As last week's Weekly Adviser mentioned, Hubco, the $1.4 billion New Jersey-based holding company, is one of America's few unionized banks. Yet CEO Ken Neilson seems to take the situation in stride, and it does little or nothing to deter profitability.

Until the bank started growing in the mid-1980s, it was entirely organized. Now 13 of 45 branches that are unionized - with the rest showing no apparent interest in becoming bargaining units.

In fact, of 700 employees, including part-timers, only 120 are in the bargaining units, and only 60 pay dues. The rest are nonunion employees, as allowed in an open shop.

Ken took an eight-day strike to win this open-shop status, and the results were highly satisfactory to the bank.

Some employees crossed the picket lines the first day. Others came back the second day, when the bank announced that it would have to start hiring to replace them. (By law, the bank had to function, and it did not have enough people to cover the offices and do their own jobs, too.)

By the eighth day, the union agreed to the same terms offered at the beginning. Yet some employees who had held out were placed on a priority rehiring list instead of being put back to work; the bank had promised permanent employment to the people brought on board during the confrontation.

How has Ken Neilson kept his union concerns to so low a level that he spends almost no time on union issues?

First, of course, his nonunion people are well compensated. In fact, nonunion people generally have higher pay and better benefits than the union demands.

Second, Hubco makes it its business to keep employees well informed and truly an integral part of the team. For example, when the bank had to downsize in the early 1990s, the cuts started from the top, all layoffs took place at once, and the staff was told that there wouldn't me any more.

Just as the bank told its strikers the truth about why it had to replace them, it told those remaining after the cuts what was expected of them.

What about layoffs in the organized branches? Hubco still has the power to reduce staff, but the union rules require this to be done by seniority instead of instead by management choice.

If the bank wants to keep some of those it must lay off to reduce size, it can suggest that they reapply for jobs in nonunion branches.

Who are the union people?

Eighty to 90% are female, and the shop steward is a woman who has worked for the bank for over 20 years.

Ken acknowledges that if there is an issue of an employee's being fired for dishonesty, the steward will take the bank's side every time.

In fact Hubco's human resources people find the union reasonable to deal with, as there is an organized structure with whom to talk, so grievances can be worked out informally. As a result, the bank has not had a formal grievance in years.

What about promoting people out of the union into officer positions?

Many have taken this route. And Ken indicates that a good person is a good person; the same loyalty that union leaders have shown to the union they now show to the bank.

Does union status make Hubco less attractive as a merger candidate?

Ken parried the question by stating that the board wants to remain independent as a highly profitable $1.4 billion organization, so this is not an issue now.

But specialists in union law are less sanguine about the effect of an organized work force on a bank's freedom to act.

They point out that with the number of manufacturing jobs going down, unions are concentrating on services. And some bank salaries are well below what similarly skilled people might earn as, say, unionized grocery clerks.

So this industry has to keep alert. Union problems can be much worse than what Hubco, with its policy of full disclosure of everything germane to its staff, faces today.

Mr. Nadler is a contributing editor of the American Banker and professor of finance at the Rutgers University Graduate School of Management.

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