The NYTimes Confirms My Views on Pensions and Private Equity Management Buyouts

In prior posts, here and here, I have written about the mistakes unions made years ago with pensions, and the conflicts of interest of managements as they lead buyouts of public companies. Recently, the New York Times has published pieces echoing my thoughts from months ago- September of 2005 for healthcare, which is similar to the pension debacle, and August of this year for buyouts.

It gives me a very good feeling to know I called these issues far in advance of one of the nation's leading newspapers. It's even better to know I have an even simpler solution than the one proposed by the NYTimes writer concerning buyouts.

Joe Nocera wrote "Resolving to Reimagine Health Costs," which focuses on the third-party payer health care mess. My contention is that pensions are essentially the same thing, in terms of accepting promises to pay from a company which is, typically, an adversary of the worker's union. Similar to accepting non-cash value from a company for health care, accepting promises in lieu of cash for pensions also makes for distorted decision-making.

Two days ago, Andrew Ross Sorkin wrote "Rewriting the Rules for Buyouts," recommending a complicated process by which a majority of minority shareholders should have final say in the approval of a management-led buyout. I believe my idea, expressed in the second linked piece above, is both simpler and allows for greater shareholder choice. Simply allow any shareholders to be part of the buyout, if they so choose, on the terms of the offer. This would insulated them from any supposed bad effects of being forced to sell out to the going-private group.

Given this past week's flurry of ever-increasingly large buyouts, such as Clear Channel and a large REIT, the issue is still relevant.

Since I hope to identify trends and challenges which are developing in business, and affect companies' abilities to earn consistently superior total returns, it's very gratifying to know I identified these issues long before a major news and opinion organization like the Times got around to them.