Morgan Stanley in 'union bashing' storm

Investment bank Morgan Stanley has denied it is anti-union after it advised investors to take their money and "run the other way" from companies that are highly unionised industries

"Look for the union label... and run the other way," a research note issued last week said.

"Rigidity in labour costs, processes and pension requirements, while perhaps beneficial to employees, may prove toxic to shareholders," it added.

Morgan Stanley has since been on the defensive after a barge of criticism, despite issuing a clarification to clients on Monday.

"As we have already clarified, Morgan Stanley has recommended, now recommends and likely will continue to recommend investments in strongly-unionised companies," the bank said in a statment to BBC News Online.

"In a recent research note for clients, its chief US Strategist reiterates his considered and independent view that the current tough economic environment is likely to penalize businesses with high fixed costs, pension funding issues, and rising health care obligations. Additionally, he notes that unionisation per se does not give rise to these investment concerns," it said.

The notes came to light on the same day it was reported that the bank was preparing to cut about 2,000 staff, or 3% of its global workforce in this quarter.

Union anger

Union leaders in the US and the UK reacted angrily to the advice.

Roger Lyons, general secretary of Amicus told BBC Radio that his union had good relations with many firms that had members of Morgan Stanley on the board.

"It is clear that Morgan Stanley are giving this advice based upon prejudice and not upon fact," Mr Lyons said.

"That is very bad news for investment advice," he said.

The Guardian newspaper quoted a letter to the bank from the president of the AFL/CIO, America's trade union umbrella body, condemning Morgan Stanley for "attacking the fundamental structures of fairness in our economy".