John Adler

In a campaign that's been part street theater and part critical analysis, the Service Employees International Union has been confronting private equity on issues like the taxation of carried interest and the management of PE-backed companies. The SEIU is the largest union in the US, and also one of the most politically active. John Adler, director of the union's private equity program, spoke with Jennifer Harris about the tactics the SEIU uses to convey its key messages.

WHAT ARE THE MAIN OBJECTIVES OF YOUR COMUNICATIONS STRATEGY FOR PRIVATE EQUITY-RELATED ISUES?
Our objective is to get private equity firms to change their behavior. The private equity industry thinks that their problem is a communications problem, that they have not done a good enough job explaining what they do and why they're good for the world. We don't think that the problem that private equity has is a communications problem. We think the problem is that they are essentially profiting at the expense of virtually all other stakeholders. And what we're saying is we think the private equity business model can be strengthened and will garner further support if they build into their deals participation and the ability to share in the prosperity and the value that they say they create, by workers, by the community, and other stakeholders.

WHAT DO YOU ENVISION AS AN IDEAL STEADY STATE OF COMUNICATION BETWEN THE SEIU AND PRIVATE EQUITY INDUSTRY?
I think ideally if GPs were considering transactions that are in our industries, that they would approach us in discussion. One of the things that we said in our original report is that we wanted a seat at the table for workers and communities when transactions are being done. For the most part, usually, we find out about a deal by reading about it in The Wall Street Journal, not because someone comes to us and says you know we're actually thinking about doing a deal in this industry. There are exceptions to that, and sometimes we have been involved in those discussions, but for the most part we haven't been. The SEIU has a history of forming partnerships with employers that are mutually beneficial, and that's really what we're interested in creating. I'm not sure exactly why, but very few private equity investors have shown much interest in pursuing those types of partnerships.

WHAT REGULATORY CHANGES DO YOU THINK WE'RE LIKELY TO SE DURING THE NEXT ADMINISTRATION?
Regardless of who wins the election in the fall, I do think that the tax treatment of carried interest is going to change. I do not think that GPs will continue to pay the capital gains tax on carried interest. Beyond that, I think it's hard to say. There's certainly the issue of the taxation of publicly traded partnerships, and I think that the transaction that will transform KKR into a publicly traded partnership will probably renew interest in that legislation. And I think that certainly the private equity industry is working very hard to try to relax the bank holding regulations in order to enable them to invest in banks without being subject to those regulations. That's something that we are opposed to because we believe it would encourage continued abusive banking practices and risky behavior by PE firms looking to generate outsize returns as quickly as possible.

WHO ARE YOU TRYING TO REACH WITH THIS MESAGE, AND WHAT ARE YOUR METHODS OF COMUNICATION?
We're trying to reach everybody who's a stakeholder in the deals in these companies, so not just GPs but LPs, which include many of the pension funds that our members participate in, and certainly elected officials. We have a list-serve, where we send out regular emails. We also do a lot of face-to-face work, where members visit with various stakeholders, whether it's pension funds' boards of trustees or elected officials, and we've sent delegations to portfolio companies and GPs as well. We're trying to take full advantage of the communications means that are out there by using the web; we have also posted videos on YouTube. We use whatever means we can find to get our message out to constituents.