. The AFT report also noted that over 1,200 workers, primarily from slaughterhouse cleaning roles, have unionized, resulting in improved wages and benefits. AFT members, who serve as trustees, expressed concerns about the lack of transparency regarding pension investments. Jacquelyn Price Ward, vice president of the Chicago Teachers’ Pension Fund, emphasized the need for better information to fulfill fiduciary responsibilities, leading her fund to reduce its private equity allocation from 8% to 5%.