Hey Jack Welch, Can We Talk?

Corporate and union honchos are meeting behind the scenes

They gathered on Feb. 8 at the Hay- Adams Hotel in Washington, across the street from the White House, telling only their closest aides what they were up to. General Electric Chief Executive John F. Welch led a clutch of corporate bigwigs, including General Motors' John Smith, Xerox' Chairman Paul Allaire, AT&T's Michael Armstrong, USX-U.S. Steel CEO Thomas Usher, and Penske Chief Roger Penske.

They were joined by AFL-CIO President John J. Sweeney and the federation's other two top officers, plus a cadre of union chieftains like Morton Bahr of the communications workers, Sandra Feldman of the teachers, Douglas Dority of the foodworkers, George Becker of the steelworkers, and Edward Fire, president of the electronic workers union. Another President in the hotel for a meeting--Bill Clinton--stopped by for 20 minutes with words of encouragement.

POLITICAL CHASM. The hush-hush rendezvous was the latest in a series Sweeney had initiated back in 1998 to try to find common ground between Big Business and Big Labor on national policy issues. The group--about a dozen CEOs and a similar number of union leaders--has recently narrowed its focus to three topics: health care, education, and trade.

It's not yet clear whether the two sides can bridge the political chasm that usually separates them. If they can, they hope to use their combined clout to influence Congress on one or more of these issues. From the beginning, the participants pledged not to discuss the gatherings publicly, so none of the parties contacted by Business Week would speak for attribution. But "we had the best meeting yet this time, with real dialogue on both sides," says one union president who attended.

The meetings are Sweeney's attempt to resurrect similar talks that have occurred in fits and starts for decades. While the U.S. has no tradition of European-style political dialogue between labor and capital, union and corporate honchos have met periodically to chew over national issues, usually in quiet confabs out of the public eye. The current effort dates back to the early 1970s, when Reginald H. Jones, Welch's predecessor at GE, gathered a similar group with then-AFL-CIO President George Meany. One joint initiative they undertook helped to bring about the wage and price controls installed by the Nixon Administration.

In the early 1990s, a successor group moderated by former Labor Secretary John T. Dunlop agreed to pursue health-care reform. It appointed a subcommittee on the issue headed by Welch and Sweeney, then chief of the service employees union. Eventually, the group told the Clinton Administration that it would support efforts to curb spiraling medical costs. The joint backing from labor and business helped persuade the Administration to pursue what became Hillary Rodham Clinton's failed 1994 health-care reforms. Along the way, though, Welch yanked his support, angering union leaders.

Because of that falling-out, Sweeney at first didn't try to resuscitate the group after he took over the AFL-CIO in late 1995. But two years later, aides persuaded him to try again, and in early 1998, he met with Welch, who agreed, somewhat reluctantly, to form a new group. The circle renewed its meetings in New York in October, 1998, and has convened twice a year since, alternating between New York and Washington, moderated by former federal mediator John Calhoun Wells. Among the other CEOs involved are Bechtel's Riley Bechtel, Boeing's Philip Condit, Yucaipa's Ronald Burkle, and J.P. Morgan's Douglas Warner.

PUBLICITY-SHY. The talks can be testy, participants say. For example, Welch and Feldman squared off last year over workers' right to form unions without management interference. And consensus has been slow in coming: It took a year just to find topics where the group thought sufficient common ground existed to warrant further discussions. Still, the parties may be moving toward a meeting of the minds: They recently brought in Lewis B. Kaden, a New York-based lawyer at Davis Polk & Wardwell with extensive public policy experience, to help write policy papers.

Health care is one possible area of agreement. The companies are mostly old-line manufacturers that are more likely to offer health insurance than other sectors. They're upset about soaring insurance premiums, which are jacked up in part by the cost of the many uninsured workers forced to use emergency care. But finding the right approach remains difficult. "We can't even agree on health care internally, much less with a bunch of union leaders," says one corporate participant.

Group members have been sensitive about publicity out of fear that they would appear to be some sort of Trilateral Commission. "We don't claim to represent anyone," says one participant. Still, they will likely wield plenty of clout--if they can agree on an agenda in the first place.

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