Signs of rising union influence, falling US competitiveness

Signs of rising union influence, falling US competitiveness
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First Published: Sun, May 10 2009. 09 29 PM IST

Updated: Sun, May 10 2009. 09 29 PM IST
You know how sometimes you have a week that starts out with a mediocre Monday, then Tuesday is pretty lousy, Wednesday is even worse, and everything goes downhill from there? A week so foreboding that you start to wonder whether you’re seeing the beginnings of a trend—and you hope you’re wrong?
We’ve just had one of those weeks—and you should have had too, if you support US business. Three recent events should have you very worried. Each suggests a rising tide of union influence and the concomitant lowering of American competitiveness, just when our country can least afford it.
Now, some might be thinking, “Here they go again, bashing organized labour because of its higher wage rates.” Not so fast, please. For the record, we are very much in favour of competitive wages and employees from the shop floor up having a voice in their companies. What we object to are union work rules, which tend to be rigid and adversarial and which almost always inject needless, gummy bureaucracy into organizations.
Work rules kill productivity. We’ve seen it happen in industry after industry. Which brings us to the three events that have us concerned.
The first is senator Arlen Specter’s defection to the Democratic Party. Of course, with all his politicking over the decades, Specter had proved that he wasn’t exactly a staunch Republican. In 2003 he was a co-sponsor of the Employee Free Choice Act. This legislation would facilitate union efforts—to put it mildly—by eliminating the secret ballot in which employees vote on whether they want to unionize, installing in its place a much more public “card check” system. The Act died in the Senate in 2007, but its revival this year was going strong. However, in March, when polls showed that Specter was already trailing in Pennsylvania’s 2010 Republican primary, he withdrew his support for the Bill, dealing what appeared to be a deathblow to its passage.
Who knows what he’ll do next? With Specter’s new affiliation and Democrat Al Franken likely to soon win his long-running battle with Republican Norm Coleman over the ballot count in last November’s race for Minnesota’s senate seat, Senate Democrats could have the filibuster-proof 60 votes they need to pass the Employee Free Choice Act. And, given President Obama’s enthusiastic support of the legislation during the campaign, he can be expected to eagerly take out his pen and sign it into law. And so, hello to unionization efforts everywhere, and not just in the usual blue-collar sectors, but also in banks, insurance companies and every corner of the service sector. Hello again to the possibility of a return to the slow-moving, workers vs management dynamic that was common in the US before global trade heated up. Except that global competition is now fiercer than ever.
The second worrisome event occurred in North Carolina on 29 April, when Bank of America Corp. shareholders, galvanized in part by strong union advocacy, voted chief executive officer (CEO) Ken Lewis out of his post as chairman. What’s so bad about that? Nothing—in terms of shareholder voice. We’re all for that. But ultimately, we don’t like or support dividing the two top executive roles between two people because it encourages dysfunctional, productivity-sapping “decision shopping”, where senior managers in search of backing for their initiatives play the CEO and chairman against each other. It also tends to undermine something that companies today need desperately—clarity. When there are two bosses, you usually get two messages.
And then there’s the auto industry, which the government essentially proposed to hand over to the United Auto Workers on 30 April, when Obama forced Chrysler Llc. into federal bankruptcy protection. How ironic. According to the terms of the multiparty deal, the union, which certainly had a role in Chrysler’s undoing, will take ownership of half the company’s equity. General Motors Corp. (GM) seems to be going in the same direction. As Jack posted on Twitter, “Even France wouldn’t do this.”
Look, we certainly don't know what happened behind closed doors in the Washington-Detroit negotiations. But the ease with which Chrysler’s large debt holders, such as JPMorgan Chase and Co., appeared to cave on a pennies-on-the-dollar deal might suggest that the Troubled Asset Relief Program was somehow involved. The government was wielding a big stick, and it wielded it in favour of the unions rather than following the conventions of traditional bankruptcy law.
Is such a radical upending of the economic system good for business confidence and capital formation? It’s hard to imagine this turning out well.
And so, we are beginning to feel afraid. In fact, very afraid. We believe that America needs to be more competitive than ever to bring an end to this recession. It looks like not everyone agrees.
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Jack and Suzy are eager to hear about your career dilemmas and challenges at work, and look forward to answering some of your questions in future columns. Jack and Suzy Welch are the authors of the international best-seller, Winning. Their latest book is Winning: The Answers: Confronting 74 of the Toughest Questions in Business Today. Mint readers can email them questions at
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First Published: Sun, May 10 2009. 09 29 PM IST