WHAT IS WEALTH FOR?
HOW RESPONSIBLE
INVESTMENT CAN
SHAPE THE FUTURE
CHAPTER 4
PRIVATE EQUITY
A CATALYST REPORT
By Claire Parfitt, Gabrielle Lynch and Jo-anne Schofield
catalyst.org.au
CHAPTER 4
CHAPTER 4: PRIVATE EQUITY
CONTENTS
1. Summary
A. Some strategies for engagement
2. What is private equity?
A. some Australian companies owned by PE firms
3. The controversial ‘LBO’ method
A. LBO profit making tactics
4. ESG implications of the LBO method
A. Social impacts
B. Governance issues
5. Ethical criteria for private equity investments: The UNPRI
A. Early steps to integrating ESG
6. References
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WHAT IS WEALTH FOR? HOW RESPONSIBLE INVESTMENT CAN SHAPE THE FUTURE. A CATALYST REPORT 59
1. SUMMARY
Private equity (PE) has become a particularly controversial investment vehicle since the
PE boom period of 2000–2007. Economic conditions during this period including the high
availability of cheap credit were favourable to large PE deals, and in particular, the leveraged
buy-out (LBO) model. PE investors, and especially the owners/managers of PE firms, have
made super profits, which were often associated with negative social impacts including tax
avoidance, declining working conditions and job cuts, and corporate bankruptcy. In addition,
PE firms have been accused of charging exorbitant fees for their asset management services
and of supplying little information about how they manage investments.
PE firms pool funds from other investors in order to purchase companies, using a debt
financing model. The primary sources of funds for PE include superannuation or pension
funds as well as banks, insurance companies and high net worth individuals.1 Pension
funds contribute an average of 5 percent of their own portfolios to PE as an asset class,
both globally and in Australia.2 In Australia, superannuation funds are by far the most
important source of capital for PE firms, which rely on them for 60 percent of their
funding.3 This should mean that the PE industry is responsive to superannuation fund
managers’ concerns regarding environmental, social and governance (ESG) factors and
the need to integrate them into investment decisions.
The following is an outline of private equity investment, the LBO model and evidence
on the ESG impacts of this model. The PE industry has engaged with the concept of
‘responsible’ investment primarily through the UNPRI,4 and a review of this engagement
is also provided.
This chapter explains that the social and governance consequences of the LBO model
typically fall outside of the matters dealt with by ‘responsible’ investment and many
available ESG tools. Practices like tax avoidance through clever accounting, retrenching
workers, extracting high management fees and destabilising companies through debt
arrangements do not necessarily breach laws, nor even most ESG standards. Some
labour standards may have been breached through anti-union practices. Otherwise, there
appears to be little that ESG standards can offer to rein in the negative impacts of PE
management practice.
Some investors, such as the Norwegian government pension fund, choose not to invest
in PE firms given their lack of transparency about what they invest in, the negative effects
of the LBO model, and their high management fees which cut into investor returns.5 In
2011, a number of significant PE investors including the Victorian Funds Management
Corporation and UniSuper decided to stop making new commitments to PE in favour of
other asset classes, in the wake of the 2010 Super System Review (Cooper Review).6
A. Some strategies for engagement
A starting point for institutional investors who are concerned about the ethical
implications of their existing PE investment may be to engage with these PE firms, as
proposed by the UNPRI. This essentially involves subjecting PE investment to the same
standards for transparency and accountability that ethical investors would apply to their
share portfolio. Possible strategies are: questioning the current investments of the PE
firm; finding out how companies in the portfolio are being managed; and setting up
WHAT IS WEALTH FOR? HOW RESPONSIBLE INVESTMENT CAN SHAPE THE FUTURE. A CATALYST REPORT 60
structures for on-going information about the application of ESG criteria in managing
those investments. Institutional investors can also consider developing their own criteria
for ESG which goes beyond that provided in the standard ESG tools, in order to capture
some of the extractive practices that have been associated with the PE industry. The
Australian Council of Superannuation Investors (ACSI) points out that the primary
role of investors, and in particular, institutional shareholders, in PE transactions is to
hold a company’s directors and management accountable for their actions.7 ACSI also
suggests that investors may consider working together when engaging with a company to
scrutinise PE transactions.
2. WHAT IS PRIVATE EQUITY?
Private equity (PE) is an asset class comprising company shares that are not publicly
traded. There is no precise definition of ‘private equity’ but, in general, the term
comprises two forms of investment: venture capital and a type of corporate acquisition
which makes a company ‘private’ by purchasing a controlling interest and typically places
it under new management.8 These corporate acquisitions can include buying publicly
listed companies, family firms, public sector firms, secondary buyouts and buying
particular divisions of a larger enterprise.
PE as an asset class has generated enormous profits for its investors, particularly in the
boom period of 2000–2007.9 As in other parts of the world, private equity deals grew
rapidly in Australia in the early 2000s. This took a dip after the global financial crisis from
2008 to 2011, but private equity fund-raising was back up to pre-crisis levels again in
2012. New funds raised by 17 private equity firms in Australia totalled AUD3.09 billion
in 2012, which was a 54 percent increase on 2011.10 In 2012, PE fund managers in
Australia controlled around AUD30 billion and were invested in 539 companies.11
The ‘venture capital’ form of PE investment has a long history and has classically been
used as seed capital to develop a business before exposing it to the open market.
Another form of PE investment, the ‘corporate acquisition’, grew rapidly in the early
2000s, and was accompanied by some changes in PE investment strategy, including the
emergence of the ‘leveraged buy-out’ (LBO) model.12
A. Some Australian companies owned by PE firms
In 2012, global PE investments reportedly reached USD3 trillion 13 and covered many
companies which are considered ‘household names’. In Australia, for example, retailer
Barbecues Galore, poultry producer Inghams14, Dick Smith Electronics and accounting
software company MYOB15 are all owned by PE firms. In the past, PE firms have held
companies such as retailer Myer, Angus and Robertson bookstores, and manufacturer
Pacific Brands, and have made an unsuccessful bid for Qantas.
Through their ownership of these companies, PE firms employ large numbers of people.
In 2007, approximately 4 percent of the United States private sector workforce was
employed in a PE-owned company 16 and in the United Kingdom around 20 percent.17
In Australia, PE firms employ (directly and indirectly) around half a million workers, or
4 percent of the workforce, as at 2013.18
WHAT IS WEALTH FOR? HOW RESPONSIBLE INVESTMENT CAN SHAPE THE FUTURE. A CATALYST REPORT 61
3. THE CONTROVERSIAL ‘LBO’ METHOD
The LBO accounts for roughly 30 percent of all PE investment activity in Australia,19 although
55 percent of the PE funds raised in 2012 were for buy-outs.20 The LBO is one of the
most prominent and controversial PE investment strategies, in which funds to purchase a
company are raised through a combination of equity and debt. According to this approach,
only 20 percent of the company’s value must be raised for the purchase of the company
and the rest of the purchase is financed through debt. The formula’s heavy reliance on debt
means that low interest rates are a necessary condition.21 The LBO was a particularly popular
strategy in the 2000s, and was criticised for the risks associated with high levels of debt.
The period from 2000 to 2007 was a boom time for LBO activity globally. Cheap credit,
weak regulation and tax advantages in many jurisdictions allowed for the complex
financial engineering that generated many high-priced PE deals and unprecedented
profits for the principals of PE firms.22 The World Economic Forum reported in 2010 that
the total value of LBO transactions between 1970 and 2007 was USD3.6 trillion, of which
USD2.7 trillion (75 percent of the total) was gained after 2001.23
A. LBO profit-making tactics
The LBO method proved a quick way to make profits by taking a listed company private
for a short period, increasing its market value and returning it to the public in three to
five years for a higher price.24 During the PE boom period of 2001–2007, PE firms were
making 20 to 25 percent profit.
The LBO model has used a variety of tactics to generate these profits, including
reducing employment, selling assets, reducing taxation burdens and charging
management fees.25 There are three key strategies used by PE managers to make the
LBO profitable for themselves:
• tax avoidance;
• fees; and
• value extraction.
Tax avoidance
PE investors can benefit from various types of tax benefits, sometimes referred to as the
erection of ‘tax shields’,26 including:
• Lower corporate tax due to a large debt burden.
• On the sale of the company, investors profit from the return being treated as a
capital gain rather than income.
• In many cases PE firms or consortiums set up their funds in low-tax jurisdictions.
These taxation benefits have captured the attention of the global media, particularly as
the deals and therefore the taxation savings grew larger. For example, in 2007, the United
States PE firm Kohlberg Kravis Roberts bought the United Kingdom’s retail chemist
Alliance Boots. This LBO transaction was done with a debt-to-equity ratio of £11.1 billion
to £1.2 billion, saving the firm £150 million in taxes.27 In 2010, the Australian Taxation
Office attempted to address this problem by requiring PE investor TPG to pay income tax
rather than capital gains tax on the sale of retailing company Myer.28
WHAT IS WEALTH FOR? HOW RESPONSIBLE INVESTMENT CAN SHAPE THE FUTURE. A CATALYST REPORT 62
Fees
PE managers collect fees in two forms:
• fees for management of the purchased firm during the period of ownership, usually
around 1–2 percent of funds invested; and
• ‘carried interest’ fees collected on the gains made from the sale of the firm, usually
around 20 percent of the profit generated.
The small number of people controlling PE firms have become extremely wealthy from
these fee payments. For example, the two individuals who set up the PE firm Blackstone
received over USD600 million in 2006 alone.29
Value extraction
Publicly listed companies raise most of their capital through issuing shares. Typical
FTSE-listed companies operate on the equation 70 percent equity to 30 percent debt.30
LBO investors, by contrast, reverse this equation so that most of the company’s capital is
raised through debt. This means that the company itself is required to pay interest on the
money borrowed for its own purchase. Value extraction refers to the use of the company’s
resources to service the interest on these debts. Some examples of ‘value extraction’
devices PE firms have used to service such debts include:
• Selling off company assets and leasing them back to the company.
• Reducing and/or restructuring the labour force with lower costs, including imposing
new work contracts with reduced wages and conditions.
• Outsourcing services, for example, using external providers to manage pension
fund obligations.
• Short-term cost cutting such as reducing or eliminating research and development.
Profit from resale of the company: Taking it public again
Following the sale back onto the public market, the company will retain debt levels built
up by the PE managers resulting from leasing of property or equipment, outsourcing
services or underfunded pension schemes. These obligations remain with the company
and not the PE investors. In some cases this has meant bankruptcy following resale,
for example, Mervyns’ retail in the United States31 and Angus and Robertson Australia.
Myers department store in Australia also lost significant value after refloating,32 while
Hilton Hotels received a government bail-out in the United States to keep it functioning
after resale.33
‘Once the take-over is complete, the target business is restructured so that these new debts become
the debts of the company itself. In this way, companies which are victims of equity fund take-overs
are actually made to finance the take-overs themselves.’34
4. ESG IMPLICATIONS OF THE LBO METHOD
The LBO method has generated substantial externalised costs. These costs are primarily
borne by the companies purchased by PE firms, and the various stakeholders in those
companies, such as employees. Some of these harms include reduced wages and
WHAT IS WEALTH FOR? HOW RESPONSIBLE INVESTMENT CAN SHAPE THE FUTURE. A CATALYST REPORT 63
benefits to workers, exclusion of trade unions, lay-offs and resulting unemployment
costs.35 In addition, companies owned and controlled by PE funds have tended to
spend less on research and development, have less transparent operating practices,
pay high fees to their PE managers, pay lower taxes due to high debt ratios in funding
arrangements and experience higher rates of bankruptcy or company closure.
PE has come under considerable scrutiny as a result of trade unions and other critics
exposing these social costs.36 Investors and public policy makers have been particularly
receptive to these arguments in the wake of the recent global financial crisis. As a result
of popular agitation, the United Kingdom, European and United States PE industry
associations began to implement self-regulation in around 2007. The UNPRI also used
the moment to harness the interest of investors and PE firms and offer a service to PE
specifically to address environmental, social and governance (ESG) matters.
The UNPRI has been the most widely adopted ESG tool in the PE industry. The UNPRI
has established a specialised department providing research, a private clearinghouse
forum, and other networking and information-sharing tools / spaces specifically for the
PE industry. Some research indicates that PE funds are beginning to integrate ESG
factors into decision-making, to a limited extent.37 The main results of ESG integration
are in improved reporting and monitoring, and the integration of environmental factors
into investment decision-making.38
However, the externalised costs of the LBO method appear to impact most heavily on the
‘social’ and ‘governance’ elements of ESG. There is little, if any, evidence to show that
PE funds perform better than any other funds or companies on environmental matters.39
On the contrary, regarding corporate governance, there are concerns that the lack of
transparency in PE owned and controlled companies can allow for conflicts of interest,
corruption, questionable business ethics, poor risk management and excessive levels of
executive compensation. Similarly, the LBO method has been criticised for social issues
such as the adverse effect on workers in PE owned and controlled companies, and the
negative effects of tax avoidance. However, few of these social concerns would fit neatly
into internationally recognised ESG tools and/or be viewed as ‘serious ethical’ breaches,
as discussed below.
A. Social impacts
Fees and taxes
Some of the primary social impacts of the LBO method include the generation of large
debt burdens for PE–owned companies, avoidance of corporate taxes due to these high
debt burdens and charging exorbitant fees to PE investors.40 Also among the social effects
is an increase in income and wealth inequality, due to PE firms taking super profits and
PE-owned companies avoiding taxes.41 Some examples include:
• In December 2005, PE fund Carlyle along with two other investors, bought out
Hertz. Carlyle contributed approximately USD750 million to the purchase. In June
2006, the investors paid themselves a special dividend of $1 billion. In November
2006, Hertz was relisted on public markets, though the investors retained a twothirds stake. For its USD750 million investment, Carlyle received proceeds totalling
more than USD400 million, while its remaining stake in the company was worth
WHAT IS WEALTH FOR? HOW RESPONSIBLE INVESTMENT CAN SHAPE THE FUTURE. A CATALYST REPORT 64
USD1.3 billion in November 2006. This amounted to a return of 128 percent in less
than one year.42
• In September 2004, three private equity firms: KKR, Carlyle Group and Providence
Equity, paid only USD550 million for a USD4.1 billion purchase of satellite operator
PanAmSat Corporation. The remainder of the purchase was financed through debt.
A month after the deal was done, PanAmSat took on additional debt and the PE
funds paid themselves a USD250 million dividend.43
• In 2005–06, five of the ten largest PE-owned companies in the United Kingdom
effectively paid zero corporate tax, despite combined sales of over £12 billion and
operating profits of more than £400 million.44
• PE fund Blackstone paid taxes at a rate of 1.4 percent in 2006. If it had paid tax at the
34.5 percent rate for company tax, its bill would have increased from USD32 million
to nearly USD800 million.45
• In Australia, PE firm TPG made a profit of around AUD 1.58 billion on its three-year
investment in retailer Myers, refloating the company with significant debt.46
In the workplace: cuts to jobs, pay and conditions
Trade unions and other critics have identified numerous workplace impacts of the LBO
model. These include job and pay cuts, union-busting strategies by PE managers such
as the use of contracted or casual labour to undermine unions’ right to organise and
bargain, and to undermine prevailing working conditions.47
One trade union leader described the results of increasing PE ownership for workers:
‘[i]nvestors, creditors and top company managers take heavy risks, but it is their own
choice and they often reap rich rewards. The employees of a target company have the
risk imposed on them. They share the costs in the event of failure. But in the event of
success, they can expect at best maintenance of the status quo; at worst, a loss of their
jobs; nearly always, pressure on their pay and working conditions.’48
Some examples of these cuts include:
• After a group of PE funds purchased German telecom company, Tenovis, PE
managers laid off 2,500 of the 8,000 workers and forced remaining workers to take
a 12.5 percent pay cut.49
• Bulgarian telecom company BTC was bought by a PE fund in 2004. 10,000 of the
24,000 staff were retrenched. The company was accused of targeting workers for
dismissal who were organising in the union.50
• Food service provider Gate Gourmet was purchased by a PE fund in 2002. PE
managers undermined collective bargaining negotiations with workers at Heathrow
and Dusseldorf airports by hiring contract workers, to limit union claims for
concessions on working hours, holiday pay and shift pay.51
The anti-worker character of the LBO model became even more extreme after the 2001–
2007 boom period, when the era of cheap credit ended and other financial conditions
changed. PE funds looked for other methods to increase short-term profits, including
squeezing the workforce and other stakeholders like suppliers.52 Also as a result of the
global financial crisis, new LBOs came to a halt and many PE firms were forced to keep
WHAT IS WEALTH FOR? HOW RESPONSIBLE INVESTMENT CAN SHAPE THE FUTURE. A CATALYST REPORT 65
their investments for a longer period than they would normally have done, due to weak
equity markets.53
In Australia, there is less evidence of the kinds of attacks on workers that have been
documented in Europe and North America.54 There is some evidence of a more
restrained approach to labour relations. For example, the PE management of Myers cut
some conditions, like removing the entitlement to rostered days off; and reducing the
occupational classifications under the collective agreement. However, the managers did
not drastically cut staff numbers, relying on natural attrition rates and limits on new hires,
and did not impose a non-union agreement or individual contracts. 55 Nonetheless, there
is insufficient information to properly assess the effects on the Australian labour market.
Furthermore, superannuation funds concerned about ‘responsible’ investment must also
investigate whether PE firms that they finance are investing overseas using exploitative
labour practices, and properly audit their impact on labour.
Destabilising companies with high levels of debt
It is argued that LBOs have led to a higher level of company failure and bankruptcy. It is
difficult to directly attribute company failure to the LBO method, rather than the prevailing
economic conditions and the financial crisis. However, some have cited examples of
corporate bankruptcy due to the high levels of debt in PE deals, such as the bankruptcy
and associated legal action by Mervyn’s retailer in the United States. A number of
Australian firms have also fared poorly following resale on public markets, including
Myer, Pacific Brands, Repco and Vision Group.56 Myer shareholders have lost significantly
as the company’s shares have never reached their original issue price of AUD4.10,57
currently standing at around AUD2.50.
Mervyn’s bankruptcy and legal action
A group of PE investors bought retailer Mervyn’s from Target Corp in 2004 for USD1.25 billion. The
PE owners contributed about USD455 million of equity and raised USD800 million in debt to fund the
purchase. The investor group earned more than USD250 million in profits, while the Mervyn’s store
chain went into liquidation.
In September 2008, the retailer sued its PE owners, seeking monetary damages. Mervyn’s alleged
that the structure of the PE acquisition pushed the company into bankruptcy by stripping it of its
assets and over-burdening it with debt.58 Mervyn’s was successful in obtaining damages in 2011.59
ESG standards need updating to reform PE
The social impacts of the LBO method are well catalogued. They include exorbitant profits
fuelling wealth inequality, tax avoidance, increased unemployment, reductions in wages and
benefits for workers, anti-union management practices, and contribution to the bankruptcy
and financial instability of otherwise viable companies. Unfortunately, despite these clear
social deficiencies it is questionable whether the management practices associated with
the LBO model contravene global ESG standards. Practices like tax avoidance through
clever accounting, retrenching workers, extracting high management fees and destabilising
companies through debt arrangements do not necessarily breach laws, nor even most ESG
standards. To some extent, labour rights as established under international law and other
instruments have been reportedly breached through anti-union practices. Otherwise, existing
ESG standards can do little to reign in the negative social effects of the LBO model. They
clearly need updating to reform new investment vehicles like PE.
WHAT IS WEALTH FOR? HOW RESPONSIBLE INVESTMENT CAN SHAPE THE FUTURE. A CATALYST REPORT 66
B. Governance issues
Some of the key governance issues regarding PE investments are transparency, reporting
and fee structures.
Transparency
Freedom from the transparency and reporting requirements imposed upon public
companies can increase PE funds’ ability to extract super profits.60 Opaque PE
management structures also make it difficult to identify the ‘employer’ for the purposes
of industrial negotiations. PE firms often claim that they are not answerable to workers
and trade unions, although in practice many of their decisions impact on the workforce.61
Unions have argued that lack of transparency concerning management structure and
operations undermines dialogue with workers, and that unions should be involved in PE
deal negotiations from the beginning to ensure a fairer distribution of profits, and see that
the company operations remain viable.
In the fallout from the global financial crisis, it became clear that many PE funds had
loaded their investee companies with substantial, and in many cases, unserviceable
debts. A study in the United Kingdom showed that the complexity of credit and debt
arrangements for PE transactions, often organised through financial syndicates, meant
that half of the banks surveyed did not know the final destination of the debts they had
distributed.62 There have subsequently been demands for increased transparency in the
United States and United Kingdom regarding debt levels, though regulations have not yet
been changed. This has obvious implications for workers, both as investors through their
superannuation funds, and as employees of PE invested firms.
Reporting
PE fund owners who raise capital from investors (like pension funds) for a PE transaction
typically control all information about the proposed transaction. Investors often do
not have information about the PE fund’s intentions when managing any companies
purchased. This could block investors with a mandate to consider the ESG implications
of their investments. Particularly, for example, trustees of pension funds should consider
the possibility that investing in PE may lead to undermining their members’ working
conditions or to loss of jobs. Trustees could request reports on these crucial ESG issues,
and/or work with unions to independently investigate and compile information. There is
some evidence that the PE industry is increasingly aware of this tension in the competing
interests that pension funds must satisfy. David Rubenstein of the Carlyle Group has
said that the PE industry needs to be more careful about reducing employee numbers,
particularly since many investors in PE were organisations like pension funds, which
claimed to be working for the benefit of workers.63
Fee structures
Pension funds have also begun to examine the exorbitant management fees charged by
PE funds. Under pressure from civil society, many pension funds and other institutional
investors have been encouraged to question and review the fees payable under
investment contracts with PE firms.64
WHAT IS WEALTH FOR? HOW RESPONSIBLE INVESTMENT CAN SHAPE THE FUTURE. A CATALYST REPORT 67
5. ETHICAL CRITERIA FOR PRIVATE EQUITY INVESTMENTS: THE UNPRI
A. Early steps to integrating ESG issues
Information on ESG integration with the PE industry is limited, as are so many other
areas of PE management practice, due to inadequate standards for transparency. Under
pressure from civil society and amidst the increased mainstreaming of ESG issues,65 the
PE industry has made some moves towards integrating ESG factors into its management
practice via the United Nations Principles for Responsible Investment (UNPRI). A large
number of PE funds have signed up to the UNPRI and have complied with reporting
and other implementation requirements. The UNPRI is vague in its definition of
responsible investment, and its principles do not make clear the obligations imposed
upon signatories.66
Published case studies
The UNPRI has released some case studies of the adoption of the principles by PE
funds,67 which illustrate that the approaches of PE funds differ in various ways, including:
• the importance they assign to ESG issues relative to financial performance;
• the specific ESG issues that firms consider in their responsible investment activities;
• the scope of their commitment to responsible investment, and whether this
commitment applies to individual portfolios, to specific asset classes or across all
asset classes; and
• the resources allocated to responsible investment, the involvement of senior
management and the level of transparency in its practice.
Of the nine case studies published in 2009 and updated in 2011 regarding UNPRI
integration in the PE industry, most refer to environmental matters, such as responses
to climate change. Three case studies identify PE funds incorporating reporting and
monitoring measures of ESG into their management practice. One case study mentions
operational changes to engage with trade unions, the hiring of local people and building
relationships with the firm’s local community.68
Conferences, guidance documents and survey
To improve ESG performance in the PE sector, the UNPRI organised conferences in
2010 and 2013 to discuss how PE funds can better align their interests with those of
their long-term investors (like pension funds)69 and how to integrate ESG issues into PE
industry practice.70 The UNPRI has also published guidance documents for investors
in PE to help them put pressure on the PE industry to change its practices.71 The guide
suggests methods of positive and negative screening of investments against ESG criteria,
as for example conducted by the Norwegian government’s pension fund, discussed
in the next chapter. Investors are also encouraged to engage with PE firms before
investing, and during the period of the investment to ensure the ongoing implementation
of ESG principles.
In January 2013, the UNPRI also published the results of a survey that showed a growing
interest in ESG amongst PE firms. More than 80 percent of the companies surveyed had
taken ESG issues into account in valuing and deciding upon proposed PE deals.
WHAT IS WEALTH FOR? HOW RESPONSIBLE INVESTMENT CAN SHAPE THE FUTURE. A CATALYST REPORT 68
The effects of this UNPRI initiative
There is a limited amount of critical scholarship on the results of this initiative by the
UNPRI, and caution is advised in making any assessments. However, some research,
relying on findings by the UNPRI and ratings from EIRIS, shows that the UNPRI has had
a positive effect on the integration of ESG into the PE industry. Clearly progress is driven
by a willingness of participants to change, usually under pressure from civil society.72
Critique
As noted earlier, criticisms of the UNPRI initiative include the vague definition of
responsible investment and the lack of specificity in the six principles upon which is
based. Also, given the particular concerns associated with PE industry practice (such
as job cuts, reductions in wages and benefits and tax avoidance) and the fact that ESG
standards offer little to regulate these, there have been calls for improved regulation of
the PE industry on certain matters, such as tax, accounting, fair conditions and wages for
workers, and transparency.
1
2
3
4
Bibby. 2008. ‘A thirty minute guide to private equity.’ http://www.andrewbibby.com/socialpartners.html [accessed 3 September 2013].
Westcott, M 2009. ‘Private equity in Australia’ Journal of Industrial Relations. 51(4) 529–542.
Australian Bureau of Statistics. 2013. 5678.0 – ‘Venture Capital and Later Stage Private Equity, Australia, 2011–12’.
Freshfields and UNEP Finance Initiative. 2009. Fiduciary Responsibility: Legal and practical aspects of integrating environmental, social and governance issues into
institutional investment. http://www.unepfi.org/fileadmin/documents/fiduciaryII.pdf [accessed 3 September 2013] (Freshfields report, 2009).
5 Criscione, V. 2011. Financial Times. http://www.ft.com/cms/s/0/d18b8af6-68d6-11e0-9040-00144feab49a.html
6 Allens 2011. PE market update. http://www.allens.com.au/pubs/pdf/pe/AustralianPrivateEquityUpdate2011.pdf [accessed 23 July 2013].
7 ACSI. 2009. Public companies being taken private.
8 RBA. 2007. Private Equity in Australia.
9 Froud, J. and Williams, K. 2007. ‘Private equity and the culture of value extraction,’ New Political economy.
10 White, A. 2012. ‘Good year but private equity deals scarce’. The Australian. 2 November 2012. http://www.theaustralian.com.au/business/markets/good-year-but-privateequity-deals-scarce/story-e6frg916-1226508714217 [accessed 12 February 2013].
11AVCAL Yearbook. 2012.
12 AVCAL. 2011. PE and VC explained. http://www.avcal.com.au/stats-research/fact-sheets [accessed 12 February 2013].
13 http://www.cnbc.com/id/48410754/Private_Equity_Assets_Hit_Record_3_Trillion [accessed 1 March 2013].
14 ABC. 2013. http://www.abc.net.au/news/2013-03-11/inghams-poultry-bought-by-private-equity/4565108 [accessed 12 July 2013].
15 White, A., 2012. [accessed 12 February 2013].
16 Beeferman. 2009. . ‘Private Equity and American Labor: Multiple, Pragmatic Responses Mirroring Labor’s Strengths and Weaknesses.’ Journal of Industrial Relations 51(4)
543–556.
17 UNI Global Union, 2007. Private Equity: Why it matters to trade unions.
18 AVCAL. 2013. Economic contribution of private equity in Australia. Available at: http://www.avcal.com.au/documents/item/530 [accessed 22 July 2013].
19 Australian Bureau of Statistics. 2013. 5678.0 –‘Venture Capital and Later Stage Private Equity, Australia,’ 2011–12.
20 AVCAL, 2012.
21 Folkman, P., Froud, J and Williams, K. 2009. ‘Private Equity: Levered on capital or labour.’ Journal of Industrial Relations. 51(4) 517–527.
22 Folkman et al. 2009.
23 WEF, 2010. ‘Globalization of Alternative Investments’, Working Papers Volume 3, The Global Economic Impact of Private Equity Report 2010. http://www3.weforum.org/
docs/WEF_IV_PrivateEquity_Report_2010.pdf [accessed 3 September 2013].
24Beeferman,2009.
25 See for example, Wright et al. 2009. PE impact on employment; ACSI. 2009. Public companies being taken private.
26 ACSI, 2009. As above.
27 Clark, I. (2009b) ‘Private Equity in the UK: Job Regulation and Trade Unions’ Journal of Industrial Relations. 51(4) 491–502.
28 Reuters. 2010. ‘Australia rules against private equity on tax,’ http://www.reuters.com/article/2010/12/01/australia-tax-idUSSGE6B004520101201 [accessed 23 July
2013]; see also Allens. 2011. Private equity market update. http://www.allens.com.au/pubs/pdf/pe/AustralianPrivateEquityUpdate2011.pdf
29 Bibby, 2008.
30 Froud and Williams, 2007.
31 IUF’s private equity buyout watch. 2012. ‘Banks, buyout firms agree to major settlement.’ http://www.iuf.org/buyoutwatch/
32 Ferguson, A. 2012. ‘Private equity on the nose as deals go south.’ Sydney Morning Herald. http://www.stuff.co.nz/business/industries/6959724/Private-equity-on-the-nose
[accessed 3 September 2013]
33 IUF’s private equity buyout watch. 2010. ‘Blackstone surfs government Hilton subsidy.’ http://www.iuf.org/buyoutwatch/
34 Bibby, 2008.
35 Wright, M., Bacon, N. and Amess, K. 2009. ‘The Impact of Private Equity and Buyouts on Employment, Remuneration and other HRM Practices’. Journal of Industrial
Relations. 51(4) 501–515; SEIU,2008. ‘Take back the economy: July 17 Global day of Action’; WEF 2010; UNI Global Union, 2007. ‘Private Equity: Why it matters for trade
unions.’ IUF. 2007. ‘A workers guide to private equity buyouts.’
36 See, for example, SEIU ‘Behind the buyouts’.
37 UNPRI, 2011, ‘Responsible investment in PE: Case studies’.
38 UNPRI, 2011, As above.
39 UNPRI PE ‘Case studies.’ 2011. 2nd edition.
40 IUF,2007; UNI Global Union,2007.
41 Beeferman, 2009.
42SEIU,2007.
43IUF,2007.
44IUF,2007.
45 SEIU Behind the buyouts.
WHAT IS WEALTH FOR? HOW RESPONSIBLE INVESTMENT CAN SHAPE THE FUTURE. A CATALYST REPORT 69
46 ABC. 2009. http://www.abc.net.au/7.30/content/2009/s2739681.htm [accessed 23 July 2013].
47 Wright et al 2009; SEIU,2008.; WEF 2010; UNI Global Union, 2007.
48 UNI Global Union,2007.
49SEIU,2008.
50 UNI Global Union, 2007.
51 IUF. 2007.
52 Folkman et al. 2009
53 Hodkinson, Financial News. 2012. http://www.efinancialnews.com/story/2012-06-19/kkr-alliance-boots-stake-sale-walgreens; IUF, 2008. ‘Locusts into Vultures 2: Funds
in $12.5 Billion Debt Buyback Deal.’
54 See, for example, Beeferman, 2009.
55 Westcott. 2009. ‘Private equity in Australia’. Journal of Industrial Relations.
56 Crikey. 2009. http://www.crikey.com.au/2009/09/29/myer-and-the-perils-of-the-private-equity-float/ [accessed 23 July 2013].
57 Verrender, I. 2012. ‘How a Myer float floated off to the Caymans’. http://www.businessday.com.au/business/how-a-myer-float-floated-off-to-the-caymans-201205251zaag.html [accessed 23 July 2013].
58 Lattman, P. 2008. ‘Making a bundle on Mervyn’s’. WSJ. http://online.wsj.com/article/SB122748733837451899.html [accessed 3 September].
59 IUF, 2012. ‘IUF’s private equity buyout watch. Banks, buyout firms agree to major settlement in lawsuit charging planned bankruptcy of major retailer – a “game changer”
for private equity?’ [accessed 8/4/2013].
60 Beeferman, 2009.
61 IUF, 2007.
62 Froud and Williams, 2007.
63 ‘Super Returns: What about the workers?’ http://dealbook.nytimes.com/2009/02/04/super-return-what-about-the-workers/, [accessed 13/02/2009].
64 UNPRI. 2010. ‘Responsible investment in private equity. A guide for limited partners’; Bloomberg, 2008. ‘Permira’s Bjorklund sees “tough two years” for LBO’s’. [accessed
8/4/2013].
65 Freshfields, 2009.
66 See previous chapter for the list of six UN principles for responsible investment.
67 UNPRI, 2011.
68 UNPRI, 2011. As above.
69 UNPRI, 2010. ‘Responsible investing call to secure future of private equity community.’ [accessed 8/4/13].
70 UNPRI, 2010. As above, [accessed 8/4/13].
71 UNPRI, 2010. ‘Responsible investment in Private equity: A guide for Limited Partners.’
72 Majoch, 2011. ‘UNPRI 5 years of evidence’; see also Freshfields, 2009.
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