PESP applauds adoption of Responsible Workforce Principles for Private Equity by Maryland State Retirement and Pension System

Last week, the Maryland State Retirement and Pension System (SRPS) voted to adopt Responsible Workforce Management Principles for Private Equity to manage potential labor-related risks within its portfolio. Maryland SRPS joins a growing list of investors setting workforce management policies for risk mitigation and value creation among its investments. 

Below is the statement of Justin Flores, Director of Labor and Jobs at the Private Equity Stakeholder Project (PESP):

“Investor-led oversight has been an essential tool for protecting long-term value and ensuring sustainable business practices. Investing in employees through competitive wages and benefits supports value creation and implementing good health and safety practices can reduce costs associated with injuries and illnesses, including workers’ compensation payments, medical expenses, and lost productivity. In contrast, poor workforce relations can lead to operational disruptions, litigation, fines and reputational harm that can have material impacts on a company’s performance. Without strong external oversight of workforce management, risks may go undetected until they escalate, potentially affecting investor returns. 

“Private equity firms own over 29,000 companies and employ 13 million US workers. Private equity-backed companies have higher risk of bankruptcy, which often result in layoffs and other workforce harms.

“Meanwhile, private equity firms are facing disappointing returns, more competition for deals, higher interest rates, and challenges exiting portfolio companies. At the same time, investors are seeking better alignment with General Partners around long-term objectives and sustainable economic growth. Investors can and should clearly state their expectations of private equity sponsors. 

“We applaud Maryland SRPS for adopting this policy and Comptroller Brooke Lierman for her leadership. As the landscape for private markets continues to evolve, this move represents a common-sense approach to managing investment risks and stewarding the pensions of Maryland retirees.”