A Primer on Private Equity at Work: Management, Employment, and Sustainability

[Excerpt] Private equity, hedge funds, sovereign wealth funds and other private pools of capital form part of the growing shadow banking system in the United States; these new financial intermediaries provide an alternative investment mechanism to the traditional banking system. Private equity and hedge funds have their origins in the U.S., while the first sovereign wealth fund was created by the Kuwaiti Government in 1953. While they have separate roots and distinct business models, these alternative investment vehicles increasingly have been merged into overarching asset management funds that encompass all three alternative investments. These funds have wielded increasing power in financial and non-financial sectors – not only via direct investments but also indirectly, as their strategies – such as high use of debt to fund investments – have been adopted by investment arms of banks and by publicly-traded corporations. This primer focuses on private equity (PE) because this is the new financial intermediary that most directly affects the management of, and employment relations in, operating companies that employ millions of U.S. workers. However, as the boundaries among alternative investment funds have begun to blur, we will touch on hedge funds and sovereign wealth funds as their activities relate to private equity. To address the question of why these new financial intermediaries have become prominent in the last three decades, we begin by outlining the changes in financial regulation in the U.S. and the characteristics of labor market institutions that have facilitated the emergence and rapid growth of private equity and other alternative investment funds. We outline the changes in size and scope of the private equity industry; describe the generic PE business model, using examples from the retail sector where it has been particularly active; and examine the sources of gains for PE investors. We then review the impact of private equity buyouts on the sustainability of the operating companies and on workers and employment relations in these companies. In the period since the collapse of the housing and real estate markets and the onset of recession and financial crisis, the risk of financial distress and even bankruptcies among the highly leveraged operating companies in PE portfolios has increased. We examine this increased risk to operating companies in this period. In addition, we discuss the experience of private equity firms in the post-crisis period, noting the signs of recovery in the sector as well as the continuing challenges facing private equity investors. We illustrate our points – both positive and negative – with brief case examples to help clarify the issues. We conclude with proposals for regulatory changes that are needed to curb the destructive outcomes associated with some types of private equity activity

The Dynamics of Power and Psychological Safety on Team Cohesion During Interprofessional Simulation-Based Education

Healthcare team functioning requires coordination and collaboration between multiple practitioners towards a common goal of delivering safe and quality patient care (Lemieux-Charles & McGuire, 2006). Communication patterns, leadership, mutual support, and situation monitoring are all processes of effective teams (Weaver et al, 2010). However, despite the growing focus on developing interprofessional teams, minimal focus is given to the contextual and cultural forces influencing healthcare team functioning. Negative relationships amongst providers can affect teams in clinical settings, which in turn can undermine patient safety (Carpenter, 1995). Sources of poor team cohesion can be rooted in unequal distributions of power and the inability to express oneself without fear (Leonard, Graham & Bonacum, 2004; Edmondson, 1999). The Interprofessional Critical Care Simulation (ICCS) experience at VCU is one program that aims to foster positive relationships by giving nursing and medical students an opportunity to work together in a simulated environment before they graduate. Each academic year, senior nursing students (~150) and fourth-year medical students (~170) participate in a series of three two-hour simulation workshops over a two-week period. Students are grouped into 48 interprofessional teams of approximately 6-7 members, and each team is assigned to one faculty facilitator for the series. Four faculty facilitators (two nurses and two physicians) conduct the workshops in the simulation centers in the School of Nursing or in the School of Medicine. During the 2015-16 academic year, we asked medical and nursing students to complete a self-reported paper survey measuring team cohesion (Jung & Sosik, 2002), perceived power distance (Yoo, Donthu & Lenartowicz, 2011), and psychological safety (Edmondson, 1999) at the end of the ICCS course. Each scale was validated in prior research, however power distance was tailored to measure perceptions of power on the team compared to the original measure regarding an individual’s beliefs regarding how power should be distributed. The mediation model was tested with 1000 bootstrapping samples and controlling for semester through SPSS Version 23 (Armonk, NY) Process Macro, model 4 (Hayes, 2013). After data cleaning efforts, 243 (76% response rate) post-surveys were included in analyses. There were 134 (55%) nursing students and 98 (40%) medical students in our sample. The majority of respondents were female (n=135; 56%) and identified as Caucasian (n=151; 62%). Our partial mediation, Rsq=0.30, F(2,227) = 47.94, p\u3c.001, revealed that as power distance increased 1.0 unit, psychological safety decreased 0.28 units, however as psychological safety increased 1.0 unit, team cohesion increased 0.40 units. In addition to this indirect relationship, the direct relationship illustrated that as power distance increased 1.0 unit, team cohesion decreased 0.19 units, total effect = -0.30 [-0.40, -0.20], indirect effect= -0.11 [-0.18, -0.05]. Facilitators of such interprofessional activities should shape team interactions so power is equally distributed amongst medical and nursing students, and support environments where students feel safe to speak up. Creating a safe space where learners clearly understand their roles and responsibilities on an interprofessional team will impact the affective nature of team dynamics. Future research can focus on the impact of facilitator leadership on team dynamics and influences of context and culture when transitioning to the clinical learning environment

Private Equity and the SEC after Dodd-Frank

A new report by Senior Economist Eileen Appelbaum of the Center for Economic and Policy Research (CEPR) shows just how much the recnt SEC investigations of private equity funds has revealed and why it remains important to continue to regulate the industry. The report reviews the widespread practices in the industry that have unfairly enriched some private equity firms at the expense of pension funds and other investors in their funds

Testimony of Eileen Appelbaum Before the Commission on the Future of Worker-Management Relations

Testimony_Applebaum_011994.pdf: 107 downloads, before Oct. 1, 2020

Wages, Fringe Benefits and Efficiency in Union-Firm Bargaining

This paper provides an efficient union-firm bargaining solution within the right to manage framework, by separating efficiency and distribution considerations through bargaining over wage and fringe benefits. We show that without insurance considerations, efficiency is achieved by equating the wage and workers’ opportunity cost and providing the union with a surplus share in accordance with its bargaining power. We also show that with insurance considerations, the optimal contract, again, equates the wage and workers’ opportunity cost, but it also provides full insurance. There is empirical evidence that fringe benefits are, indeed, common and play an important role in union contracts.Price Union Contracts, Efficient Bargaining, Right to Manage

S-D exchange model of zero-bias tunneling anomalies

S-D exchange model of zero bias tunneling anomalies observed in meta P-N junction

Are Lower Private Equity Returns the New Normal?

U.S. private equity fundraising had its best year ever in 2015 -- raising $185 billion. But is the enthusiasm of investors warranted? Do PE buyout funds deliver outsized returns to investors and will they do so in the future? This report answers this question by reviewing the most recent empirical evidence on buyout fund performance; the answer is no. While median private equity buyout funds once beat the S&P 500, they have not done so since 2006 -- despite industry claims to the contrary

Restrictive loads powered by separate or by common electrical sources

In designing a multiple load electrical system, the designer may wish to compare the performance of two setups: a common electrical source powering all loads, or separate electrical sources powering individual loads. Three types of electrical sources: an ideal voltage source, an ideal current source, and solar cell source powering resistive loads were analyzed for their performances in separate and common source systems. A mathematical proof is given, for each case, indicating the merit of the separate or common source system. The main conclusions are: (1) identical resistive loads powered by ideal voltage sources perform the same in both system setups, (2) nonidentical resistive loads powered by ideal voltage sources perform the same in both system setups, (3) nonidentical resistive loads powered by ideal current sources have higher performance in separate source systems, and (4) nonidentical resistive loads powered by solar cells have higher performance in a common source system for a wide range of load resistances