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Obamanomics' Effect on Industrial Stocks

Two proposed legislative acts could be detrimental to industrial stocks.

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Winds of change are blowing through Washington, and their effects are likely to be felt throughout our industrial stock coverage universe in a big way. Specifically, two proposed changes in business law may prove to be quite nettlesome for any part of the nation's industrial complex that employs a significant amount of human labor or receives income from overseas subsidiaries.

Card Check
The Employee Free Choice Act (known as card check) was introduced in the U.S. Senate last week. If passed, there's a chance it could stanch what has been a steady decline in private-sector union membership over the past 30-plus years by making it much easier for organized labor to infiltrate nonunion shops and industries. Under current law, if a union wants to organize a nonunion shop it has to receive an affirmative vote from the majority of workers at that location through a secret vote that is taken if the employer deems it necessary (alternatively, the employer could waive the election and just recognize the union once it saw the majority would be in favor, but this rarely happens). If the majority votes in favor of organizing, the National Labor Relations Board certifies that union as labor's representative. Under the current law, the employer holds a fairly strong hand, as a secret vote reduces the effectiveness of intimidation tactics of organizers and also allows the company to campaign about the merits of remaining nonunion in the interim.

Eric Landry does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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