New Investment Funds, Restructuring, and Labor Outcomes: A European Perspective

Abstract

Manuscript Type: Empirical\ud \ud Research Question/Issue: This article considers the consequences for employment, work organization, and industrial relations when companies are acquired by private equity, hedge funds, or sovereign wealth funds. It also assesses the role of national labor regulation in moderating labor outcomes.\ud \ud Research Findings/Insights: The article draws on three case studies – a Spanish supermarket chain, a German engineering company, and a ports and logistics group hitherto based in the UK. Employment reductions are found in each case, though to varying extents. There are few changes in work organization but some developments in employee voice and representation. National systems of labor regulation do not impact substantially on employment reductions but they do affect the extent to which worker representatives receive information after, though not during, the acquisition.\ud \ud Theoretical/Academic Implications: Contrary to extant theory, the extent of national employment regulation does not appear to be an impediment to restructuring by investment funds. The differential effect of the three funds suggests that the extent of ownership is not decisive in explaining the level of activism or its impacts on labor. Instead, the objectives and time frames of funds appear to be more important.\ud \ud Practitioner/Policy Implications: The implication of the findings is that greater disclosure and regulation of new investment funds is more likely to enhance employee protection than further labor regulation. Broadly, this has been the main thrust of recent policy within European Union institutions

Diversity of Institutional Investors and Foreign Blockholdings in France: The Evolution of an Institutionally Hybrid Economy

“…In short, the opportunities provided by the changing context of the institutionally French economy (reduced role of the state and introduction of new corporate governance practices) have been exploited most forcefully by short‐term funds. Thus, the extent of foreign ownership is less important in influencing corporate governance outcomes than the objectives and time horizons of foreign funds with important policy implications for the regulation of institutional investors (see also Gospel, Pendleton, Vitols, & Wilke, 2011).…”

La financiarización en España: ¿la emergencia de un nuevo modelo de acumulación?

“…Todos ellos tienen en común una nueva concepción de la empresa que aparece como un conjunto de activos financieros antes que como una organización con fi nes productivos. La adquisición de empresas no fi nancieras por fondos de inversión acaba comportando profundas modifi cacio- nes en aspectos como las estrategias corporativas, el horizonte temporal que se tiene en cuenta a la hora de valorar la inversión productiva o la rentabilidad de la empresa, la gestión de retribución de los mandos superiores y el conjunto de la plantilla, o bien la representación y participación de los trabajadores/ ras (Gospel et al, 2011). En esta línea, Santos Ruesga (2012) apunta una serie de efectos en las relaciones laborales y la relación de empleo que implican una reducción del número de asalariados y un ajuste a la baja de sus salarios, que conlleva una redistribución de la renta mucho más favorable al capital fi nanciero que la existente en el modelo de propiedad inactiva y gestores con objetivos propios.…”

“…They all have in common a new conception of companies as a set of financial assets rather than as an organisation intended for production purposes. The acquisition of non-financial companies by equity funds has caused profound changes in areas such as corporate strategies, the time frame that is taken into account when assessing productive investment, the profitability of the company, the remuneration of senior management and of the entire workforce, and the representation and participation of workers (Gospel et al, 2011). In this regard, Santos Ruesga (2012) pointed towards a number of effects on labour relations and the employment relationship which involve a reduction in the number of employees and the downward adjustment of wages, which leads to a redistribution of income much more favourable to financial capital than that existing within the model of inactive property and managers who pursue their own objectives.…”

Sovereign wealth funds, productivity and people: The impact of Norwegian Government Pension Fund‐Global investments in the United Kingdom

“…Theoretically, the potential impact of SWFs on employment is complex and depends largely on the specific SWF. SWF investment may help the position of employees through the provision of much needed capital infusions to struggling firms (Gospel, Pendleton, Vitols, & Wilke, ). However, SWF involvement may also lead to job cuts and insecurity (Moeller, ).…”

“…Indeed, prior case study evidence suggests minimal influence by SWFs on wages, working conditions, and employee voice (Gospel et al, ; Wilke, Vitols, Haves, Gospel, & Voss, ). In a case study of the effects of the Dubai SWF‐linked Dubai Ports World's acquisition of P&O, Gospel et al () found few effects on employment but noted minor, albeit detrimental, changes in voice and pensions. The objective of this study is to provide empirical insights where there currently are few, and in doing so to address many of the points raised above by investigating the impact of equity ownership of one prominent SWF, the NGPF‐G, on employment in U.K. listed firms.…”