....
REINING IN PRIVATE EQUITY: Leo Hindery Jr., a private equity investor and former CEO of AT&TBroadband, wrote a Fortune op-ed in which he makes the case for why his industry needs to be reined in.
Hindery says there is a practice escalating across the economy. He adds, “That practice is the unchecked and reckless overuse of heavy burdens of debt, and then of bankruptcy laws, by some private equity firms and hedge funds to the overwhelming detriment of employees and retirees.”
He goes on to make a case for Sen. Elizabeth Warren’s Stop Wall Street Looting Act, a new bill introduced this week. (Context: Her policy proposal would slap new rules on private equity and “useless speculation” on Wall Street. A centerpiece of her “economic patriotism” plan is to transform private equity firms, which she said often act like “vampires” when they buy companies by “bleeding the company dry and walking away enriched even as the company succumbs.”)
From Hindery’s column:
Today, too many PE fund managers are generalists, with little or no experience in the industry they’re investing in. And we’re seeing them use a much-discredited playbook: cut costs, take out cash for their own short-term benefit, add little genuine competitive value, and then slash jobs and worker benefits in a desperate bid for greater operating cash flow.
This is why this week’s legislation matters so much. The aptly-named Stop Wall Street Looting Act would finally hold predatory private equity firms and hedge funds liable for the damage they cause, close tax loopholes that encourage excessive debt and let executives avoid paying their fair share of taxes, and limit the debt that predatory firms can access to seize control of companies.
And, tremendously importantly, the bill would protect workers when employers go bankrupt, giving them added recourse to pursue the severance that is currently denied them.
No comments:
Post a Comment