J Minto: Applauding the Failure of Turbo-Charged Capitalism

Yesterday I attended a creditors meeting for those owed money by Redgroup - a trans-Tasman consortium which includes Angus and Robertson, the largest chain of bookstores across Australia, and New Zealand book chains Whitcoulls (76 stores) and Borders (five stores). I was there representing Unite Union members employed in the five New Zealand Borders stores.

This is the largest company to be put into voluntary administration under a 2007 law which aims to give early warning for a company getting into trouble and therefore enabling a better outcome than waiting for a total collapse and the inevitable liquidation where stores close, jobs are lost and creditors left high and dry.

Redgroup is owned by Pacific Equity Partners which is the largest creditor - some $118 million from a total of $170 million. We shouldn't lose any sleep for any losses PEP itself might suffer however. This Australian private equity company came to New Zealand on a shopping spree five years ago with six billion borrowed overseas and purchased the likes of Independent Liquor, Baycorp, Veda Advantage, Tegel, Hoyts cinemas and iconic biscuit maker Griffin's. Whitcoulls and Borders are also in the mix.

At the time they were widely thought to have paid too much. They bought at the top of the market, before the financial crisis and global recession, and have been feeling the pinch since.

They have no interest in the products or services provided by the companies they purchase - their only aim is to cream as much as possible in the shortest time from these companies for the tiny number of wealthy "partners" they represent. A few years later they sell and already PEP has been reported in Australia as preparing some of these companies for resale.

Writing for The Age Richard Flanagan sums up Redgroup like this -
REDgroup Retail, the owner, was a typical early noughties business, created by a private equity firm, overly indebted, seeking to make up the growing difference between its mounting debt burden and its more humble income by using its businesses to fleece customers and suppliers.

Thus in 2007 came the unedifying and frankly disgusting attempt by Angus & Robertson, bearer of the oldest and one of the proudest names in the history of the Australian book trade, to charge small Australian publishers for simply stocking their books, demanding up to $20,000 to make up for their supposed reduced profitability.

A&R's strategy was, I was told some years ago by one of their senior executives, to go to war with the publishers and win. They looked to retailers like Woolworths as their model, with their crushing of the suppliers and producers as the key to making more money.

New Zealand publishers and writers have similar experiences, Avarice Incorporated would be a more apt name for PEP. They are turbo-charged capitalists - the self-styled alpha males of corporate capitalism and we should loudly applaud their every failure. However the damage and destruction they cause along the way can be immense for ordinary workers.

As a union organiser I deal with three of the New Zealand companies owned by PEP. The interesting thing is that while the owners of these companies may change often, the employees who generate the wealth are the most stable part of the businesses. These workers will have typically given many years of loyal, efficient service only to be repaid with spiteful attempts to claw back any conditions of employment above the statutory minimums every time a new owner takes over to squeeze yet more cash before they flick them on.

Without exception the staff of these companies could operate them more capably and effectively as co-operatives. Greedy shareholders are an unnecessary burden on any company.

Here in New Zealand some 1300 employees face losing their jobs unless the administrators can sell the Whitcoulls and Borders New Zealand stores as a going concern. The next few weeks will tell.

In the meantime I've been appointed to the creditors committee to look out for the interests of our 50 members in the five Borders stores. (The Whitcoulls stores are not unionised) Most of our members are on, or very close to, the minimum wage.

If a private equity shareholder loses their shirt we shouldn't lose any sleep but if a single one of the 1300 New Zealand employees loses their job it will be a tragedy.

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