One of America's leading investment banks, Morgan Stanley, has outraged US
unions by telling clients to pull their money out of heavily unionized industries.
"Look for the union label - and run the other way," the analysts say in a research
note circulated to north American clients last Thursday.
Describing pension plans as "toxic" for shareholders, the analysts argue that
union firms are more likely to provide retirement and healthcare benefits that
could eat into corporate profits.
"Rigidity in labor costs, processes and pension requirements, while perhaps
beneficial to employees, may prove toxic to shareholders," the note says.
Union leaders reacted furiously, accusing Morgan Stanley of giving irresponsible
advice to investors.
In a letter to the bank, John Sweeney, the president of the AFL/CIO labor federation,
said Morgan Stanley appeared to be "attacking the fundamental structures of fairness
in our economy".
Pointing to the collapse of anti-union companies like Enron, WorldCom and Tyco,
once the darlings of Wall Street, Mr Sweeney said analysts had failed to tell
investors to sell these companies until it was too late to salvage anything from
the "tech wreck".
"It is hard to resist the conclusion that the same biases about what constitutes
successful employee relations underlie both your analysts' enthusiasm for Enron,
WorldCom and Tyco, and their hostility to union workers and their employers."
In a separate note sent on Monday, the report's authors did an apparent u-turn,
saying they were not anti-union, and that while heavily unionized industries have
"meaningfully underperformed the market, we are explicitly not in a position to
cite unionization per se as a cause of this performance".
Morgan Stanley declined to comment: "We have heard from Mr Sweeney and we look
forward to talking to him to address his concerns," a spokeswoman said.
Duncan Green from the lobby group Just Pensions, which puts pressure on the
City to invest responsibly, said the bank was advising investors to contravene
international labor laws.
"If these analysts lose their jobs as a result of their half-baked advice,
I hope they don't go running to the union to defend them," he said.
© Guardian Newspapers Limited 2002