Private equity ownership of companies often has a positive impact on employee relations according to the latest study from the Centre for Management Buyout Research (CMBOR) in association with the European Venture Capital Association (EVCA).
The researchers, based in the University of Nottingham, assessed the quality of employee relations using a range of measures, including changes to real earnings, occupational pension schemes, employee consultative committees and trade union relations, and revealed that across these criteria private equity involvement either made no difference to existing relations or had a positive effect.
Private equity investment was found to have the most positive effect on employee relations in traditionally liberal market economies, such as the UK. In those European economies with wide-ranging regulatory frameworks, the effect of private equity investment on employee relations was neutral.
The key finding of the report showed that the number of companies with a unionised workforce is static post-buyout at 71%. Real earnings of non-managerial employees increased in just over half (51%) of cases. A large minority of 47% experienced no change.
Availability of occupational pension schemes increased from 76% of companies before a buyout to 81% afterwards. The amount spent on non-managerial employee training increased post-buyout in 45% of cases, and fell in just 3%.
Employee commitment best practice increases, with regular team briefings up from 71% to 90%. The proportion of private equity-backed companies that had a consultative committee in place increased from half before the buyout to 63% afterwards.
Javier Echarri, secretary general of EVCA said: “While company managers, rather than private equity professionals, are normally responsible for operational decisions relating to employees, this study suggests that private equity investment can be a trigger for improvements in employee relations.”
Professor Mike Wright of CMBOR said: “This study looks beyond private equity’s effect on absolute employment levels, to the changes in employee relations across a range of measures. While companies may experience redundancies or employment growth during various points in their life cycle, the fair treatment of stakeholders should transcend economic cycles.”
The study, which was undertaken by CMBOR at the University of Nottingham during the first half of 2008, involved questionnaire and face-to-face interviews with 190 human resource and company executives.