Pagliuca’s views didn’t match chain’s actions

Stephen Pagliuca served on the Burger King board until September. Stephen Pagliuca served on the Burger King board until September.
By Frank Phillips
Globe Staff / December 1, 2009

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For nearly seven years, Stephen Pagliuca sat on Burger King’s board of directors, helping to guide the struggling firm back to profitability and generating huge dividends for his firm, Bain Capital, and its two partners in their buyout of the fast-food giant.

But the company’s drive to build profits and expand operations included a push in Washington against raising the federal minimum wage and against forcing companies to provide health insurance for their workers, two causes that Pagliuca, now a candidate in next week’s Senate Democratic primary, champions.

“Over 30 million Americans currently lack adequate access to health care, putting many hard-working families one job loss or one major illness away from financial ruin,’’ Pagliuca says in his campaign literature. “I am deeply committed to ensuring all Americans get covered and believe it is our moral obligation.’’

Though his campaign says Pagliuca never hid his progressive views from his fellow board members, Burger King has spent more than $500,000 over the last three years in part to lobby against legislation promoting a minimum wage hike and universal health care. The National Restaurant Association also spent heavily to lobby against the same measures.

Burger King - which, like many competitors, does not subsidize health insurance for most of its workers and pays minimum wage - has made hundreds of millions of dollars for Bain and its two partners, Goldman Sachs Capital Partners and Texas Pacific Group. Pagliuca’s campaign will not say how much he personally made from the deal. He resigned from the board in September when he launched his Senate campaign.

Burger King’s chief executive, John Chidsey, said in a statement that Pagliuca was well known among the board members for being “very liberal on social and workers’ rights issues.’’ He said directors frequently engage in lively debate on issues facing the company and the industry. But he said decisions such as health care for workers are made at the management level.

“The ultimate authority in running the day-to-day business has been delegated to management by the board,’’ Chidsey said.

Pagliuca declined to be interviewed, but a spokesman, Will Keyser, said that his current views in favor of health care and raising the minimum wage have been long held. Keyser said he would have supported a policy change at Burger King on health care, but the issue never came before the board.

“Had it been raised, Steve would have voiced his view that the company should contribute to the cost of health insurance for its employees,’’ Keyser said.

Keyser did not directly answer why Pagliuca, despite calling health care a “moral obligation,’’ never raised the issue himself.

Keyser also said Pagliuca is in favor of increasing the federal minimum wage. “It is a view he has long held and shared with the company’s leadership while serving as a member of the board,’’ he said.

The company says it has added roughly 24,000 jobs since Bain and its partners bought it in 2002.

Three months ago, Pagliuca and his colleagues on the Burger King board were expressing concerns that Democratic initiatives in Washington were going to cut into profits. In an Aug. 27 filing with the Securities and Exchange Commission, the company warned investors that the health and wage mandates threatened Burger King’s revenues.

“Among the more important regulatory risks regarding our operations we face are the following: the impact of employer-mandated health care, minimum wage,’’ states the document, which Pagliuca, as Bain’s representative on the board, signed. The health care bill, in particular, would have a significant drag on the company’s operating results, the firm warned.

“If these bills are enacted into law, our operating results and the operating results of our franchises could be impacted significantly,’’ the document states.

The conflicts between Burger King’s positions and those taken by Pagliuca as a Senate candidate highlight the difficulties that business executives often face when they seek public office.

Governor Deval Patrick, running in 2006, faced questions about his role as a director of a controversial subprime mortgage lender and as Coca-Cola’s corporate counsel. Former governor Mitt Romney, Pagliuca’s mentor at Bain, suffered considerable political damage over his private equity investments when he ran for Senate in 1994, and questions resurfaced when he ran for governor in 2002 and for president in 2008.