Re: Meidner Plan

["Norman G. Kurland" <thirdway@cesj.org>]

Thomas Brandt wrote:

> Thanks to Norm and David for this very useful feedback.
You're very welcome, Thomas.
>  My initial reaction is
> that a Meidner-like plan could be formed by labor unions to pool employee-owned
> stock without depriving workers of voting rights, while still addressing
> one of
> the weaknesses of ESOPs (lack of diversification).
The central premise behind the ESOP as one part of a national ownership
strategy, which CESJ calls "Capital Homesteading," is to lift workers in
the productive private sector directly, jointly and personally (not indirectly
or collectively through their labor representatives) with the full powers,
rights, risks and responsibilities of capital ownership and with their
individual sharing of the full income stream from bottom-line cash flow. 
Such a "democratic ESOP" anchors the non-human productive assets, up to
100% depending on what portion of an enterprise's equity shares is owned
by its workers through an ESOP, with those supplying the human inputs (i.e.,
all those who make up the "working community") to the labor-capital mix
of that enterprise.  This is the most voluntary and least coercive
way to address the shifting of capital under globalization.

Outside and non-worker stakeholders would gain their portion of any outsiders' equity through other Capital Homesteading vehicles (e.g., for consumers, workers of suppliers, area residents where the enterprise is a land planning and development corporation) that would be financed basically on non-recourse procreative credit similar to a leveraged ESOP.  Our work in structuring the very successful Worker Shareholders Association at the Alexandria Tire Company in Egypt, which shared ownership with worker stakeholders in the "birth mother" state-owned tire company and other investors, is a good illustration of my point. ( If you're interested, see this case study listed on our site map at CESJ Web Site Map )

Our vision of the new and expanded role of labor unions in a world structured for the diffusion of ownership and economic power is described in chapter 9 in our book "Curing World Poverty", which can be retrieved through the summary article on Value-Based Management" at What is Value-Based Management?

Diversification of assets is a valid concern, but it is secondary to the issue of anchoring capital by empowering workers with full ownership rights and building a genuine ownership culture within all the workplaces of the world.  And that's the job for the Value-Based Management approach to change.  However, once workers have captured full ownership rights (ideally without giving up or risking anything in the bargain), then the issue of risk aversion can be appropriately addressed.  (1) Capital insurance as advocated in our proposed Capital Homestead Act is one means for covering the risks of ESOPs.  (2) The ESOP itself can be diversified.  All my ESOP clients whose shares are not publically traded have special parallel accounts covering all ESOP participants to hold highly liquid diversified assets which must be distributed to these participants in case the company goes bankrupt or the shares become worthless.  (Keep in mind that normally, in non-union situations, employees give up nothing when an ESOP is established, and there is nothing to prevent a union from bargaining for genuine economic justice (i.e., a big slice of the corporate capital growth pie and growth profits as supplement to traditional "wage system" benefits.)  (3) A third approach to achieving diversification for ESOP participants would be the adoption of the proposed Capital Homestead Act as national and state policy, so that workers and all citizens could acquire diversified asset portfolios through CSOPs, CICs and ISOPS.   A summary of this approach is described by clicking on Capital Homestead Act is designed to maximize sustainable growth and broaden wealth distribution.

> While some will say this
> will dilute the link between employee productivity and reward, I think
> the
> counter-arguments may be stronger.  I also see this as another
> possible way to
> broaden capital ownership on the subnational level that doesn't depend
> on
> reforming the Federal Reserve and federal tax code. I may have more
> to say after I read the articles sent by David.

Mahalo and Aloha!

PS to David:  I don't expect you to remember this, but we talked about 15 years
ago when I first learned about ILSR.  I was a graduate student interning for
Clem Bezold at the Institute for Alternative Futures in Alexandria, VA.

Thomas, if you have a more efficient or less coercive way to democratize
ownership without having to beg from current accumulators of capital and
without engaging in class warfare or divisive governmental redistribution
schemes to achieve that end, I'm all ears.

Norm Kurland