Issues of employee performance aren't inherent because you have a contract. If you work for a public company, your VP probably has an employment contract that protects him from many types of arbitrary actions. A baseball player is a unionized employee with a collective bargaining agreement -- and teams obviously have tools to incentivize performance.
Managed well, a union is a tool for compliance as well. Companies and governments have done things like push healthcare administration to the union or pool sick leave to let employees police leave abuse. I've worked and managed in union shops, and have hired and fired people. The issues you talk about usually reflect immature process on the employer side. If you follow your rules, you can fire employees for misconduct.