Union Leader Andy Stern on the Future of Big Labor

The AFL-CIO is expected to elect Rich Trumka as the new leader of the federation today, succeeding longtime President John Sweeney. Trumka would be heading a much larger organization if Andy Stern, head of the Service Employees International Union, had not taken his union (now 2.1 million strong) out of the AFL-CIO four years ago. Stern, who once was a student at the Wharton School, was an early critic of banking industry practices and the private equity juggernaut. He is passionate about health reform (about 1 million members of the SEIU are health-care workers), and he is a staunch supporter of President Barack Obama. The SEIU, according to The Wall Street Journal, was also a generous backer of the voter registration group Acorn (the Association of Community Organizations for Reform Now), which is at the center of a scandal that just erupted.

MARIA BARTIROMO Could the election of Trumka lead to a re-merger between the SEIU and the AFL-CIO? Should business be worried?

ANDREW L. STERN The good news is that the AFL-CIO and all the unions have been pretty united when it comes to health care and free choice [eliminating the secret ballot in union elections].

Didn't taking your union out of the federation four years ago diminish the power of Big Labor? No. I think it's allowed a healthy discussion about whether unions really want to be lapdogs of a political party or watchdogs for the interests of the members and their families. If we can all come back together with a new plan, that would be very exciting.

What led to the bad blood between you and the AFL-CIO? At one point, you were one of Sweeney's top lieutenants. American workers were losing their health care, their jobs, their long-term security. The rich were getting richer. And we were not willing to change in spite of all that American workers were confronting. So when you're walking down a road and you know where it ends, the wise thing to do is walk in a different direction where there's hope. Rich Trumka has a real opportunity here to work together to [fix] what I think we all now acknowledge is a labor movement that needs to change.

Are you disappointed with the attention President Obama has given to issues of importance to labor? Between the economy, wars, and the lack of hope, no one has been left in such a deep hole at the beginning of their Presidency. Getting out of it is going to take time. So we're just going to have to be patient, collaborative, thoughtful, and do what has worked well in health care, which is build coalitions with employers and organizations that normally haven't worked together. With health care we've demonstrated, by working with the Business Roundtable, the Federation of Independent Business, Intel, and Wal-Mart, that there are certain issues that are not Democratic or Republican issues—they're American issues.

So what would you like health-care reform to look like? I would like a system where there are no more cases like Pat DeJong, who lost her husband and then, because of the medical bills, lost the ranch that had been in her family for 100 years. We need insurance reform where there's no preexisting conditions or excessive out-of-pocket expenses. We need to cut costs and make sure there's real competition, because there are many states where one insurance company dominates the market and the prices are higher than in other parts of the country. And we need to make sure everyone takes part in the system, as they do with car insurance.

With the bank rescue and the Detroit rescue, there's been much more government involvement in the affairs of business than we've seen in decades. Now we're starting to hear the words "industrial policy" again, and some people are saying the government should support selected industries to compete in the world economy. Do you believe that? I think what America needs is a plan. We've always used the research and development capacity of the federal government, whether it was out of the Defense Dept. or NIH [National Institutes of Health], to incubate and support new technologies that allow America to be successful. I don't think the government is in a position to run companies, and I don't think it wants to. But yes, we should help find the batteries of the future that will allow American manufacturers to dominate the global car business. Yes, we should keep trying to help create new drugs and new biotechnologies that will allow Americans to build new industries. But the government role is incentivizing entrepreneurial behavior, not managing companies.

We've seen executive pay on Wall Street reined in by Washington. Should government be dictating compensation at the top of American business? Clearly when the government is a major investor or owner, or when it's in the position of bailing out failure, I think taxpayers expect their elected representatives to make sure that there's accountability—not just on compensation, but on transparency, on how boards of directors are elected. We all know that the short-term, excessive compensation schemes that were created encouraged people to do risky things. So I don't think government, per se, should be involved in setting salaries, but we should have a framework that doesn't end up with taxpayers bearing all the pain while CEOs get all the gains.

Long before the economy collapsed, you were a critic of the banking industry and private equity. What are your thoughts as we watch the financial industry being put back together? First of all, we were right that there was an irrational enthusiasm that we could just make money by leveraging companies, creating debt, securitizing it, and the world would never end. Anybody who has to balance their budget appreciates that you have to create worth and live within your means if you're going to be successful. The private equity model was a dead end. And [private equity has] shown they can't manage any better—which was their claim—than anyone else. So we need a new regulatory system and a financial framework that can't presume anyone is too big to fail. Also, I don't think it's a good idea for private equity to be buying into banks. You know, we are watching the slow reemergence of some of the same bad behaviors that got us into this mess.

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