UNION LEADER ANDY STERN ON THE FUTURE OF BIG LABOR

As BusinessWeek went to press on Sept. 16, the AFL-CIO had elected Rich Trumka as the new leader of the federation, 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, once 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 under fire for allegedly unethical behavior recorded on videos by conservative activists.

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.

An op-ed in the Journal on Sept. 16 says the SEIU gave Acorn $7.4 million between 2005 and 2008. Do you still support Acorn?

We have been watching this story unfolding with concern, and we have encouraged [Acorn] to take dramatic steps to resolve the underlying problems. Some of the behaviors we've seen on the videos are unacceptable.

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 excessive out-of-pocket expenses or restrictions on preexisting conditions. 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.

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.

MANAGING FORWARD: THE RESET ECONOMY

Getting ready for the post-recession world

Has the recession led you to rethink the way you operate your union? What is the SEIU doing to prepare for a recovery?

Well, it's made us appreciate that we have to be better partners with our state governments and employers in terms of efficiency. It makes us appreciate that our pension funds are tied to the success of the economy. And it makes us very much want to come together with other Americans and employers and people in the nongovernmental part of our country and say we need to create a 21st-century American economic plan so Team USA can compete and win.