Searching for Eastern's Bottom Line

Abstract

[Excerpt] Over the last two years labor unions have faced escalating demands for concessions and give-backs. To counter the spread of concession fever, many unions are trying to develop a more sophisticated picture of a company's financial condition and overall strategy. First and foremost they are taking a closer look at the factors that determine a company's bottom line. The underlying assumption is that management uses financial accounting gimmicks to "reduce" profits and justify concessions. This is not an easy task, primarily because the expertise and data needed to investigate a company's performance is not readily available to most unions, especially at the regional or local level. In-house capacity in this area usually resides at the national level where in-depth research on specific companies is either inaccessible or nonexistent. Very few accounting, consulting or research firms serve unions; most have a strong pro-business bias that accompanies their reliance on large corporate accounts. As a result, most unions stand at a distinct disadvantage when it comes to refuting company claims of hardship. This weakens both the leadership and membership, and makes it difficult for unions to present their case to the press and the public. At Eastern Air Lines, two unions used very different approaches to analyze the company's financial condition. The pilots hired a prestigious corporate accounting firm. A partner in this firm flew down to Eastern's Miami headquarters for a half day presentation.In a subsequent 30-minute oral report to the union leadership he "confirmed" that Eastern was in bad shape, thereby justifying concession demands. Nothing was put in writing for the membership and the fee was $5000. IAM District 100 took a different approach. The leadership decided first to educate themselves about Eastern's finances in order to independently assess the company's condition. They realized that this required a solid understanding of basic accounting principles. For guidance, they turned to experts not beholden to company clients. Finally the IAM leadership educated the total membership about what they had learned.