New York State Common Retirement Fund adopts labor standards for private equity

On April 23, New York State Comptroller Thomas P. DiNapoli, trustee of the New York State Common Retirement Fund, announced the fund’s adoption of a Responsible Workforce Management Policy and Principles for its private equity investments. The policy contains 12 principles to be followed by private equity managers within 90 days of their receiving the information. 

The Comptroller discussed the Principles at a White House meeting that same day along with other pension fund representatives and members of the North American Building Trades Unions (NABTU), who have been promoting such policies at pension funds across the country. 

The principles cover a broad set of labor standards and state that private equity firms should encourage their portfolio companies to respect internationally recognized human rights, comply with relevant legislation, remain neutral when workers seek to organize and collectively bargain, prioritize health and safety, encourage improved pay and benefits, among other things. 

The New York State Common Retirement Fund is one of the largest public pension funds in the United States, with $259.9 billion in assets under management –  $38 billion of which are allocated to private equity investments.

The policy decision by the New York State Common Retirement Fund comes as more public pension funds and investors have identified the need for labor standards within their private equity investments due to the risks associated with these investments. The value-extractive private equity model can reduce wages, benefits, and staffing at firms they acquire – with devastating consequences to millions of workers, their families, and entire communities. 

The Private Equity Stakeholder Project recently released a labor scorecard that underscores a pattern of hazardous or negligent labor practices within the industry. All eleven private equity firms analyzed received grades of “C” or lower, with seven failing grades. Blackstone, Cerberus, KKR, Sycamore, Roark, CD&R, and BC Partners all received Fs. 

As private equity continues to grow as an employer, stakeholders, worker advocates, elected officials, and pension fund trustees have sought to ensure that funds implement worker protections in their investments to safeguard both employees and the long-term sustainability of investments. The industry manages $11 trillion in assets and owns companies that employ more than 11.7 million American workers and millions more worldwide. 

New York State Common Retirement Fund private equity policy is intended to support responsible workforce management with “the goal of enhancing the overall value of investments.” Comptroller DiNapolisaid that the fund is “championing workforce management best practices because they have the ability to enhance the performance and resilience of portfolio companies and, in turn, our investments.”

Other funds that hope to mitigate adverse impacts to workers, financial risks, and reputational damage should adopt specific labor standards across their private equity portfolio that include fair wages, reasonable working hours, paid leave, non-discrimination, safe working conditions, and protections in the event of layoffs.