How does the unionization of a publicly traded company affect stocks? In my attempt to determine if such a travesty could happen to a publicly traded company, I conducted some research.
I decided to research union history by company. Doing my search this way provided a lot more feedback and my results were rather surprising. In my quest to narrow down the many different possibilities that had presented themselves to me, I decided to focus on only those companies that are currently being traded publicly. Many investors will put lots of money into companies that are performing well financially. The commitment and faith that these investors put into these companies is very intriguing to me and sparked a newfound curiosity. I wondered how "protected" such individuals were from unions. I was very surprised to find out that there are a few publicly traded companies that are plagued by union stress, namely Verizon (VZ).
Verizon has been very successful in providing communication services to its customers as well as expanding their empire. However, Verizon is not immune to the demands of a union. In July, many workers of Verizon were threatening to walk off the job. Although the Verizon worker strike was something that I recalled as it was going on, it is still surprising to realize the gravity of such a situation on not only the company but how quickly such a crisis can affect so many more people and businesses.
Wireless customers were unaffected by the situations but other customers in different sectors of Verizon's business were expected to endure impact of the strike. Although the strike took place last year and a tentative agreement has been reached, it is a situation that can happen again and impact even more people in a very severe way. To Verizon, worker troubles are a problem, and it could hamper the company's share price.
*For reference, the S&P 500 ETF returned 11.62% during the same period.
For those who invest in AT&T (T) instead of Verizon know that you too are affected by the impact of unions. AT&T's union contract has expired in April of this year and currently the negotiations have been moving at a snail's pace.
AT&T's company also had employees walk out on them in California and Nevada this past June. The workers who walked out perform services for AT&T's land line products. The interruptions to service and other customer needs had to have had an effect on the company stock for AT&T which does impact the stockholder's directly by decreasing their wealth.
On a positive note, however, AT&T has been investing in its core business. We wrote about it in "Eliminating Copper Wire Thrusts AT&T Ahead of Competitors."
For those who invest in Sprint Nextel (S) my research did not indicate any type of union trouble for the company. This could be due to the fact that Sprint is not as large of a company like its competitors are. Although Sprint is plagued with its own problems, fortunately they seem to have been spared from dealing with the trouble that often comes with unionization.
Unions clearly have a very strong presence in the communications sector of publicly traded companies. I than began to wonder how many others whose stock values may also be at increased risk because of unions. I then decided to take a deeper look at a different industry.
Cisco Systems (CSCO) is a large supplier of internet equipment like routers, software and network management services. As many of us are aware, much of CISCO Systems growth has been through the acquisition of other technology companies that they thought were in line with their company vision. From my research I was not able to find any union disputes against Cisco Systems or any of the companies it has acquired through the years. The stockholders in this company can take a small sigh of relief that at the moment, unionization does not appear to be a problem for this company at this time.
Other stockholders who can relax from the threat of union activities that may decrease the value of their company stock are also those investors who pour money into Google (GOOG). At this time, I was not able to find any evidence that Google was dealing with any type of union issue. Microsoft (MSFT) also did not have any active and open disputes with any union groups that their employees may have gravitated to.
There are many different reasons why workers feel the need to unionize especially when the main focus of a company becomes all about improving the company's bottom line. Almost all labor union disputes begin over pay and benefits. The important thing to note for everyone, whether they are actively investing in a publicly traded company or not is that at some point, the impact of the union dispute will be felt.
For those cautious investors I highly recommend that you go beyond the financial statements of a company and research any active or pending labor union disputes that could impact the stock tremendously. This may help save you from a loss down the road.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.